Shipping's ability to meet decarbonization targets seem both extremely easy and very tough. Near-term regulations look achievable while 2050 limits potentially look more ambitious rather than credible goals, leaving shipping in a precarious position to balance these competing challenges, and in a short time.
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The International Maritime Organization agreed in its initial greenhouse strategy 2018 to reduce the carbon intensity in the global fleet by 40% in comparison to 2008 levels by 2030 and to reduce greenhouse gas emissions by 50% by 2050.
There had been talk that the IMO would boost a 50% cut in greenhouse gas emissions by 2050 to 100% but delegations at the 77th session of the Marine Environment Protection Committee, which ran Nov. 22-26, voted not to adopt a resolution.
2050 may seem far away, but calculated in shipping years and the purchases of ships bought later, this decade may well be still sailing the seas when that day comes.
The industry has certainly been trying to clean up its act. The shift away from high sulfur fuel oil to IMO's global low sulfur mandate which started Jan. 1, 2020 showed the ability to cope with energy transition, when drastically removing sulfur content in fuel -- either via scrubbers or very low sulfur fuel oil -- was the priority.
There were only 59 Fuel Oil Non-Availability Reports, or FONARs, received by the IMO under The International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI, between Jan. 1, 2020 and March 1, 2021, IBIA Director Unni Einemo said at an industry event organized by S&P Global Platts recently. This indicates that initial apprehensions of availability of compliant fuels were misplaced and refiners quickly adjusted their crude slate to satisfy the rising demand for cleaner fuels.
And 2030 targets don't look too challenging either. Efficiency improvements have already gone a long way in improving emissions. While total maritime trade has grown over the past decade, the sector's emission intensity has decreased because of larger vessels, design improvements, technological upgrades and slow steaming.
The Energy Efficiency Design Index, targeted to reduce CO2 emissions by reflecting a ship's energy efficiency in actual use, and the Ship Energy Efficiency Management Plan to measure and control GHG emissions from the already existing shipping fleet are targeted towards this end.
In fact, amendments to the MARPOL Annex VI are due to enter into force on Nov. 1 2022, with the requirements for Energy Efficiency Existing Ship Index, or EEXI, certification coming into effect from Jan. 1, 2023.
The new regulation will require existing ships to improve their efficiency roughly to be in line with the Energy Efficiency Design Index, or EEDI, requirement for new ships today. To facilitate this transition, BIMCO, among the largest international shipping associations representing shipowners, recently said it had published an EEXI transition clause to be used in both existing and future time charter parties.
"In addition to EEXI, we are also developing clauses for emissions trading systems (ETS) and the carbon intensity indicator (CII) regime to meet the future challenges for the industry," Soren Larsen, Deputy Secretary General at BIMCO, said in a statement on Dec. 7.
The use of low carbon alternatives such as LNG, LPG, methanol are also being explored to help the industry comply with targets over this decade.
Switzerland-headquartered WinGD, a developer of low-speed gas and diesel engines for marine propulsion, said in a white paper on Dec. 9 that the use of LNG was one of the single biggest ways to reduce emissions in current vessels and will enable the use of carbon-neutral synthetic or bio gas when it becomes available.
"Taking action now is the right choice as simply waiting for the availability of clean fuels won't be enough," it said.
The majority of LNG carriers being ordered are being powered by LNG. It's a similar story for LPG. The largest vessel count for methanol-powered ships is for product tankers in dual fuel engines.
But while the use of low carbon options seem to help the industry comply with regulations for now, they fail to help provide the long-term carbon intensity reduction and zero emission goals, which will require an extensive switching to alternative fuels and technologies.
Around 85% of the sector comprises deepsea shipping, which is far more difficult to decarbonize given the high density fuels these use, expensive retrofitting and longer lifespans.
The International Energy Agency in a May report said that ammonia and hydrogen were set to be the main marine fuels if the net-zero aim is achieved in 2050, accounting for about 60% of the market, with ammonia set to power 45% of ships in a net-zero 2050.
The high energy density for alternative fuels is critical for their use in large oceanic vessels. Liquid ammonia and liquid hydrogen have energy density of around 30% and 22%, respectively, compared to HSFO. This translates in storage requirements of around 3.3 and 4.5 times. However, storing hydrogen on board becomes an even bigger issue given the space needed and heavy tanks required and thus limits longer distance sea travel.
Methanol and ammonia provide more practical solutions given they offer more accessible storage and transportation options, and there is greater experience in handling these materials. But ammonia's immediate adoption is hampered by its source and the future cost of green ammonia.
The bottom line is that apart from energy densities and storage considerations, future technological growth will determine the choice of clean fuels. And no technology is commercially available currently on a broad enough scale.
However, looking at the merits, clean methanol and liquid ammonia still have a certain edge over liquid hydrogen due to higher density, lower onboard space requirements, favorable handling temperatures, easier bunker storage and long handling experience.
For large vessels with long routes, the shipping industry could start adopting grey methanol in the near term and switch to green methanol from hydrogen in the longer term. This may increase costs due to engine modifications but may be price effective longer term.
Fuel flexibility remains vital, with hybrid ships and propulsion systems likely becoming a key tool to unlock both reduced fuel consumption benefits and cut emissions.
Web of complexity
Then there is also a catch: invest now in a particular fuel option brings down the costs around infrastructure but raises the demand and thus the price of the fuel.
But a lot rides on the demand for clean shipping, a supporting policy and regulatory environment, investments in renewable methanol, ammonia and hydrogen production and even competition from other transport sectors for similar alternatives. It seems jet is focused on biofuels and cars around electric vehicles, but should the economics and availability change, there could be greater competition in the shipping space. After all, shipping has traditionally taken 'the bottom of the barrel' in oil terms and it remains to be seen if a similar situation arises with alternative fuels.
Global cooperation between various maritime stakeholders — shipowners, shipyards, engine manufacturers, fuel producers and distributors, classification societies, charterers, port authorities — is imperative to meet shipping's decarbonization goals.
In Asia, Singapore, the world's largest bunkering port, is promoting cleaner fuel initiatives with the establishment of a Global Centre for Maritime Decarbonization, the latest feather in its cap. The center set up with a S$120 million ($88.7 million) fund from the Maritime and Port Authority of Singapore, along with six founding partners, will spearhead the maritime industry's energy transition journey.
Other Asian ports such as Japan, China and South Korea are also boosting cleaner fuel options, including LNG.
Also critical to this transition are banks and financiers. The Poseidon Principles, meant to enable financial institutions to align their financial portfolios with responsible environmental behavior, and the Sea Cargo Charter, a framework for assessing and disclosing the climate alignment of ship chartering activities around the globe, are welcome developments. However, their benefits will take some time to unravel fully, especially since they are voluntary initiatives.
From near-term targets, to constantly shifting long-term goals, from small journeys to deepsea shipping, from oil tankers to container carriers, from ports and bunkering to onboard storage, getting the specifics of the supply chain for different parts of the industry will be crucial. Never earlier has shipping faced such a daunting web of solutions to meet its varied and competing needs but never more has it needed one voice.
It is starting to find that voice but that voice needs to resonate unanimously and swiftly to spearhead this transition.