Shipping Faces Urgency to Decarbonize

Emissions from maritime shipping are coming under increasing scrutiny in the run-up to UN climate talks in Glasgow this year, with the release last week of a stark new climate science report from the Intergovernmental Panel on Climate Change only adding to the sense of urgency (NE Aug.12'21). Shipping lags behind many other sectors in the energy transition, with just 0.39% of the world’s shipping fleet currently set up to run on alternative fuels aside from drop-in biofuels -- including 0.22% battery-powered, 0.16% LNG and 0.01% methanol (NE Feb.18'21). Such fuels will, however, need to reach at least 5% of bunker fuel supply by 2030 and 27% by 2036 to keep in sight the target set by shipping’s governing body, the International Maritime Organization (IMO), for a 70% drop in carbon dioxide emissions from 2008 levels by 2050, suggests the industry-led Getting to Zero Coalition. Carbon Pricing Experts suggest that strategic policy interventions are needed to hasten the sector’s transition. For instance, the introduction of a meaningful carbon price would create a level playing field for the development and utilization of zero-carbon bunker fuels, the World Bank argues (NE Jul.22'21). However, efforts to advance a global carbon price for shipping are stalled. The Marshall Islands submitted a proposal to the IMO for a $100 per ton tax on all greenhouse gas (GHG) emissions in the international shipping industry. But a recent meeting of the IMO’s Marine Environment Protection Committee pushed back deliberations on this until November at least, and also postponed a decision on another proposal for a $2/ton levy on fuel sales (NE Jun.24'21). Unilateral Action Frustrated at the slow pace of action at the IMO, some parties are taking matters into their own hands. This includes the EU, which included shipping in its “Fit for 55” climate and energy policy package unveiled last month (NE Jul.15'21). Brussels proposes ending the current taxation exemption for fuel supplied for shipping while also extending its emissions trading system (ETS) to cover the sector. Under the EU plan, from 2023 all ships above 5000 gross tonnage, regardless of flag, will need to surrender EU emission allowances. This would cover 50% of the emissions from voyages that enter or depart the EU and 100% of emissions from ships traveling between EU ports. Once the system is fully phased in, under current prices, ships would be required to pay more than €50 for every ton of CO2 they emit. “This will incentivize a shift to cleaner alternatives,” said Faig Abbasov, shipping director at campaign group Transport & Environment. However, others doubt it will speed the pace of decarbonization for international shipping and suggest it could hinder further progress on further GHG reduction measures at the IMO. This EU move could “seriously put back” negotiations, with non-EU states like Japan having “already expressed concern over this diplomatic overreach and imposition of a unilateral and extra-territorial tax on trade,” says Guy Platten, secretary-general of the International Chamber of Shipping. Different Options Some suggest that shipping companies cannot keep waiting for the right policy signals to emerge, and should move urgently toward low-carbon fuels. But what are their options? LNG is currently the most advanced alternative to conventional fuels. Currently, LNG-fueled vessels account for just 0.16% of the global shipping fleet but 4.5% of the 2020 order book. However, carbon savings from LNG are only 20% compared with oil-based fuels and won’t meet the IMO's 2050 target. Methanol, which is made from natural gas, has a similar problem with only 15% "well-to-wake" emissions savings versus regular bunker fuels. Biofuels are seen as promising by some, but dismissed by others. Concerns include demands on the land needed to produce them in bulk, as well as competition from aviation and the road fuels market for limited supply (NE Jun.11'20). Instead, the shipping industry is focusing increasingly on zero-carbon ammonia and hydrogen in the medium to long term. The International Energy Agency (IEA) also identified ammonia and hydrogen as the main low‐carbon fuels for shipping over the next three decades in its recent “Net Zero by 2050” roadmap (see table). It sees their combined share of total energy consumption in shipping exceeding 60% in 2050. Sustainable biofuels would also provide more than 20% of total shipping energy needs in 2050, while electricity would play a very minor role, according to the IEA net zero roadmap. But governments need to define their strategies for low‐carbon shipping fuels by 2025 at the latest, given the slow turnover rate of fleets, the IEA suggests. Ronan Kavanagh, London Breakdown: Needed Growth