Shipping industry's zero-emission trials

The global shipping industry is under increasing pressure from activists, governments, customers, and financiers to improve its commitments to de-carbonise and move towards zero-emission of greenhouse gases (GHG) by 2050. It is a difficult challenge for fuel suppliers, engine manufacturers, ship builders, ship owners, charterers, port operators and policy makers.

In April 2018, the International Maritime Organization adopted a strategy to reduce GHG emissions of the industry to 50 per cent of the emissions in 2008 and cut the average carbon intensity by at least 40 per cent by 2030 and 70 per cent before 2050. Activists consider those targets and the vision towards zero-emission targets before the end of this century as inadequate.

The key to achieving reduction of emissions is development of alternate fuels by the oil industry. At present, only about 400 ships in a global fleet of 61,000 vessels operate on alternate fuels. Others are mostly powered by liquefied natural/petroleum gas and diesel that contribute to around 3 per cent of the global GHG emissions. The oil industry needs to invest heavily in research and development. The present options being discussed, of methanol, bio-diesel, biogas, ammonia or hydrogen as fuel, do not look all too promising due to availability, safety and cost considerations.

The next step is for the engineers to design and for manufacturers to make the engines that can use the new fuels. Standardisation and regulations have to catch up with the new developments to ensure safety of the vessels, cargo, seafarers, and others handling the fuels. The facilities for transport, storage and handling of the new types of fuels have to be developed at the ports and other locations. The financiers and insurers have to come on board.

Ship building takes at least 18-36 months after receipt of orders, depending on the type of vessel. Once commissioned, the ships continue to ply for 20-30 years more. So, an order placed today can mean that the ships made in the next 2-3 years and running on conventional fuels may still be in service by 2050. If there is any indication that such vessels will not be allowed to sail due to environmental concerns, the orders for ships may dry up, constraining the total capacities required to move cargo through the oceans. It’s premature to order ships that will comply with regulations in 2040 or 2050, because there is no clarity on future fuels and how much will be available. The probability of zero-emission vessels getting commissioned before 2030 is not very high. Managing the transition is crucial.

The shipping industry has already taken steps towards rating of the vessels, improving energy efficiency and data collection systems, reducing speed of the ships, re-routing to reduce calling on various ports enroute to destination and so on. These initiatives help but not enough. Meanwhile, major retailers like Amazon, IKEA, and Unilever have said that they want to move their cargo by zero-carbon ships by 2040. Some major banks have talked of extending new shipping loans only to owners who will operate cleaner vessels.

Given the uncertainties and challenges, the major stakeholders intend to work out their strategies, on the sidelines of the United Nations Climate Change Conference called COP26 at Glasgow, Scotland, at a conference ‘Shaping the Future of Shipping’ on Sunday. Hopefully, they will set realistic targets and draw up credible road maps.

Email:tncrajagopalan@gmail.com