The push for zero-carbon shipping gained significant momentum in 2021 with a string of commitments from both industry and governments. The transition is being kicked off by bold frontrunners who dare take the important first steps into unknown terrain but more needs to happen faster. By Mads Peter Zacho, Head of Industry Transition Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping.[ds_preview]
When the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (»Center«) was established in June 2020 few shipping companies had committed to a net-zero target by 2050. Today the number is growing rapidly, which is evidence of strong industry leadership – some will argue that industry leaders are well ahead of regulators and governments. Shipping is part of the solution and is actively contributing to solving the climate crisis.
The move towards a more sustainable maritime industry is led by first movers within all areas of the global maritime industry. Cargo owners are pushing for zero-carbon shipping with retailers including Amazon and IKEA committed to using exclusively zero-emission vessels to transport their cargo by 2040.
Ship owners are investing in new vessels capable of running on alternative fuels and by that creating the needed demand for green fuels that will help unlock the transition on the fuel supply side. And regions and governments start developing local policies and regulation that can potentially scale to become the global regulatory framework that will enable the full transition.
These first movers must be celebrated and supported for their courage as they are taking great responsibility to get the transition going. Despite the progress and positive development, we are still not on track to decarbonize by 2050. Even if we take all ongoing and all planned decarbonization activity into consideration we are not even close to where we need to be. More needs to happen faster and we need to see an actual shift and confirmed emission reductions by 2030 already for the goal to be within reach.
In the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping we have identified four key focus areas that can help accelerate the transition in the coming decade:
Level playing field for shipping players
A significant obstacle in the global maritime industry’s path to decarbonization is the misalignment of stakeholder incentives. For example, ship owners may be reluctant to fit vessels with the most energy efficient technologies as they find it difficult to share the financial burden of these upgrades with operators who charter these vessels. Another dimension of misaligned incentives is geographical; the burden of decarbonization rests more heavily on developing nations that may not be able to absorb the costs of adopting new technologies. Therefore, levelling the playing field should be a global priority; an effort that would encompass a mix of market-based measures that incentivize private actors to adopt emerging technologies voluntarily and regulatory interventions enforced by local and global authorities.
Energy efficiency support
The author
Mads Peter Zacho has worked in shipping for 18 years, recently as Chief Executive Officer (CEO) for J. Lauritzen A/S. Before that he was Chief Financial Officer (CFO) in Torm, CFO in Svitzer and deputy head of Treasury in Maersk. He spent the first 10 years of his career in the financial industry in Denmark and the United States. Mads brings shipping experience from a number of shipping segments, namely the dry bulk, gas tanker, product tanker, container and towage segments. Mads has an MSc in Economics from University of Copenhagen and an MBA from IMD, Lausanne.
Onboard energy efficiency is a key driver of the global shipping industry carbon-zero journey; it will be responsible for about half of the industry’s decarbonization by 2050. To start, the industry could benefit from an assessment of the emissions reduction potential of existing energy efficiency (EE) technologies to identify the most promising solutions. This would require further transparency on vessel efficiencies and stakeholders would need to standardize industry-wide performance metrics and inform new standard practices. Meanwhile, gap analyses of known EE levers could be used to set realistic goals and targets, as well as to identify potential avenues of technological development.
Alternative fuel deployment at scale
There are numerous fuel pathways available to the industry, each with strengths and challenges pertaining to widespread adoption.
E-Fuels or hydrogen carriers with high volumetric energy density produced from renewable electricity looks to be gaining momentum. Maritime e-Methanol technology is already known and vessels running on such fuels are soon to be in operation while ship engine manufacturers anticipate that the first ammonia engine could be in operation by 2024.
Blue fuels may play a role if they’re scalable fast enough or if the costs of renewable energy don’t decline at a fast enough rate. Two specific challenges hinder the uptake of blue fuels: lack of industry standards for proven permanence of carbon capture and storage, and the mitigation of upstream methane emissions that have a negative impact on the environment.
While biofuels may not be prohibitive in terms of cost, they are currently being challenged by other constraints such as limitation of global production capacity, a need for new established supply chains, various technical maturity of the different fuel options, and increased cross-sectoral competition with other industries also looking for green alternatives (for example, cement, steel, and aviation). Conquering these challenges on a global scale means bio-methane is projected to have a more dominant role as a maritime transition fuel from 2030s onwards, while bio-methanol and bio-oils are projected to significantly impact the fuel mix from 2040s.
Support to first movers
First movers on any emerging technology take on greater risk than their peers because there’s no guarantee of ubiquity and the technology in question may have to undergo further refinement before it can be adopted more widely, if it ever is. As such, many companies—be they fuel providers or shipping companies—may be reluctant to invest in and employ new decarbonization technologies. To overcome hesitation, other participants in the shipping value chain may have to underwrite some of these risks. More needs to be done to encourage future fuel providers to invest in the R&D of alternative sources of power before the demand for them exists and to incentivize shipping companies to order vessels that can run on alternative fuels before the fuel supply infrastructure is in place. Developers of new technology could be given more platforms to demonstrate the commercial viability and feasibility of their innovations to other maritime and industry-adjacent participants to inspire confidence and raise the necessary capital.
