Fuel choice key to the journey to cleaner shipping

International shipping emits around 940 million tonnes of CO2 annually and is responsible for about 2.5% of greenhouse gas (GHG) emissions. In response, the UN’s International Maritime Organization (IMO) has set the industry the target of halving its GHG emissions by 2050. With the average lifespan of a conventional cargo ship at 20 years, the industry has recognised the need for revolution, not just evolution. It must start delivering near-zero-emission vessels by 2030, if these ambitious targets are to be met. Discussions over alternative fuels are now more heated than ever before.

Current Technologies

Decarbonising the shipping industry is a crucial step on the road to net neutrality. At the current time no technologies are being implemented that will support the IMO regulations nor enable the sector to achieve its goals.

The IMO’s 2030 target to reduce CO2 emissions by 40% per transport work will not just affect newbuildings but many of the vessels in service today. This means that newly delivered ships will have to achieve an 80-90% reduction on current levels in order to bring down the average to 50% by 2050. While other technologies might be able to offer significant reductions, achieving emissions reductions on such a scale is likely to rely on a change of fuel. The industry must pivot to technologies such as hydrogen, ammonia, methanation (synthetic) fuel or battery, and fuel cells, as well as collaborate on research and development that will enable the sector to achieve greater sustainability.

Challenges: collaboration

Collaboration poses one of the biggest challenges to success. The country members of the IMO each represent their own diverse views and priorities that often leave it constrained in its efforts, limiting the actions it can take. For example, the IMO has considered a carbon tax or similar financial disincentive but does not have the affiliated bodies with tax collecting functions.

Equally, individual countries alone are not incentivised to act with independent strong policies because of the risk of competitors introducing softer, or loop-hole policies. The proposal to include the shipping industry under the EU’s Emissions Trading System (ETS), announced in October 2020, is a good example of this. Countries including Japan, South Korea and Greece, alongside a number of international bodies including BIMCO and INTERCARGO, have warned that this regionally imposed solution could in fact lead to opposition and competing responses from other large countries. If major EU ports introduce a strict carbon tax system, it is likely that ships will avoid these ports, opting instead for nearby port calls, creating so-called ‘carbon leakage’ into non-EU-controlled areas. There could also be a ‘carbon offset’ meaning that the taxes that are being paid to the EU is money transferred from the IMO to the EU. This could result in weakening the self-imposed research and development required within the shipping sector, risking delays to the decarbonisation process.

Challenges: Economic recovery following the pandemic

The COVID-19 pandemic is a second potential barrier to the decarbonisation of the industry in two ways: changing consumer behaviour and the impact on the industry of the reductions in cargoes and fleet rates during the period.

According to the OECD, there has been a 60% decline in international tourism in 2020. Uncertainty over when sailing will reconvene remains. Multiple reports however have indicated that the sector might expect an increase in bookings for 2021 in comparison to 2019. A recent survey from CLIA found that 82% of cruisers are likely to book a cruise for their next holiday.

Overcoming the challenges:

Collaboration on research and development is crucial. The establishment of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping demonstrates the strength of collaborative partnership. Working with partners such as MHI, who are founding members, the Center is driving collaboration to research and create solutions that will accelerate the decarbonisation of shipping. Meanwhile, the sharing of technologies with other industries will offer additional ways to decarbonise the transportation sector. For instance, carbon capture has made significant strides due to the knowledge exchange with the power generation sector, and now, thanks to collaboration, testing is underway to assess its technological viability for marine vessels.

The pandemic meanwhile has underscored the importance of ensuring economic sustainability of decarbonisation technologies. Governments, alongside the industry, are important stakeholders in this, supporting the process of building back green. They understand that funding for green projects is essential for supporting the scaling up of decarbonisation efforts. The “Longship” project supported by the Norwegian government is a prime example. It aims to boost the practical application of green technologies, which it is hoped will eventually lead to further cost reductions and the widespread dissemination of technologies.

Looking ahead: new fuel opportunities

The most promising technologies that can help the industry make the greatest progress against its targets are the use of hydrogen, ammonia and methanation fuel. With battery technology currently only a viable solution for short journeys such as ferry crossings, alternative approaches are being sought to decarbonise the sector. While there are a number of alternative fuel choices under consideration, MHI Group believes that that the IMO’s targets will drive demand for ammonia as a low-carbon shipping fuel.

Ammonia can be made from hydrogen and is a denser gas, providing a potential solution for the shipping of hydrogen in large volumes. If pressurised at room temperature, ammonia becomes a liquid in the same manner as liquefied petroleum gas (LPG). This means that it is relatively easy to design and build new ships to handle either LPG or ammonia. Mitsubishi Shipbuilding has already built a multi-gas carrier capable of holding LPG and ammonia. It is also developing a concept ship – the LCO₂ Carrier Cool Blue – capable of carrying liquefied CO₂ captured by carbon capture facilities, making carbon capture possible in places where there may not be any suitable storage sites.

Conclusion

The shipping industry is on the right track to achieve decarbonisation targets, but we may not be moving fast enough. The industry is investing significantly in R&D projects, however, the broader framework needed to deliver economic incentives to shipowners has not yet caught up to make the adoption of the revolutionary technologies commercially feasible. To pave the way towards decarbonisation, we need greater collaboration within and across industries, clearer policymaking in IMO regulations, and government funding of green projects.