At UN Climate Week this week, calls have increased for shipping to urgently ditch fossil fuels to meet the planet’s climate goals.
The global shipping industry remains weakly regulated and is significantly off course to meet climate targets that scientists and the rest of the world all agree are needed to avoid runaway climate change.
A new report, entitled ‘Zero-Carbon for Shipping’ from leading international conservation organization Ocean Conservancy was launched at a virtual gathering of world leaders and decision-makers at Climate Week in New York this week.
It highlighted that the global shipping industry was not doing enough to address the climate crisis. Currently the shipping industry is heading off trajectory and current proposals are less than 25% of the ambition levels that are needed.
Shipping emits over 1 billion tons of carbon a year, making it the sixth-largest emitter in the world after China, U.S., India, Russia and Japan. These emissions have been growing significantly year on year, and are expected to be 50% higher by 2050, possibly tipping the world beyond its carbon budget.
The Zero Carbon report highlights several pathways for how global shipping could transition from a heavy dependency on fossil fuels to alternative fuels. This would transform an industry that is a major contributor of greenhouse gas emissions into a multi-trillion dollar energy stimulus for a new green economy around the world.
The question is why hasn’t global shipping been moving swiftly enough.
The event brought together a panel of international experts from the shipping industry, government and civil society to explore the future of alternative fuels (electrofuels) to meet and exceed the UN shipping agency, the International Maritime Organization’s (IMO), voluntary goal to “reduce the total annual greenhouse gas emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts towards phasing them out entirely.”
The big picture
“In order to restrain warming to within 2 degrees, total decarbonization must be achieved in the same time frame of 2050,” Dan Hubbell, Ocean Conservancy’s Shipping Emissions Campaign Manager, remarked. “To achieve the IMO’s goal and also halt climate change, the first zero-emission ships must be on the water by 2030.”
The race to decarbonize shipping is taking place against an emerging backdrop of climate change impacts on financial systems, the likelihood of mass displacement of people, their communities and the impacts on global biodiversity loss.
Commercial production of Zero Carbon ships by 2030
In order to meet this target, commercial production lines of shipbuilding needs to be assembled and having zero carbon ships ready to go by 2030. This means making important fuel and infrastructure choices soon.
The four main fuels and propulsion systems being debated are:
- Electrification of the shipping fleet. So far this has been restricted to smaller ferries and coastal vessels, though this is starting to change. China, Germany, Sweden and Norway have been the pioneers in various forms of electric shipping and both China and Norway have begun trials on a range of new large scale electric vessels.
- Hydrogen fuel cells. Some hydrogen fuel cell technologies allow ships to produce their own hydrogen from seawater and so can operate without emitting greenhouse gases or fine dust pollution (as traditional vessels currently do). There are a range of ways to produce hydrogen, so only green hydrogen from non fossil fuel sources would be considered sustainable.
- Ammonia. While ammonia is a greener fuel, there may be additional safety protocols that would need to be added to vessels given the higher explosive risk of this fuel, as seen in the Port of Beirut in early August. Ammonia is currently heavily used in the agriculture and fertilizer industries and several new safety measures would have to be introduced on large ships.
- LNG (Liquified Natural Gas). This choice of fuel has been very controversial due to methane leaks that are occurring along the supply chain. Methane is 86 times more dangerous than carbon dioxide in the atmosphere, and has been growing 150% in the last five years, primarily driven by ships that are powered by LNG.
The proposals being discussed at the IMO on the next decade have been framed in such a way that not all greenhouse gases are being evaluated. The proposal put forward by Japan’s delegation at the IMO (called the EEDI framework) only covers CO2, not any other greenhouse gases. According to a major report for the IMO by the International Council on Clean Transport, “Methane, which traps 86 times more heat in the atmosphere than the same amount of CO2 over a 20-year time period, represents a small but rapidly growing share of greenhouse gas emissions from shipping. The 150% growth in methane emissions from 2012 to 2018 was largely due to a surge in the number of ships fueled by liquefied natural gas (LNG)”.
Japan wields significant influence within the IMO as a ‘Category A’ country, and the Chair of the powerful Climate and Environment Council is a representative of the Japanese Government as Director for Shipbuilding and Ship Machinery Division at Japan’s Ministry of Transport. This has raised many questions about Japan putting country conflicts of interest ahead of global sustainability concerns.
Choices made in the next decade is key: 2020-2030
What is important is that the world does not need to wait until 2030 to take action. There needs to be urgent action on existing ship fuels today.
Several scientific papers and articles have highlighted the controversial position that the UN shipping agency, the IMO, has taken on reforming the current fuels regime and why current ambitions are less than 25% of the ambition level to meet the Paris Agreement on Climate Change.
It is against this context that the Zero Carbon for Shipping Report was launched, with a special focus on Central and South America, given the importance of refueling hubs around the Panama Canal.
“What we wanted to do in our report is to highlight the potential for green electrofuels in achieving and exceeding the IMO targets by 2050,” said report author Nick Ash from Ricardo Energy and Environment, who noted that the IMO’s current goals are not ambitious enough.
Notably, the shipping industry opted out of the Paris Agreement in favor of voluntary reductions. It is currently not on trajectory to meet climate targets.
A steep decline in shipping emissions is critical. It’s one way for the industry to transform the adoption of a new clean energy source—electrofuels derived from hydrogen or ammonia. Electrifying fleets and liquefied natural gas (LNG) are other options being considered. The latter is controversial. LNG use releases methane, one of the most potent greenhouse gases responsible for global climate change.
Ash noted the adoption of electrofuels could lead to additional benefits like reducing the costs of renewable energy, long-term jobs in infrastructure and sustainable industries, reduced reliance on imported fossil fuels and the decarbonization of other supply chains.
Shipping has a big fossil fuels problem
Shipping has a double-whammy fossil fuels problem.
First, a significant proportion of global shipping revenues comes from transporting fossil fuels, such as the transportation of coal, oil, gas and LNG (which is responsible for highly toxic methane leaks across the supply chain).
Second, large ocean ships are almost exclusively powered by fossil fuels. To make matters worse, it is not just any fossil fuel, but the very worst sludge at the end of the oil refining process. This is why many point to the global shipping industry as essentially a half a trillion dollar subsidy for large oil companies.
So the 60,000 large ocean vessels are essentially large oil-fired power stations in the middle of the ocean, attached to a transportation device.
Industry as early adopters
“We as a shipping company and an industry are committed to moving to the direction that is required to experience this transition for the industry,” Christian Csaszar, Ultranav’s director of Fleet & Projects, said at the event. Ultranav, headquartered in Santiago, Chile, operates around 300 ships in 15 countries and is a member of the Getting to Zero Coalition.
He emphasized the need for cross-collaboration between the maritime industry, the energy sector, governments and civil society. Csaszar also noted that policy intervention to incentivize the uptake of green electrofuels would be necessary to overcome the challenge of more economic fossil fuel alternatives.
Regional innovation incubation
The report presented four case studies from South and Central America that demonstrated how decarbonizing shipping could benefit other industries and local economies while with global potential for replicating success.
Benjamen Maluenda Philippi, Head of New Energy within Chile’s Ministry of Energy shared the government’s recognition of hydrogen-based technologies as an increasingly important high-quality energy source that is brought about by a “never seen before alignment of stakeholders, both public and private, all around the world that are kind of rowing together in this same ship towards some clean energy use solutions.”
Chile’s renewable resources could produce around 160 million tons of hydrogen—enough to supply the entire world’s demand for hydrogen twice over according to Philippi. He stressed the important role of governments as coordinators and leaders to realize the vision of public, private, local and international stakeholders enabling and investing in a clean energy future. Chile hopes to have a national green-hydrogen strategy by November of this year.
“A challenge for many other Latin countries in the next decade will be how do we get the urgent hype into reality and actually deliver projects, deliver initiatives so that people can see that this is real, that this is the future, and that this works,” he added.
Chile, Colombia, Brazil and other countries in South America have the renewable resources to advance green electrofuels for shipping, perhaps by taking a leaf out of Saudi Arabia’s playbook to diversify its energy exports. Saudi Arabia recently announced a new investment in a large facility to produce green ammonia from solar and wind to export future sustainable fuels.
“I’d like to see some announcements coming out of those countries for similar projects that are going to be realized and investment decisions in the next few months so that these are ready for full deployment in the mid-2020s,” Ash said.
Calling on all stakeholders
Lavinia Hollanda, Senior Shipping Consultant at Instituto Clima e Sociedade (Institute for Climate and Society), an NGO based in Brazil stressed the need for collaboration. Her organization has been working with a group of investors to make a public statement about decarbonization and really pressure companies, pension funds and banks to be more ambitious in their commitments.
“Investors, equity shareholders and debt holders have a lot to do in terms of pressuring companies to show targets and push forward decarbonization in the logistics chain,” she noted.
Business customers in shipping can also play a role by demanding greater transparency of carbon emissions from the shipping industry. This could be from customers shipping products in containers, grain or industrial minerals such as iron ore and other mining products.
This does not have to be theoretical, but from actual vessel emissions that can be tracked in almost real time – all that information is available today.
Greater R&D in shipping
Research and development to modernize and clean-up the shipping sector has been historically underinvested in. A price tag of $2 trillion to decarbonize the sector may seem big. However, when spread out over 30 years and compared to the total global energy investment of $1.85 trillion in 2019 alone, it becomes not only feasible but hard to ignore the huge opportunity to invest and create jobs in a new, sustainable sector.
As different sectors like shipping and aviation look to decarbonizing, the experts called for careful consideration of solutions to avoid uptake of harmful options like LNG, for example, with issues around methane slip and the high likelihood of stranded assets from obsolete infrastructure investments.
“We cannot afford to build an infrastructure in Latin America that will be stranded within a few years,” noted Hollanda. “I do not want to bet on infrastructure, for example, LNG.”
While LNG is often touted as a cleaner climate fuel for maritime ships, new lifecycle analyses cast doubts on even the modest reduction promoters claim for the fuel. There’s been plenty of signs this year that many investors share the concern for stranded assets. Over half the LNG export projects planned for 2020 have been put on hold or disrupted over concerns for COVID-19 and climate change.
One of the biggest challenges in the global shipping industry has been the historical underinvestment in innovation and technology. In shipping, less than 1% of revenue is invested in technology. This is in comparison to 10% in the banking sector. If shipping could move from this 1% figure to a benchmark of 10%, this would result in technology investment rising to $300 million a year (from $30 million today), thereby increasing the chance of hitting these bold targets.
From voluntary principles to concrete actions
Many voluntary principles have been announced to meet climate goals.
These are good gestures, but the climate crisis is just that – a crisis.
It calls for more immediate and firm steps from all nations. South and Central America have an important role to play with some very concrete actions.
“Latin America countries have vast natural resources and have a willingness to be leaders in this transition, but we do not have the same technological resources, the same human capacity, the same budgets that will enable us to accelerate the transition,” added Philippi. “We need to work together with other economies in the developed world so we can get these technologies in place and run the costs down.”
Reports like Zero-Carbon demonstrate how much bolder the shipping sector could be.
With time running out to get ready for a new generation of ships, countries should seize the opportunity to invest in a green maritime future now.
The planet cannot wait for anything less.