Shipping was once a very sustainable, zero-emissions industry thanks to the use of sails and oars to provide marine propulsion. The introduction of the steam engine in the 19th century very quickly changed all that and today the industry accounts for about 3% of all greenhouse gases added to the Earth’s atmosphere every year.
Traditionally these ships have used the worst bits of the petroleum distillate supply chain. The most common one being basic fuel oil which is a thick, black, viscous compound that emits noxious fumes when burnt.
One of the reasons they have gotten away with this so far is that most of this dirty fuel is burnt out on the open ocean – out of sight and out of mind.
Today, however with the sheer scale of the shipping industry, this inconvenient truth cannot be overlooked by the world anymore. If you have lived in a large port city you may have noticed the toxic atmosphere and smells when lots of these vessel dock, or are waiting to dock, there.
Environmental challenge
From this year the International Maritime Organisation (IMO) has brought in some pretty tight regulations to control these emissions.
Just to give you an idea of the urgency and scale at which the shipping industry needs to make its sustainable transition: Globally, the average age of a cargo vessel today stands at a precarious 21.9 years; presently, there are approximately 100,000 vessels of all shapes and sizes sailing the world’s seas and oceans.
A recent UNCTAD report, Review of Maritime Transport 2022, highlights the need for lower emissions and greater investments in maritime supply chains. “We must not delay the decarbonization of shipping,” urges UNCTAD Secretary-General Rebeca Grynspan.
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According to the report, total carbon emissions from the world maritime fleet in 2020 and 2021 increased by 4.7% each year, with most of the increases coming from container ships, dry bulk and general cargo vessels.
The present situation is untenable, and the shipping industry has to move fast to reduce – if not eliminate – its greenhouse gas emissions.
The technology challenge
According to experts in the container shipping industry such as CEO of Vespucci Maritime Lars Jensen, who also moderated the recent Future of Logistics Part III TLME conference, shipping lines are presently flush with the profits from recent years and are eager to invest in new ships that will not only burn clean but burn less and most likely reduce operating costs moving forward.
But the liners, despite availability of ready funds, are unable to replace ships quickly enough due the uncertain and uneven technology developments in the fields of ship engine and green fuels.
The current flux in the ‘state-of-the-art’ of new technologies that will be used to design better ship engines - and the green fuels that they will burn - is making shipping lines defer their bets until there is more clarity on these emerging technologies.
Industry Response
Big shipping lines are well-aware of the environmental challenges and obligations. As part of their net-zero strategy majors like Maersk and CMA CGM have placed orders with Hyundai’s shipbuilding arm Korea Shipbuilding & Offshore Engineering for a number of methanol-fuelled vessels that they hope to commission using green and low-emission fuels over the next two to three years.
However, the production of green methanol is yet to achieve industrial scale. Shipping lines are hoping that their large orders for these green ships will accelerate R&D in the production of green methanol or equivalents. In fact, they are doing more than hoping and have already made active investments.
Maersk, has entered into a number of partnerships with green methanol producers like CIMC ENRIC, European Energy, Green Technology Bank, Orsted, Proman, and WasteFuel with the intent of readily sourcing at least 730,000 tonnes/year of green fuels by the end of 2025.
Berit Hinnemann, Head of Green Fuels Sourcing, A.P. Moller - Maersk: "Maersk has set an ambitious end-to-end net-zero goal for 2040 and the availability of green methanol at scale is critical to our fleet’s transition to sustainable energy.
"Partnerships across ecosystems and geographies are essential for the scale-up needed in order to make meaningful progress on this agenda already in this decade.”
One factor likely to adversely affect investment in new builds, is an uncertain finance environment where the cost of borrowing has slowly crept up in recent times. Further, the steady slide since the beginning of the year in ocean freight rates has also not helped matters, particularly with the smaller players who may have to put off their low carbonisation or decarbonisation investment plans for now.
Customer is King
But there is some good news too that has come from several players in the wider markets who are driving sustainability in the shipping industry.
The demand to greenify operations is coming not only from the IMO or other regulators, but today it is also coming from the shippers themselves who are demanding - and publicising – sustainable logistics. Many of the biggest brands today have moved on from paying mere lip service to actually making efforts to clean up their supply chains and make their products genuinely green and emissions-free.
This sudden corporate eco-consciousness is in turn driven by the end customers of today especially the younger demographic who are becoming more aware and conscious of the environmental impact of the products they use as they are the ones who are the most invested in the future of the planet. These customers will drive future demand, and the sustainable choices they seem to be making today, bode well for the future of sustainable shipping.
Future Outlook
Whether the IMO’s target of a 50% reduction in GHG emissions by 2050 is achievable? As of today, that’s anybody’s guess. But there is a palpable sense of urgency building up within the biggest shipping lines to transition to greener operations. The recent large purchase orders of green newbuilds and advance purchases of green fuels are testimony to that fact.
As with any new technology, green shipping is going to come with its own paradigm and the rest of the supply chain today is also making operational adaptations and improvements to ensure the green gains made in shipping are not squandered away by energy-inefficient warehousing, trucking or other last-mile operations.
Like most other industries shipping and logistics too are market driven and more and more end-customers, who are eventually paying for the sea freight, are realising that the choices they make today will affect the choices that they may have to make tomorrow. This customer trend, more than anything else, is going to be the driving force powering green, sustainable ships that will soon be berthing at a port near you.
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