Shipping facing ‘a brutal decade’ on its decarbonisation journey

Panellists at today’s UK Chamber of Shipping conference on Pathways to 2030 weighed up the tough challenges facing shipping over de-risking investment in decarbonisation technologies and fuels whilst keeping up the pace on its energy transition.

In an environment break-out meeting, moderated by Tom Strang, Senior Vice President Maritime Affairs for Carnival Corporation, the difficulties surrounding shipowners’ decisions over the new bunker fuel options were set out by Bud Darr, Group Executive Vice President, Maritime Policy and Government Affairs at Mediterranean Shipping Company.

‘It’s not wise to be looking for one solution as the solution,’ he said. ‘We can’t afford to take the risk that we are wrong on one solution’.  He called for industry collaboration on finding routes to decarbonisation, as well as a diversity of fuel and technology choices, which should be supported by ‘sensible, thoughtful and pragmatic regulations’. However, Darr highlighted, ‘The most significant impediment that we are facing is not regulation, it is the lack of viable solutions’.

Howard Lungley Senior Sustainability Consultant at Frazer-Nash, also addressed the issue of ‘no regret investment’ in shipping’s decarbonisation. He suggested that lessons could be learned from the commercial electric vehicle fleet sector, which has adopted a step-by-step approach. A phased-in deployment of technologies or fuels is preferable to trying ‘to do everything at once,’ he said.

While industry might have an inbuilt inertia, once momentum on development builds and a tipping point is reached, ‘then things can happen very quickly,’ said Lungley.

He also noted that the attributes of a ‘successful’ business will also change going forward and will be focused on ‘experimentation, learning and innovation’.

Bud Darr picked up on one of the key themes of the conference: shipping will have to compete for its fuel against other market sectors. While green hydrogen may be one of shipping’s preferred future fuels, available quantities are small at present and other industries also want to transition to its use. As such, shipping must take steps to send out its ‘demand signals’ before market competition for green hydrogen really ramps up, he said.

Tristan Smith of the UCL Energy Institute also pointed to those companies that are positioning for the energy transition because they have ‘the opportunity to vertically integrate [products] through the value chain even more’. He highlighted Japan’s Itochu, and global commodity trader Trafigura, with its marine fuel and cargo operations, as examples of this.

Smith also highlighted the potential for some companies to be ‘disruptors’ in the energy supply chain. A company such as ammonia producer Yara could, hypothetically, move into the supply sector with a ‘disruptive’ offer of lower cost fuel.

Nick Brown, CEO of Lloyd’s Register, saw the energy transition as ‘a real opportunity for more capital to flow into the industry’. Bud Darr said that if the industry wants to attract investment for the energy transition, then it must have a strategy to manage its risk and engage in a range of diverse R&D projects.

The discussion then turned to the European Commission’s proposal to include shipping in the EU Emission Trading System (ETS) – this could be implemented as early as 2022. Darr said the EU ETS proposal was ‘not a good idea’, and he favoured a global approach to the introduction of levies or market-based measures. The shipping industry is not being ‘the obstruction’ in the discussion about a global solution at IMO level, he said, rather progress is being hampered by inter-government ‘diplomacy’.

The EU’s unilateral action was ‘essentially a tax on trade,’ said Darr, and there was a danger that other countries would retaliate or implement their own measures.

Smith said that although a global solution might be the preferred option, the IMO could take years to act on this. Lloyd’s Register’s Nick Brown said that ‘for us regulation is critical [and it will] send a strong message to the fuel suppliers’. However, he continued, ‘it would be good if IMO could move in pace with the demand for that regulation’.

He also highlighted that there is a role for national and regional regulation in some instances, such as for domestic fleets.

UCL’s Smith emphasised the importance of accelerating shipping’s transition in the context of climate change. ‘We have no choice – we have to decide things at speed,’ he said. ‘It’s not an academic exercise, it’s a survival exercise.’

Lesley Bankes-Hughes

Lesley Bankes-Hughes