Business Viewpoint: Fuelled for change

Low sulphur fuel requirements may command headlines now but attention will centre on zero-carbon fuels beyond 2020 reports Katharine Palmer, LR’s Global Sustainability Manager

While the fuel challenges associated with International Maritime Organization’s (IMO) 2020 global sulphur cap may dominate maritime conversations now, 2020 is only the beginning of the journey as the industry must also navigate the impact of global decarbonisation efforts.

Last year, the IMO adopted an initial greenhouse gas emissions (GHG) reduction strategy targeting at least 50% reduction by 2050. While regulators are currently working on implementation, a revised strategy will be adopted in 2023, and therefore, shipping should also be future-proofing for what’s next rather than simply focusing on the short-term compliance requirements. It’s important to balance this with the longer term, for example, the transition to zero-carbon fuels.

Lloyd’s Register (LR) is working with academic partners to assess fuel and technology trends for the marine industry, including the launch this year of the Zero-Emission Vessels (ZEV) Transition Pathways study in conjunction with the University Maritime Advisory Services (UMAS). This study, the follow up to last year’s Zero-Emission Vessels 2030 and Low Carbon Pathways 2050, aims to show what is needed to enable the transition, both at the ship and supply infrastructure level, to deliver ZEVs that are crucial to achieve the IMO’s GHG strategy 2050 ambition.  ZEVs will need to enter the world’s fleet in 2030 and form a significant proportion of new builds from then on if shipping is to successfully meet IMO ambitions, reinforcing the need that all stakeholders should start taking action now.

A key question this study seeks to answer is the role policy-makers, financiers and consumers must play in the shipping industry’s transition to zero-carbon. For policy-makers, civil society is key given its ability to apply pressure for change. LR’s ZEV Transition Pathways predicts that in the early 2020s, more countries may develop and implement national action plans to address GHG emissions. This may see more ports introduce incentives to ships that demonstrate that they are reducing GHG emissions. By 2030, such efforts may be stepped up, boosting incentives, and allocating funding to ZEVs to create the conditions to support the transition. It is expected that by 2040 national GHG reduction strategies will be the norm.

According to the LR study, the finance sector will need to align new and existing businesses activities with international climate goals. This will involve assessing the climate risk exposure to their portfolios and setting targets to meet GHG strategy goals. Development banks will become active players in this transition by funding ZEVs and in time less funding will be available for non-ZEV projects.

Pressure from consumers will also drive this change with the cruise, RoPax and container sectors expected to be the first movers. Danish shipping company Maersk has already pledged to cut carbon emissions, saying in its recent sustainability report that “all the breakthrough innovation (for decarbonisation) will have to take place in the 2020s and (it) is more than any single company can do.” As research, development and deployment is proven in these sectors, other areas of shipping will follow so that by 2030 ZEVs are proven for all ship types.

So, what does this mean for ship owners and operators now? From a practical perspective, if ZEVs need to enter service by 2030 anyone planning to finance, design or build a ship in the 2020s will need to consider how it can switch to non-fossil fuel later in its operational life. LR’s experience in innovative zero emission technologies, such as wind, hydrogen fuel cells and batteries, shows that the technological solutions are there. More importantly, the study also shows that economics, price and sustainability, as well as timing, are imperative to successfully meeting the GHG 2050 goal, as this creates the optimum conditions for the timing of the take up of ZEVs.

Read the full study here: