Lord Turner of the UK’s Energy Transitions Commission, recently emphasized that the shipping industry is one of the most expensive sectors within the international economy to decarbonize. Heavy political and public pressure for climate change related regulations is being applied in Western Europe and beginning in the US.
Many analysts believe that emission targets for the shipping industry need to be sped up if they are expected to meet current international climate change goals. Some believe the 2030 and 2050 goals to be very unrealistic. To complicate this matter, these “decarbonization” goals will definitely double freight rates during the proposed transition to “greener,” zero-carbon marine fuels. This topic was keenly discussed at an International Chamber of Shipping (ICS) conference on 11 September 2019, in London UK.[1]
At this conference. policy makers and climate change scientists outlined the challenges faced by owners and charterers of the world’s 60,000-vessel commercial fleet to decarbonize shipping and the enormous scale and pace of change that is being pushed. Despite environmental and regulatory imperatives to reduce maritime greenhouse gas emissions, shipowners were told freight rates would likely double to fund zero-carbon fuels, even as the commercial viability of these products remained uncertain.
Carbon taxes were also announcement as “probable” and was described at a parallel conference on future fuels held at the same time. Many shippers are very concerned with these demands and associated costs. Leading climate change scientist Anders Hammer Strommen suggested greenhouse gas emissions from international shipping must be cut 50% by 2030 and reach zero by 2050 if global average temperatures were to rise no more than 1.5°C. The 50% cut is some 20 years earlier than agreed last year at the International Maritime Organization (IMO). Many scientists and technicians say the technology to shift international shipping to zero emissions by 2050 is available, but freight rates will have to double to fund the higher cost of green marine fuels. It is debatable who the escalated rates will affect the most; shippers or consumers, or both.
Green hydrogen and ammonia are being looked at as the preferred alternative fuels with the most potential to meet ambitious emissions targets and reach commercial scales. Financing the development of alternate fuels for use in vessel engine systems, and then developing the infrastructure to supply them to the ships, is a sizable challenge.
The Environmental Defense Fund executive director for Europe has publicly stated that eventually some form of tax may need to be placed on the (shipping) industry. “Shipping needs to contribute to any solution to reach a zero-carbon economy,” he said. Many political and environmentalists believe the shipping industry is entirely able to adapt to a doubling of freight rates to fund an early transition to zero carbon emissions. Some even suggest they establish a carbon fund to drive the urgent initiatives, this according to Tovald Klaveness (TK) a Norwegian shipping company.[2] TK has stated that collective action is urgently required to establish an industry carbon fund. The proposed fund could be modelled on Norway’s NOx Fund, which requires companies to pay a levy in accordance to the quantity of emissions and uses the money to support for NOx reducing measures. This appears to model other government carbon tax type proposals. Examining the principle that the current carbon cost is about $25.00, and if three tons of carbon is emitted from every ton of fuel burned by the shipping industry, TK projects a rounded cost of $20bn that could easily be achieved with the proper industry support within an international application.
The current climate change debate, along with international political and environmental activist pressures, are forcing many sectors to re-think their future “green” goals. This is very true with all levels of the shipping industry. How this squares with future climate science and economics, remains to be seen.
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[1] https://lloydslist.maritimeintelligence.informa.com/LL1129143/Zerocarbon-shipping-to-double-freight-costs
[2] https://lloydslist.maritimeintelligence.informa.com/LL1129145/Carbon-fund-and-cargo-collaboration-can-fund-zeroemission-shipping
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