Local regulations “spell trouble for international shipping,” warned DNV GL Maritime’s CEO Knut Ørbeck-Nilssen this week (22 September), saying that “local and regional law makers are increasingly demonstrating impatience and distrust with the IMO’s progress.”
He took the opportunity of a webinar held to launch the 2020 edition of its Maritime Forecast to 2050 – which assesses the industry’s transition to a carbon-neutral future – to express concern at the European Parliament’s support to bring shipping into the EU’s Emission Trading System (ETS). “If this goes through … this has global implications,” he said.
Speaking to me later, he echoed concerns expressed in reports by the World Shipping Council and by ECSA and others. A large proportion of the world’s ships trade into European waters but many do not, giving them a cost advantage. “A level playing field is vitally important for shipping” he said and urged the EU to support the IMO and the developments being made there.
Instead of legislation, initiatives such as Norway’s Green Shipping Programme and the EU’s own Green Deal, which was launched in December 2019 and includes shipping in its scope, are better ways of encouraging decarbonisation, he suggested.
DNV GL’s latest report is the fourth in an annual series and this year includes more modelling scenarios, including one that assumes decarbonisation by 2040. The report’s lead author and principal consultant for regulatory affairs in DNV GL Maritime Tore Longva, told me that this shorter timescale was studied to reflect the EU’s expectations but also because he believes that “society actually expects more, and that could impact the next revision of IMO’s strategy.”
To achieve that goal, after 2030 “things have to move really, really quick,” he said during the webinar. Bio-methanol would be the fuel of choice he predicted, because “it’s relatively easy to make and has a fairly good energy density.”
LNG: a ‘robust’ choice
If 2050 is the target, however, then Mr Ørbeck-Nilssen advises that “installing a dual-fuel LNG engine is a robust choice for today” because it allows flexibility in the future. “Seizing the opportunities of decarbonisation is critical to optimising a ship’s earning potential,” he urged.
On that basis, “shipping must start on a decarbonisation pathway and this decade is going to be instrumental” in preparing for that transition. “We need a massive scale-up of new technologies and better fuel alternatives” he believes, warning that regulations and incentives will have an impact from as soon as 2023 and saying that shipping must develop a new generation of carbon-neutral ships. Looking beyond LNG, “it seems that ammonia and methanol are very promising fuels with electro- and bio-LNG and MGO as transitional fuels,” he said.
Apart from ammonia, these are clearly carbon-containing fuels. In my view, those cannot be considered ‘carbon-neutral’, especially as the report focuses on tank-to-wake CO2 emissions, rather than well-to-wake emissions. This portion of the fuel’s journey accounts for more than 90% of its total greenhouse gas emissions, Tore said, and because of that, “we assume that all biofuels, electro-fuels and blue fuels [fossil fuels coupled with carbon capture and storage] are all carbon neutral.”
Regular readers will know that I have written before about the difference between those two measures, especially in connection with IMO’s greenhouse gas emissions policies, and I hope that IMO might shift its stance towards a well-to-wake comparison. I believe this opens the door to carbon-containing fuel options if they have been produced in a sustainable way, avoiding the need for such fuels as hydrogen and ammonia, which are difficult to make and store.
So during the Q&A I asked what difference it would have made if a well-to-wake analysis had been made, and Tore confirmed that “it would certainly impact which of the other fuels would be applicable” but did not believe it would affect his overall conclusion that ammonia or methanol are the preferred long-term fuels.
That conclusion had emerged from the study’s assessment of 30 scenarios and I encourage you to follow the link above to read the full report. Tore summarised its findings, saying that fossil fuels including LNG will be in rapid decline or phased out by 2050, leaving ammonia and methanol as the most promising fuels.
But that is dependent on the prices and availability of primary energy sources. If there is enough sustainable and reasonably-priced biomass, then bio-methanol will be the leading fuel. If cheap and renewable electricity is available, then electro ammonia will be the best fuel. ‘Blue’ ammonia might also be a viable option, using captured carbon and methane as raw materials.
In the meantime, he echoed Knut’s backing for LNG. The report includes what Tore called a ‘stress test’ of the business case for a Panamax new building by looking at three existing engine and fuel options. Over a 20-year period, a dual-fuel engine emerged as “the most robust choice” he said, and listed three factors in its favour: it is cheaper than diesel fuel, it yields 20-25% emission reductions, and there is more flexibility than other fuels in planning its onboard storage.
What seems to be lacking is industry commitment. At present, he said, only 1% of existing ships and 10% of newbuildings are able to use alternative fuels, and those are typically small vessels; “in terms of total energy use, of course the share is much lower.” Nonetheless, he added, a lot of innovation starts on small vessels and is then scaled up.
I am sure he is right, but there is a lot of scaling up to be done, especially if regulations bring the decarbonisation deadline forward to 2040. Many ships in service today will still be in operation then and their owners and operators will face some big decisions between now and then if they are to stay compliant and profitable.
Tore’s report acknowledges the risks ahead. “Picking the wrong solution can lead to a significant competitive disadvantage,” says a section titled ‘Managing carbon risk’ and in his webinar presentation, he said that in this decade, “all stakeholders need to work together to enable the business case for the shipowners to use carbon-neutral fuels.”
He set out some suggestions in the image I have reproduced here, but he believes there are many more mechanisms that could be used. “In order to have the massive uptake that’s needed, you need to ensure that you have a business case,” he stressed.
I applaud his message. I have listened to too many discussions about decarbonisation and other environmental goals that seem to ignore or sideline that basic point. But shipping companies are not charities; if regulations or other factors make their business unviable, they can invest in other industries. Knut warned about the dangers of local regulations but we should not ignore the unintended consequences of global rules.
What action are you taking to decarbonise your ships or your business? What risks do you think the industry faces along the journey?