The industry’s focus today is firmly on 2020 and the looming IMO regulatory deadline on sulphur limits in marine fuel. Although challenging in the short term, this regulatory shake-up will pale into insignificance compared to the IMO’s targets for reduction of greenhouse gases from shipping.
The targets for long term carbon emissions reductions after 2030 and towards 2050 are not challenges that we have solutions for at present; we won’t be able to use today’s technology alone to meet tomorrow’s efficiency, air pollution or carbon emission requirements.
The IMO’s 2030 GHG reduction target is relative to transport work and therefore gets some relief from the growth in trade. The 2050 target is a reduction of total greenhouse gas emissions and even if we assume a slower trade growth than today, it will not be possible to meet the target with existing technology and vessel tonnage.
This will require new ways of thinking about innovation and collaboration. The year 2050 may seem far away but the technology development, adoption and implementation must start before 2030 to enable the needed shifts in technical and logistics solutions.
Investment risks are real
Another uncomfortable reality is that the investment required to reduce and ultimately to remove carbon will be large, at a time when global economic conditions are uncertain and questions are emerging about the long term sustainability of some business models.
Shipping is an industry used to commercial risk and opportunity, but early engagement and compliance with new regulations is something that should be encouraged and not punished by regulatory uncertainty. The industry needs regulation that provides a level-playing field for all and a means of compliance that is available, technically proven and commercially attractive. Without these key criteria there is a huge regulatory risk attached to the period between 2030 and 2050.
Every stakeholder, whether a shipowner, charterer, or investor, must consider the lifecycle risk to the asset values when making investment decisions in a low-carbon and ultimately no-carbon future. The risks include regulatory viability, meeting charterer and end user sustainability requirements and cost competitiveness.
Mitigation of these risks will require the ability to reward not to penalise early adopters of new technology and give some certainty to followers, incorporating technology options at newbuilding stage as well as for retrofitting and clearing the way for investment in the development of new technologies.
Understanding the impact and efficacy of the available technology options and their degrees of maturity will be critical in decision-making for investors, owners, shipyards and charterers.
We must also be realistic: the transition to a low carbon future is likely to add cost to seaborne transportation and we do not yet know the scale of that additional cost. This will be the cost of the sustainability of the industry in the long term; it is critical that the contribution of shipping to the global economy is understood and that it is seen as a positive contributor to global trade. While we will pay our share accordingly, we also need our unique role in global trade to be recognised.
To do this requires that the industry engages and educates not just stakeholders but the public as end consumers – people who are increasingly interested in the environmental footprint of the products they buy.
How do we get there?
The Third IMO Greenhouse Gas Study found that shipping accounts for on average 2.6% of global CO2 emissions based on 2007-2014 data. This percentage reflects how efficient shipping is in transporting almost 90% of the worldwide trade. However forecasting growth in trade and seaborne transportation the shipping CO2 emissions are estimated to grow by 50-250% within the current energy efficiency and regulatory framework.
Since shipping is already an efficient mode of transportation and significant low-hanging reductions in fuel consumption have been achieved in recent years with design and operational improvements, it will be difficult to achieve additional major improvements using current technology.
To reach these targets will require a combination of measures which could include radical improvements in ship design, the development of new fuels, energy sources and propulsion alternatives as well as the concept of slow steaming, market-based measures and application of digital technology.
The reduction targets by 2030 are challenging but since they are measured against cargo transport work they allow for trade growth. However the measures prior to 2030 must take into account the 2050 total reduction target to account for the trade and transportation growth while reducing absolute GHG emissions. This will push the industry towards new frontiers of technology.
Application of digital technology
Simplification of shipping with the application of digital technology has potential to introduce the biggest reductions in fuel consumption and emissions by optimising the speed, reducing waiting time, and minimising contractual transactions.
Digital technology and improved connectivity will allow next generation performance optimisation, preventative maintenance, better positioning of ships with cargoes. The opportunities seem limitless, but the implementation is not without challenges. The question is “when” rather than “if” on the introduction of digital technology into shipping in a larger scale.
Among the most significant development in ship design and operations for the future is the introduction of smart functionality. This technology can benefit both new and existing ships long before we consider issues such as vessel autonomy. Using a systems approach to design and better system integration during construction has potential to improve the operational efficiency and safety of vessel across the board.
Greater standardisation and the use of robotics in design and construction will also improve system reliability and robustness as well as construction quality, an issue that is commonly cited for shipping’s inefficiency.
Increased reliability, combined with preventive and predictive maintenance and 3D printing will bring a step-change to inventory management of spares, operations and maintenance, also improving lifecycle efficiency.
New fuels, energy sources and operational alternatives
New low-carbon and zero-carbon energy sources are needed to reach the 2050 total reduction target. LNG is a viable alternative with some contribution to CO2 reduction. Other alternatives that can use current technology include LPG, methanol and ethane.
Renewable energy sources offer an opportunity for zero-carbon energy and in applications available today they are used to provide a reduction in the conventional fuel consumption, but with more development work we can expect greater application.
Although many new energy sources and propulsion technologies are being tested today, more development work is needed to make them viable options for world-wide shipping.
Slow steaming in the low charter rate and freight rate environment has already had an effect on CO2 emission levels compared to 2008. Further slow steaming may be expected in 2020 by owners wanting to control their fuel cost. However, regulating slow steaming is not a simple solution. It would require a definition of slow steaming for each ship type and size, and it would require establishing minimum power requirements for safety.
Speed optimisation for vessels is a good technical solution. Although it is relatively easy to accomplish for a single vessel it would be more complicated to put into a regulatory framework.
Even with regulatory complications both slow steaming and speed optimisation should be included in the studies as potential compliance options, as they are already widely used by the industry to respond to market conditions.
Market based measures are the most controversial topic in the de-carbonisation debate. ICS has supported Fuel Levy approach in place of Carbon Tax alternative. The objective would be to use the collected levy to partially fund the low carbon technology.
No time to wait
Despite the scale of the shift the industry must make, our clients are challenging us and other industry partners to engage now with the IMO targets rather than wait until the regulations mandate the course of action.
The future sustainability of the industry requires innovation across the board – including technology and business model and ABS is well positioned to contribute to the innovative process. The industry needs regulation that provides a level-playing field and ABS can provide technical advice to the regulatory development process.
Understanding the available technology options and their maturity will be critical in making investment decisions. ABS can make technology evaluations as well as techno-economic analyses to support decision making and as an independent party ABS can provide information to all stakeholders whether on regulations, technology options or the collective experience with technology.
Our latest program is designed to support the adoption of more smart technologies by a wider range of shipowners. Future technology development will introduce many new solutions to the market and more than ever there will be a need for independent evaluation of their feasibility and verification of their safety.