The shipping industry is one of the oldest in the world, having been around for thousands of years. It has been a pillar of the world economy; despite the advent of other transportation modes, 90% of the global trade is performed at sea. However, this growth has implied environmental costs, as shipping contributes to 3% of global greenhouse gas (GHG) emissions. Shipping activity releases several amounts of carbon dioxyde (COâ‚‚), particulate matter and sulphur dioxide (SOâ‚‚), all of which harm the environment. But as we transition from a fossil fuel-oriented economy to a greener and environmentally-conscious society, shipping aims to reduce its global emissions in accordance with these ideals.
Major regulations have principally been brought forward by the International Maritime Organisation (IMO), the UN agency responsible for the safety and security of shipping, as well as the prevention of marine and atmospheric pollution by ships. A well-known regulation has been the IMO2020 Sulphur Cap, introduced in 2016 and which required that sulphur content in fuel oil would have to drop from 3.5% to 0.5% mass-by-mass, beginning on January 1st, 2020. The IMO's current target is for shipping activities to have their GHG emissions in 2050 to be at 50% of what they amounted back in 2008, and to reduce shipping's carbon intensity by 40% in 2030 and by 70% by 2050.
With such an ambitious, but also short, time span, the industry finds itself needing to take immediate drastic changes, which has caused many shipping companies to reconsider their operational plans. Moreover, shipowners now rely heavily on the IMO’s regulatory framework for GHG emissions to be enforced before investing heavily in decarbonising technologies. This is because building a new vessel requires a substantial capital investment that can range from $60 million (for large bulk carriers) to $100 million (for large oil tankers). These vessels have a lifespan of 20+ years, hence shipowners fear that upcoming regulations will demand costly retrofitting for a relatively new vessel. To begin complying with such regulations, some shipowners have upgraded their fleet through two different ways. The first is retrofitting some of the existing vessels with an exhaust gas cleaning system (also known as 'scrubbers'). Doing so enables toxic particles generated from exhausts such as sulphur to be neutralised by a cleaning washwater system, which prevents them from being released into the atmosphere. Scrubbers, however, are criticised for using seawater as the cleansing material for sulphur, which is then discharged back into the sea without proper treatment, which could be the source of additional marine pollution. As a result, some ports have forbidden access to ships equipped with scrubbers.
Alternatively, other shipowners have invested in ships propelled by liquified natural gas (LNG), which is said to decrease nitrous oxide and sulphur emissions by 80%, as well as GHG altogether by 23%. Other recently-introduced carbon-free fuels include ammonia, hydrogen, biofuels and methanol, all of which will further cement their role as bunker fuels in the upcoming decades. Major companies like Danish giants Maersk have notably invested in LNG-powered containerships, while also expecting the delivery of 12 newly-build containerships which will be powered by methanol, beginning in 2024. Others have also followed suit, including tanker company Euronav which will renew its fleet by ordering three ammonia-powered ships due to arrive in 2023.
Despite such developments, obstacles persist. While there have been some initiatives in response to the recent regulations, alternative fuels are spotted in only 0.86% of the dry bulk fleet, in 5.42% of the crude oil tanker fleet, or in 4.1% of the container fleet. Such numbers indicate that fuel oil is to remain as the primary bunker fuel in the short run, even if more eco-friendly vessels are built. Additionally, transitioning to such fuels is not as straightforward, as they all possess different storage, temperature, propulsion and transportation properties. This therefore requires adequate infrastructure and upgraded vessels which are fit to incorporate such fuels. This means significant capital expenses, for which many skeptical shipping companies hesitate to invest. Moreover, port infrastructure tailored to alternative fuels lags behind, with only ports in Northern Europe and the US having upgraded their bunkering facilities. Having the remaining ports develop similarly implies a sound investment, for which emerging economies mostly lack the incentive and the means to undertake. Furthermore, several conservative shipping companies have attempted to overlook the regulations by operating vessels in areas in which enforcements are less strict, thus continuing to emit GHG.
Ultimately, a full decarbonisation of shipping requires a more effective collaboration between all stakeholders, from shipowners to port authorities and from national governments to international institutions. Despite such challenges, the industry remains optimistic. After all, the primary reason behind shipping's strong presence and contribution to society and the economy over millennia has been its ability to constantly adapt to the world's needs, and this will continue even as it faces its biggest test yet.
Authors: Alexandros Vrailas, Borja Bartolome and Andreas Krossoy
Copyright: Lloyd's Maritime Intelligence
