Maritime transportation underpins the global supply chain and the interdependencies among global economies. Its importance became more evident during the pandemic. Despite adverse conditions and strict lockdowns, it kept the global economic wheel running. Accounting for nearly 80% of global goods movement, this indispensable mode of transportation adds almost 940 million tonnes of CO2 and contributes nearly 2.5% to the worldwide greenhouse gas basket.

The current scenario

Under a business-as-usual scenario, with increasing demand, these emissions are projected to increase between 50% and 250%. These numbers appear to be worrying, but statistically, shipping is only a modest contributor compared to other modes of transportation. Despite this, it is beyond any doubt that maritime decarbonization would play a key role in achieving the targets set by the Paris agreement and help avoid catastrophic impacts due to climate change. The maritime industry knows what it wants by 2050, but the entire global debate rests on ‘how’? How are we going to get there? Will it be sustainable for all stakeholders? 

Lloyd’s Register of Shipping recently claimed that by 2030 Zero-Emission Vehicles (ZEVs) must be a serviceable reality. But ZEVs would require substituting present energy sources with alternative zero-emission and sustainable fuel sources. Existing infrastructure and propelling machinery that is capable of burning LNG have popularized it in the shipping industry. LNG reduces emissions from the ship’s funnel and allows ship operators to abide by IMO Sulphur caps and claim to be ‘greener’ and ‘environment caring’. Efficient biofuels are considered by many to be the silver bullet that can decarbonize the complex maritime sector. These can reduce tank-to-wake emissions, but (taking a holistic overview) it is not sustainable. LNG has higher upstream emissions, whereas biofuels require a more significant landmass to meet the energy demand. These challenges faced by biofuels and LNG make them only pro tem solutions.

Options available

Harnessing energy, for maritime application, from hydrogen and ammonia is also on the table as a substitute for fossil fuel derivatives. These can be used as fuel in fuel cells or retrofitted dual/tri-fuel internal combustion engines. When sourced from renewable sources (green hydrogen) can genuinely be zero-carbon fuel, leaving zero well-to-wake emission, and can be a link to form an actual green supply chain. The potential of hydrogen to power all modes of transportation – land, sea, and air – clearly gives it an edge above other fuels. Many economies that were initially pumping out fossil derivatives are now exploring their potential to produce hydrogen from solar energy and transport this to the world. 

Ambitious announcements by major shipping companies like Maersk about decarbonizing their fleet have already sent a demand signal for alternative fuels and supporting infrastructure in the global energy market. But this has surfaced a reality that the marine industry would have to compete with others to procure their clean fuels. Moreover, clean fuels have a challenge of higher energy density associated with them. Due to this, there is a considerable gap between the cost of traditional fuels and prospective alternate fuels in the present market scenario, which is disadvantageous for smaller shipowners and operators.

To close this gap from a cost perspective, we must ensure that vessels must bunker lesser fuels. For this, maritime operations must consider the practice of energy efficiency. This core concept is embedded in routine marine operational planning and execution. Be it better route planning, port operation optimization or efficient ship design, all must be planned by keeping energy efficiency in mind. It should be embraced by all stakeholders, as it offers a great mix of sustainability and cost-efficiency. Focusing on energy efficiency would also allow small ship operators to contribute to maritime decarbonization because, undoubtedly, setting hard regulatory deadlines for adopting alternative fuels would create imbalance. 

The path forward

Now that shipyards have started building zero-emission ships (although presently few), we can say that the maritime sector is out of the chicken-egg situation with alternative fuels. Apart from the technical aspects, to decarbonize the maritime industry, companies must develop new business models. Maritime decarbonization is a capital-intensive activity. The Global Maritime Forum’s reports have claimed that the upfront requirement is USD 1.4 trillion. Much of this investment would be needed to research and increase the efficiency of energy-converting pieces of equipment and create a robust supply chain for alternative fuels. This makes the right environment for banks and other financial players to collaborate with emerging economies in developing infrastructure and supply chains for alternative marine fuels or a green supply chain. An example would be producing green hydrogen from renewable energy sources in countries traditionally not blessed with energy sources from fossil fuels.

Based on matrices like IMO DCS and other GHG scales, banks and financial institutions are now investing in shipowners and operators in the form of cheap loans or bonds. But what is in it for the shipowners or operators? Charterers get a higher price for cargo, and banks would get a higher return on their investments, but shipowners and operators do not benefit much. Nowadays, customers are more conscious and are willing to pay slightly more for green transportation. Thus, increasing the shipping cost proportionally for efficient ship operations (eventually reducing emissions from the funnel) would not increase the product’s competitive price at the shelf. Here is an opportunity for shipowners and operators to reap the benefits of decarbonization. 

In Conclusion

Due to its complex and fragmented nature, there is no silver bullet for achieving maritime decarbonization. But we have an opportunity to build a green supply chain, as the consumer is ready to pay. We have the resources and technology available, along with finances. Undoubtedly, when pinning down which alternative fuel would be the actual fuel of the future, no one size fits all. The maritime industry’s competition with other sectors in procuring these alternative fuels makes energy efficiency an important factor and an essential step in the next five years regarding achieving decarbonization. We can reduce emissions from shipping and achieve decarbonization. The onus should be shared by shipowners, financiers, cargo owners, consumers, and regulatory organizations.