Conclusions from COP 28 in Dubai this week suggest that fossil fuel use in general will be reduced across industries in the coming 25 years, but maritime is in some ways further along this track simply because vessels operate for 20-25 years and so all new ships must be of a compliant design today.
Technologically the maritime sector has developed solutions, such as methanol and ammonia fuels, engines vessel designs, regulation is being enforced with the major remaining barrier to maritime decarbonisation the financial structures to make it happen.
The NoGAPS: Nordic Green Ammonia Powered Ships analysis of commercialising the ammonia-fueled shipping sector argued that the most likely deepsea service development remains on the Atlantic.
“Shipping will require a policy-rich transition, with a strong policy framework that supports the economic viability of zero-emission vessels,” said the report. which was published earlier this year.
Such a regulatory framework is now coming to fruition with the Inflation Reduction Act in the US and the EU’s Fit For 55 package of measures that includes the EU ETS and the FuelEU among other measures.
“Routes between the two continents, therefore, have unique conditions for first mover action, with the potential for zero-emission shipping to be viable well within this decade,” concluded the NoGaps analysis.
Taking an ammonia-powered vessel design, aptly named M/S NoGaps, that was developed in phase one of the NoGaps analysis the project collaborators, including the Global Maritime Forum, DNV, Yara Wärtsilä, MAN, Breeze Ship Design and others the second phase of the project produced an analysis of how the market could develop zero-emission services.
The study looked at various scenarios that could close the cost of operations gap between green fuel and conventional fuels, including business as usual, strong industry or public sector action, or a scenario that included both strong industry and public sector action.
“Were M/S NoGAPS to bunker US ammonia, the gap could be closed by as early as 2026. This applies to both blue ammonia - produced by conventional means with applied carbon capture and storage - and green ammonia - produced with electrolytic hydrogen - which could reach a premium of just 2% and 3% already by this point,” according to the NoGaps report.
Furthermore, the study reveals that even with more expensive European-produced ammonia, such services would achieve parity by 2030.
Last week UMAS published its latest report on maritime decarbonisation, which it says is a study on selected deep-sea and short-sea routes and the cost of zero emissions container freight shipping.
Essentially the UMAs report was aimed at:
- Identifying routes with high potential for green container shipping corridors.
- Defining technical and operational characterisation of typical vessels operating on identified routes.
- Estimating additional cost differentials associated with zero emission shipping through total cost of operation (TCO) analyses from the present to 2050.
- Estimating the carbon price required to close the price gap with conventional fuel.
One of the authors of the UMAS report, Camilo Perico, told Seatrade Maritime News that the transition should not be thought of as a blanket transition that covers the globe.
“The green corridor tool that we have been working on is one of those things that we are putting a lot of emphasis on because, just as with any other transition, there are segments, in this case routes or niches of activity, that will be better positioned to decarbonised at an earlier stage, explained Perico.
As such UMAS believes that there will be three phases in the maritime transition, emergence diffusion and reconfiguration.
The UMAS report focuses on the critical emergence phase that will kick-start the transition in earnest.
“In the short term, before IMO policy levers enter into force [expected in 2027], addressing the cost gap will require sharing this cost across the value chain, including end customers' willingness to pay for zero-emission shipping services. This report focuses on this as a mechanism to accelerate the emergence phase of shipping’s transition to zero-emission, particularly because progressive shippers can operate ahead of global policy frameworks such as that of the IMO,” said UMAS.
To achieve those goals UMAS analyses the potential of two routes in particular, Asia to the US West Coast comparing the total cost of operations (TCO) for a 15,000 teu vessel and a domestic Chinese route operating a 4,000 teu ship.
Source: UMAS
Analysis by UMAS includes the TCO of green methanol and ammonia and bio-methanol compared to conventional fuels on the two selected trade lanes. It is important to understand that the UMAS report does not consider the effects of the Inflation Reduction Act (IRA) in the US and Fit For 55 market-based measures or any regional subsidies, but relies only on the cost gap between technologies.
As such UMAS’ key findings were that for 2030 the cost gap for green fuels on the Pacific trade was in the range of $90-450/teu, while on the coastal route the range was between $30 and $70/teu.
In the UMAS analysis the cost of green methanol and ammonia converges and decreases in the 25-year period between 2025-50, but remains significantly higher that low sulphur heavy fuel oil.
Source: UMAS
Perico, however, confirms: “We were only looking at the technology angle, and this is our estimates for the worst-case scenario.”
He went on to agree that with the enforcement of new regulations, the IRA in the US and the EU Emissions Trading System in January, from a ship owner’s point of view, “Considering the opportunity that is already on the table now you would look at places where you can bunker that are supported by the IRA and combine it with EU regulation, that will probably be on the Atlantic trades.”
Momentum gained over the last six years of maritime decarbonisation is now gathering pace, with major developments technologically, in regulation and in the financial sector expected to further drive maritime decarbonisation into the short to medium term.
For Perico, the EU drive to decarbonise has already shown the way forward and he believes that the momentum from the regional developments in Europe will drive further decarbonisation developments in regulation and finance in the future.
IMO is expected to introduce a global market-based measure by 2027, and UMAS is planning a follow-up project, “One of the things that we are assessing is how to best provide insights that can then be used to support the momentum,” confided Perico.
A path to maritime decarbonisation is becoming clearer, and green campaigners are becoming increasingly confident that shipping can meet its targets.
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