Decarbonising shipping - business models will have to change

The clock is ticking, he said, as the IMO’s decarbonisation targets became more ambitious last summer, aiming for a 20% reduction in emissions by 2030, 70% by 2040, and full decarbonisation by or around 2050.

The EU Emissions Trading System (ETS), effective from January 1st this year, further raises the stakes, he said. Now the drive for decarbonisation is not just coming from regulations but through demands for a greener maritime industry from stakeholders throughout the value chain. Cargo owners are a key force – they are listening to their customers and society at large.

“We cannot ignore the reality that the supply of alternative carbon-neutral fuels is nowhere near where it needs to be to reach short-term emission reduction targets,” Ørbeck-Nilssen pointed out, adding that the classification society had estimated that global shipping would require 30-40% of the entire global supply of carbon-neutral fuels if it were to reach the IMO’s 2030 target.

“Now that is highly unlikely, bordering on the impossible,” he declared.

However, there is promising growth in the number of newbuild and retrofit vessels capable of running on alternative fuels. Interest in biofuels is encouraging, he said, and more developments are likely. But to achieve the IMO’s 2030 target without low or zero-carbon fuels, the industry will have to adopt energy efficiency measures. And there are a number of promising options.

Related:New fuels will be late and in short supply - DNV

Later, DNV’s Eirik Nyhus also stressed the scale of the 2030 challenge – “it’s only six years away”. And furthermore, he pointed out, by that time there is a goal that 5% of the energy used by shipping should come from zero or near-zero shipping fuels.

The IMO is proposing the introduction of new measures from 2027, including the introduction of a greenhouse gas (GHG) intensity standard and some form of carbon pricing. However, for these to become effective by that time, the IMO will need to take critical decisions at MEPC 81 in March, less than six weeks away.

Shipping’s inclusion in the EU ETS imposes a cost on the sector’s emissions, with owners having to pay for (GHG) emissions by way of EU Allowances, Nyhus said. Meanwhile the FuelEU Maritime regulation, effective from 2025, will assess emissions on a well-to-wake basis (rather than the ETS tank-to-wake formula) and will certainly drive up the adoption of alternative fuels.

That is because ship operators who continue to use conventional fuels in 2025, Nyhus explained, will be non-compliant from day one. He also pointed out that the UK is planning to introduce its own ETS in 2026.

Related:Complexities of compliance with the EU Emissions Trading Scheme

“So, what you have is the EU ETS in 2024, FuelEU Maritime in 2025, the UK ETS in 2026, and new IMO regulations in 2027 and 2028. There is also the review of the CII regulation in 2025 and I’m sure there will be other changes in this time period,” he said.

Changes to business models will inevitably be required through this “impactful decade” Nyhus concluded.