Shipping helps facilitate economic activity. In a 2018 report,i the World Trade Organization shows that total merchandise exports were valued at nearly USD17.7 trillion. The United Nations Conference on Trade and Development estimates shipping carries 80 per cent of global trade.ii However, ships run largely on heavy fuel oil (HFO), which means they are a source of carbon emissions and contribute to climate change. In ‘The Second Frontier. Why the Transport Sector is Next in Tackling Climate Change,’ HSBC Global Research estimate that shipping contributes 1.6 per cent to the global greenhouse gas mix. While this is a small share compared to power (27.2 per cent) and road transport (11.9 per cent), the Energy Transitions Commission (ETC)iii calculate that business as usual (BAU) shipping activities could account for up to 13 per cent of total emissions by 2040 when including freight volume growth and with emissions from other sectors declining to meet Paris Agreement goals. Decarbonising the shipping industry would therefore help mitigate climate change. In April 2018, the International Maritime Organization supplemented its plans for regulating sulphuriv by publishing a strategy to enable a minimum 50 per cent emission reduction by 2050 compared to 2008 levels.v
To deliver zero carbon emissions in shipping, which is technically feasible, higher energy efficiency and fuel shift are the important transformations. Firstly, the energy efficiency improvements found in new and existing vessels, such as more efficient internal combustion engines (ICE) and new engine design can deliver a 15-55 percent carbon emission reduction, according to the ETC’s latest report ‘Shipping: Mission Possible.’ Secondly, significant emissions reduction could be achieved through fuel shift. The use of liquefied natural gas (LNG) instead of HFO can reduce carbon emissions by up to 12 per cent vi but is still an emissions contributor. Substituting HFO to low-carbon fuel such as ammonia, direct hydrogen, and sustainable biofuels and biomass can enable zero carbon emissions for the industry. These options are currently at test stage.vii Further, renewables could power short-distance freight ships through batteries, but their status of development does not allow for propelling long-distance freight.viii
However, existing barriers for the use of lower-carbon fuels in shipping include cost considerations and the carbon intensity of local power supplies. The ETC find that currently, a low-carbon fuel shift in shipping implies a cost of USD150-USD350 per tonne of CO2 avoided. This compares with USD100-USD230 for aviation. The ‘Zero-emission Vessels 2030’ study by Lloyd’s Register and University Maritime Advisory Services (UMAS) finds that a drop in electricity prices to $0.02 kW/h can reduce costs associated with a fuel shift and even improve the cost competitiveness of ammonia and hydrogen with HFO in existing vessels. Furthermore, the carbon intensity of power supply to the local economy, measured as the ratio of carbon emissions from producing electricity per kWh of electricity generated (gCO2/kWh), must be under 200 gCO2/kWh for ammonia and 175 gCO2/kWh for hydrogen for the decarbonisation aim to make sense, according to the ETC. This could be possible where the local power mix is provided by renewables and hydro, but in many countries this is not yet the case. For example, the International Energy Agency projects these levels of carbon intensity of the power system to be achieved sometime between 2020 and 2025 for the European Union (286 gCO2/kWh in 2016), by 2030 for the United States (426 gCO2/kWh in 2016) and sometime after 2035-2040 for China and India (650 gCO2/kWh and 778 gCO2/kWh, respectively in 2016).ix
The ‘Zero-emission Vessels 2030’ study also looks at the potential for biofuels and biomass in shipping. While technically feasible, and these incur relatively low capital costs, there are other competing uses for biomass such as for power and food production, which means the uptake of these fuels is likely to be less prominent.
The decarbonisation roadmap for the shipping industry points towards more energy efficient vessels mostly propelled with lower-carbon fuels. This transformation is still in the early stages however. Technological innovation and investment in a new generation of ships coupled with cleaner and cheaper electricity to produce ammonia and hydrogen would speed up the transition.
iWorld Trade Organization, World Trade Statistical Review 2018
iiUnited Nations Conference on Trade and Development (UNCTAD). Review of Maritime Transport. 2018
iiiEnergy Transitions Commission, Reaching Zero Carbon Emissions from Shipping, 2018
ivDecision by the International Maritime Organization, 70th session of the Marine Environment Protection Committee to implement a cap on sulphur content of fuel oil at 0.5 per cent mass / mass in 2020 (24-28 October 2016)
vDecision by the International Maritime Organization, 72nd session of the Marine Environment Protection Committee, setting the industry’s level of ambition for carbon emission mitigation by at least 50 per cent by 2050 compared to 2008 levels (9-13 April 2018).
viEnergy Transitions Commission, Reaching Zero Carbon Emissions from Shipping, 2018
viiiEnergy Transitions Commission, Reaching Zero Carbon Emissions from Shipping
ixInternational Energy Agency. Webpage: Power. Tracking Clean Energy Progress