Year 2021 was very important for European shipping in its path to zero-emission targets. This year, in June 2021, International Maritime Organisation (IMO) decided on measures to reduce the carbon intensity of shipping by 11% between 2019 and 2026, and that total annual greenhouse gas (GHG) emissions from international shipping should be reduced by at least 50% by 2050 compared to year 2008.
Furthermore, in July 2021, European Commission presented the Fit for 55 package, which included proposals for the inclusion of shipping in the carbon trading, the carbon content of fuels, the abolition of duty-free treatment of bunker and the distribution infrastructure for alternative fuels. In practise, these actions driven by EU put more pressure on shipping that those decided by IMO.
There are three approaches to reduce emissions from shipping: (i) low-carbon fuels, (ii) improved ship design and other technological developments and (iii) operational solutions, i.e., ship type selection and ship speed choices. Energy companies are currently in an accelerating debate about fuel solutions and ship designers about new technological solutions, but the operational solutions can still bring the biggest emission reductions at the lowest cost.
It is estimated that trillions of euros will be needed to achieve the carbon neutrality in shipping. This is calculated by using the currently commercially-available technology as the assumption. The question in the whole shipping area is – as we do not know what kind of technologies there will be available for shipping in a decade or two – how can the shipping companies prepare themselves for the coming new regulations?
There are six important steps how the maritime sector can prepare itself for the carbon-free future. First four actions are for shipping companies, one for shippers, and one for regulators.
- First, shipping companies should improve the energy efficiency in their newbuildings. The service life of a vessel is practically always more than 20 years, up to 30 or more. It is therefore very important that the ship designs on the table are as energy-efficient as possible. This action has already decreased substantially shipping companies’ emissions, for example bulk vessels being built today can use 50% less fuel compared to the ones being built 10 years ago.
- Second, shipping companies should pilot various technical solutions to increase their energy efficiency. These include rotor sails; smart IT- solutions to manage data for maintenance, bunker optimization and safety; air lubrication systems; use of batteries in ports and fairways; information for port arrivals, etc. There are multiple solutions for energy efficiency of vessels being developed around the world, and shipping companies should be active to get them to everyday use. Their effect might be only a few procent in decreasing the carbon emissions, but they are always worth to test. It is the total effect what counts.
- Third, shipping companies should reduce their speed and port companies improve their operations. One of the most efficient ways to decrease greenhouse gases of vessels is to reduce vessels’ speed. With the fastest vessels, a drop of few knots can decrease the emissions by one third. In many cases, the improvement of data operations and cargo handling in ports save time that can be used at the sea without increasing the total transport time.
- Fourth, shipping companies should prepare themselves for the new low or zero carbon fuels. We do not know what is the fuel of tomorrow – is it hydrogen, ammonia, biofuels, methanol, or even electricity? Or them all? However, some of them are coming and shipping companies should increase their knowledge of various alternative fuels suitable for their own business models.
- Fifth, shippers cannot solely rely that maritime sector will change their operations. Shippers should also re-evaluate their full transport chains. Are there possibilities to use slower speed vessels instead of high-speed, or use containers instead of trucks, or rail instead of road, or have more cargo transported at the same time, or more precise cargo tracking to give better estimations for the time of arrival? Should there actually be more inventory and not to rely on fast transports? These decisions have to start by analysing the needs of the final customer, e.g. are they actually wanting high speed or just to have the products when needed.
- Finally, authorities and regulators have to introduce rules and support mechanisms and carbon taxes to help shipping industry to move towards carbon-neutrality. It is very important that these rules and mechanisms treat shipping companies in a fair way, so that they really focus on carbon reduction and do not make unfair situations in competition.
By following these six steps, there is a way for shipping sector to achieve carbon neutrality in a balanced way and make the shipping companies even stronger in the future.
This article has been published in Baltic Rim Economics 5/2021 8.12.2021.