When it comes to cutting shipping’s carbon footprint—and achieving the IMO’s ambitious targets for 2030 and beyond—early movers say collaboration is critical. While this may be the case, with so many competing interests across the value chain, adopting a collective approach to decarbonisation isn’t an easy undertaking.
This topic took centre stage during a recent seminar hosted by ABS. Panelists included George Wells, the head of assets and structuring at Cargill Ocean Transportation, who conceded that the adversarial nature of relationships between many owners and charterers can impede collaboration and, ultimately, the pursuit of joint initiatives such as those aimed at curbing emissions.
“It's about defending their interests under a charter party, not about collaborating, or making the vessel perform in its most efficient way,” he said.
“This is why we’re focusing on trying to break down these barriers. We want to work more collaboratively with our owners, which is why we're investing in energy saving devices on vessels that we charter, and working with the owners on things like digital tools to better operate the vessels under our charters.”
What can be done to facilitate greater collaboration across more of the global supply chain? Bo Cerup-Simonsen, CEO of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, argued that understanding individual motives— and tailoring incentives accordingly—is essential.
“I think an important part of driving a professional collaboration platform is also understanding those different incentives from the different players in the supply system, and then making sure that all the different players have a good incentive to be part of the collaboration, meaning that we share the risk, we share the financial contributions, and we share the results in a smart way,” he said.
Fuels of the future
When moderator Lindsey Keeble of Watson Farley Williams pressed panelists about the biggest barriers to decarbonisation, the economic issues associated with alternative fuels topped their list of concerns.
Ole Graa Jakobsen, vice president and head of fleet technology at Danish shipping giant A.P Moller-Maersk, pointed out that the requisite infrastructure will carry a massive price tag. While the clock is ticking, it’s unclear which fuels will get traction and are most feasible to scale. As such, few investors are willing to take a leap of faith. In the absence of clarity about the right solution, he said, the risk is just far too high.
Jakobsen also noted that non-fossil fuels will most likely be more expensive, which begs the question: how will owners and operators cope with the added cost?
Today, in response to rising consumer demand for carbon-neutral products, some of Maersk’s customers are willing to pay a small premium for green transportation. That said, the expense of future fuels such as methanol and ammonia will be far higher than those of current alternatives like biodiesel.
“Some of our customers with high sustainability ambitions are willing to absorb the added cost of carbon neutral transport, based on biodiesel but, when we start moving into some of the more scalable options that will come down the road, these are expected to be much more expensive and we don’t anticipate that our customers will be able to cover the whole additional bill, they cannot absorb that, “ he said.
Jakobsen reiterated the need for a mechanism that makes carbon-neutral fuels a competitive, economically viable solution.
While Maersk has met with fuel producers that are interested in developing alternative fuels at scale, he conceded that his company, like many others, are unable to offer the guarantees that are needed to get the ball rolling.
“They want assurances that we’ll take the fuel so they could get the investment running, but we cannot ensure that we will offtake the fuel because there’s not an economic business case for doing so [at this point in time],” he said.
Today, many of the tools that are reducing emissions have tangible economic benefits. It’s well understood that burning less fuel saves money. The commercial benefits of alternative fuels remain elusive. As such, George Wells agreed that incentive schemes are essential for the success of both global and regional decarbonisation directives.
“The energy saving devices, the fuel efficiency things that we can-do on-board vessels today, all make sense today because they save fuel and have a successful payback, they make economic sense,” he said.
“As you move forward into the zero-carbon fuels [the economic benefits] are less obvious, which is why we will need some help to incentivise the transition and innovation in the sector so we don't punish or deter first movers. I think that, at some stage, we will have to put some sort of price or cost on carbon to help us with that transition.”
Conversation comes full circle
At ABS, engineers and specialists are exploring decarbonisation solutions that are safer, practical and economical. Georgios Plevrakis, the organisation’s head of global sustainability, stressed the importance of this approach during the event, the replay of which is now available on-demand.
The success of decarbonisation incentives, he said, hinges on collaboration.
“What we found in our recently released Pathways to Decarbonisation Outlook is that we need initiatives and efforts that go across the value chain. It's only through collaboration and synergies that this can be achieved, that you can actually investigate the different technologies,” Plevrakis explained.
“You can create bridges between the supply and demand of energy fuel sources and scale up the ones that emerge as solutions….zero-carbon and carbon-neutral fuels need to make economic sense and also scale up, and you can only do that through open dialogue, collaboration and synergies.”
Plevrakis believes collaboration platforms such as the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, an endeavor in which both ABS and Cargill are charter members, represent the best way forward for partners and the industry at large.
When it comes to realising collective decarbonisation goals it’s not a question of whether the industry can do it-— it's a question of when, he continued.
“And the only way to have an accelerated answer to that is through this type of collaboration, and bringing together the different elements of the stakeholders in the supply chain, the charterer, shipowners, regulatory classification societies and vendors so that we can work together in pursuit of a common goal and mutually beneficial outcome,” he said.