For the shipping industry, steps to cut carbon emissions remain a struggle

Shipping operators are under pressure from governments and big customers like Amazon.com Inc. to clean up ships’ carbon emissions. But viable alternatives to fossil fuels are just taking shape.

The companies say supplies of methanol and ammonia – two cleaner-burning alternatives to crude-distilled bunker oil – are limited to power the world’s 60,000 oceangoing ships, and those fuels are many times more expensive.

Industry competitors are also divided on how quickly to begin the transition. Smaller companies are concerned about larger peers being able to invest, and a lack of consensus exists on what cleaner-burning fuels should power the ships of the future.

The International Maritime Organization, a United Nations body regulating maritime affairs, has set a 2050 deadline for shipping companies to drastically cut the amount of carbon dioxide that ships pump into the atmosphere.

Companies including Amazon, IKEA and Unilever said last week that they would move their products to what is known as zero-carbon ships by 2040, a more stringent target than the industry agreed upon. The commitment came days ahead of the 2021 United Nations Climate Change Conference, also known as COP26, which begins Sunday in Glasgow, Scotland. This adds to the demands for reductions in greenhouse-gas emissions by other industry competitors.

“It is premature to order rules-compliant vessels in 2040 or 2050, as there is no clarity on future fuel and how much will be available,” said Polis Haji-Ionou, chief executive officer of Cyprus-based Safe Bulkers Inc. , which operates 47 ships operating on bunker oil.

Maritime shipping is among the sectors of the wider global transportation industry that are set to make major investments to meet long-distance goals to reduce greenhouse-gas emissions.

The airline industry relies on sustainable fuels to help it reach its goal of net-zero emissions, but this year produced less than 0.1% of jet-fuel consumption, three times as much on average, according to the International Air Transport Association. Cost. as traditional kerosene. Parcel carriers are bringing more electric vehicles into their delivery operations and truck manufacturers are researching how to put electric power to work as an alternative to diesel fuel for heavy-duty trucks.

Clarkson Research Services Ltd., a shipping-services provider, has estimated that switching to new modes of electricity could cost the shipping industry $3 trillion. According to the International Maritime Organization, ships collectively contribute about 2.5% of the world’s greenhouse-gas emissions, an amount comparable to emissions from some of the largest EU countries.

AP Moller-Maersk A/S, the world’s largest boxship operator, recently ordered eight methanol-powered vessels for delivery in 2024—which can also run on conventional bunker oil. Morten Bo Christiansen, head of decarbonization at Denmark-based Maersk, said the ships’ annual methanol requirements are about 10 times the amount currently available in the market. “Getting an adequate fuel supply is a big challenge,” he said.

The latest push comes as container ships are enjoying their most profitable year on the back of record-high freight rates to move cargo from Asia to Europe and the Pacific. As economies open up from Covid-19 restrictions, record volumes of cargo on seagoing vessels are rising.

Senior shipping executives said that apart from ordering new conventional vessels, this year’s profits have mostly gone to pay off debt accumulated after nearly a decade of losses following the 2008 financial crisis.

Boxship owners are earning more in each quarter of this year than in 2020, and ship orders are at a multi-high level: so far this year by mid-October there were more than 480 orders, compared to last year’s That’s compared to 115 and 107 in 2019, according to marine data provider VesselsValue.

But apart from the Maersk order, the rest were for ships that burn conventional heavy oil or have dual fuel capacity.

“Whether to order is a big dilemma,” said Nils Haupt, a spokesman for the German boxship company Hapag-Lloyd AG, who said the company is opting to use liquefied natural gas. “It’s not the perfect solution, but that’s what we found.” is,” she said.

Banks including Citigroup Inc., France’s Société Générale SA and Norway’s DNB ASA are part of a group that aims to reduce the industry’s carbon emissions by offering new shipping loans to owners who will operate the cleaner ships verifiable. The combined shipping portfolio of the banks is about $185 billion, or nearly half of the global ship-finance market.

Michael Parker, Citi’s president for shipping and logistics, said the group has asked COP26 representatives to push the International Maritime Organization toward adopting a net-zero carbon-emissions policy by 2050.

Marine Group’s current mandate calls for ships to be 40% more fuel-efficient over the next decade and to halve total carbon-dioxide emissions by 2050 compared to 2008 levels. The group has said it could move to an earlier deadline and more stringent emissions cuts when it reviews its strategy in 2023.