Thursday, December 29, 2022

To meet environmental targets it will cost the shipping industry $3 trillion over the next few decades

Another example of there being no free lunch. See Shipping Industry Balks at Green Energy Transition: Shipowners order greener vessels but are deterred by limited fuel supplies, costs and the long route to emissions targets by Costas Paris of The WSJ. Excerpts:

"Shipowners are split on which fuel should be the new industry standard and how soon they can recoup investments to meet environmental targets established by governments and industry regulators. The price tag on investments needed in new ships, alternative fuel production and other infrastructure has been pegged at $3 trillion over the next few decades, according to shipping-services provider Clarksons. 

Methanol is an early contender to supplant the tar-like heavy fuel oil—known as bunker fuel—that powers much of the world’s 60,000 oceangoing commercial vessels. Ocean shipping accounts for roughly 3% of global greenhouse-gas emissions annually, according to the International Maritime Organization, the industry’s global regulator."

"Since new container ships can cost hundreds of millions of dollars to build, owners have great incentive to avoid the wrong bet."

"Some shipowners are trying to develop the market for greener fuels to make them available at ports worldwide at competitive prices. Green methanol is an umbrella term covering liquid methanol produced using renewable energy such as wind or solar power. Its production is limited and its price, on average, is 50% to 100% higher than bunker fuel"

"Maersk will need about 1 million tons of green methanol annually to operate the new ships but global production is about 30,000 tons"

"Big operators such as Swiss-based Mediterranean Shipping Co., Germany’s Hapag-Lloyd AG and CMA have placed orders for vessels powered by liquefied natural gas, which emits less carbon dioxide than bunker fuel and is available in greater quantities than green methanol. Others, including shipowners in Japan, are looking into ammonia, though the substance is years away from use in commercial operations."

"The International Maritime Organization, the United Nations’ maritime regulator, has set a target for the shipping industry to cut carbon emissions in half by 2050 when compared with 2008 levels." 

"Reaching consensus on carbon-reduction efforts has been difficult. It isn’t clear whether shipowners will embrace investments in new ships without guarantees on a certain amount of business and with fears of higher operating costs."

"Reaching consensus on carbon-reduction efforts has been difficult. It isn’t clear whether shipowners will embrace investments in new ships without guarantees on a certain amount of business and with fears of higher operating costs."

"Developing economies, including Brazil, Argentina, Chile and a host of African nations, have said that aid is needed because a shift toward pricier carbon-neutral fuels would harm their export-driven economies by making food and other commodities more expensive to move.

IMO members have for years discussed putting a levy on carbon emissions as a way to encourage owners to invest in green ships, help to build a global network of alternative fuel stations for vessels and subsidize developing countries. Members have yet to formally agree on how such a levy would work in practice.

The U.S. is working to establish green ocean-shipping corridors with trading partners including the U.K., South Korea and Canada that will give docking priority and other benefits to low-emission vessels. It also allocated $3 billion through the Inflation Reduction Act to electrify port equipment and machinery.

The IMO has required that, starting in January, each ship must be assigned an energy efficiency rating, similar to those used for buildings and household appliances, and a carbon intensity rating."

"Ship operators that use high-carbon-emitting fuels will have to pay higher taxes under the European Union’s Emissions Trading System"

No comments: