Breaking the “Deadlock” of Decarbonization Starts with Small Steps

The shipping and maritime business represents the world’s most effective and efficient method of trade, carrying an estimated 90 percent of the worlds cargo leading to a highly intertwined world economy. However, as the global economy grows, so too does carbon emissions from shipping, which currently accounts for about 2.9 percent of global carbon emissions.

While recognizing the necessity to decarbonize, commercial and technical limitations have trapped the industry in a “deadlock.” After all, due to the scale of the challenge, solutions will need to account for a myriad of factors including cleaner fuels, regulation, government action and behavioral shifts in society. Luckily, Shell and Deloitte’s recent report, “Decarbonizing Shipping: All Hands On Deck” found that all players across the industry understand that it is going to take unprecedented coordination and collaboration to break the “deadlock” of decarbonization, as well as individual accountability and action.

The sector has been presented with a common goal to decarbonize and cut greenhouse gas emissions by at least 50 percent by a deadline of 2050 by the International Maritime Organization (IMO) and the only way to achieve it is through manageable and actionable steps taken within the next two to three years. As the ongoing pandemic pushes the industry to adapt, the time to act is now.

Scale Up Customer Demand

The first step toward safely achieving industry wide decarbonization is to create large-scale demand for zero emission shipping through commitments from both charterers and customers that include long-term contracts and green procurement criteria.

Shipping is a capital-intensive industry characterized by large, long-life assets, thin margins and a high-dependence on a global supply of energy-dense fuels. As it stands, the lack of a global regulatory framework and limited customer demand for lower-emission shipping are significant barriers to motivating stakeholders to invest the necessary capital and resources. A recent report by the University Maritime Advisory Services (UMAS) and the Energy Transitions Commission (ETC) estimates that the cumulative investment needed between 2030 and 2050 to halve emissions would amount to approximately $1.4 trillion.

Global Regulatory Alignment

From a government perspective, it will be critical to enact uniform policies that enforce and promote environmentally friendly solutions across the global maritime shipping industry. By creating similar regulations worldwide, the shipping industry can operate on a level playing field and avoid confusion on mandated timeframes for decarbonization. For example, new IMO guidelines due in 2023 should provide clarity and be aligned with leading local and regional regulatory bodies (i.e. EU, China and US).

If policymakers can establish common, progressive regulations, it can promote technological advancements and incentivize companies to take bold steps in decreasing their carbon footprints. Governments and regulatory entities around the world have a unique role to play in that they can offer companies tax credits, guidelines and other benefits to drive the overall industry toward change. 

Cross-Sector Research and Development

Decarbonizing safely will take more than only governmental regulations. While they can set standards, mandates and provide frameworks for companies to follow, in the end, private sectors across industries need to work in unison to achieve consequential, long-term success. Therefore, cross-sector research and development (R&D) will be key to achieving decarbonization goals as the shipping industry will need to transition a global fleet to low or zero-emission fuels. After all, while the industry is exploring alternatives like hydrogen, ammonia, methanol and biofuels, there is currently no viable alternative fuel, without significant investment in emerging energy efficient technologies, that makes it possible to reach the IMO’s 2050 ambition.

This will require energy companies, ship-owners, shipyards, equipment manufacturers and representatives of onshore sectors to come together to define technical requirements and priorities for fuel R&D and coordinate how to best move forward. The mechanism could be a joint R&D fund or through direct investment. The private sector, especially multi-national companies, have the financial muscle to introduce new, safe, cutting edge technology to the market that will have a trickle-down effect on the rest of the industry.

Scale-Up Controlled Pilots

To increase the effectiveness and accelerate R&D, it will be beneficial to run end-to-end green pilots involving charterers, operators, owners and ports on specific routes and vessel types. While research in a controlled environment is important, without a trial in a “real-world” setting it will be impossible to know whether the development will truly succeed. However, potential candidates for these pilot programs must be stringently vetted and appraised before engaging in an experimental development, and a safety-first mindset must be inherent in any such project. Operators that follow a predetermined schedule, such as container ships especially on shorter and busier routes, are likely ideal candidates for pilot projects.

Coordinated Industry Commitments

Lastly, creating a coalition or consortium with a specific mandate, formed with dues from the industry, could accelerate the shift from ideas to action and help break the deadlock. This can be done by increasing the reach of existing commitments by consolidating objectives and strengthening the coordination of various concurrent workstreams. However, to succeed these coalitions and workstreams will need to provide a transparent view on who needs to do what and when by implementing independent coordination mechanisms.

For example, the United Nations Conference on Trade and Development’s TrainForTrade Port Management Programme is addressing the inequality in port development. The program is designed to share knowledge on port management and expertise to developing nations, not only helping these ports develop economically, but also assisting in the efficient management of goods. If the industry were to focus on building upon the foundation of this program, then it is possible to accelerate progress. 

The effort to safely decarbonize the shipping industry is one of the most daunting tasks the sector has ever faced as it pushes to meet IMO goals by the middle of the century. However, as evidenced by new coalitions forming and the launching of pilot programs, the industry has never been so united. The opportunity for the industry to break the deadlock is clear, and there is little time to lose if it is to meet the IMO 2050 ambition. The solutions outlined above offer a roadmap toward a start of building on progress already happening within the sector and to drive further change.

Karrie Trauth is the General Manager of Shell Shipping & Maritime, Americas.