Decarbonizing Shipping

When the A.P. Møller Foundation decided to make a seminal contribution toward combating climate change and establish the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping last year, the choice of who to lead it was easy – and close at hand. Bo Cerup-Simonsen was already well-known to them, having served six years as head of Maersk Maritime Technology. Eminently qualified with a Ph.D. in Naval Architecture & Mechanical Engineering from the Technical University of Denmark, an Executive M.B.A. from the Copenhagen Business School, numerous academic awards and board memberships along with years of practical business experience, he was the hands-down choice.

Academic and businessman, scientist and scholar, business executive and manager, he was well-versed in both academia and business and the ideal candidate to bridge the gap between theory and practice. He understood the science, understood the practical realities of getting things done in the real world, and understood the urgency of the need for action.

It was during one of his periodic sojourns in the U.S., where he had previously studied at MIT, the University of Washington and Cal/Berkeley as a Fulbright scholar and was currently overseeing newbuild and portfolio strategy for Royal Caribbean Cruises, that the call came. It was “The opportunity of a lifetime,” he says, “to be able to work on the most meaningful mission of our time and help establish real solutions that are implementable on a grand scale.”

Now, barely a year later, he reflects on what has been accomplished thus far and what challenges lie ahead.

Let’s start with your career to date and how it helped prepare you for your new job.

My career has alternated between deep science in academia and large-scale industry and business projects. During the past almost 20 years in industry, my work has been very much about cross-disciplinary collaboration to enable application of new, large-scale technology solutions – working with specialists, but not for the sake of siloed discipline excellence but in order to enable grand new solutions. My work has always been at the interface between business and technology and with various time horizons – from short-term optimizations to long-term research.

What attracted you to the maritime industry in the first place?

The combination of ocean and ships – I’m from Denmark, after all, and the sea is all around us! The industry is about global infrastructure and big business and, at the same time, ships are beautiful and the ocean is fascinating, grand and awesome. The industry itself is also fascinating, depending on deep science and grand engineering solutions – how to protect the environment, how to maintain the safety of crew and ships on the oceans, how to expedite the flow of commerce.

During graduate studies I was particularly drawn to the safety and environment of the sea after the Exxon Valdez accident in 1989. This accident motivated me to work deeply with first enhancing technical safety and later to work on the business side to improve energy efficiency.

What inspired the A.P. Moller Foundation to establish the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping? Where is it located and what are its goals?

The Foundation wished to support efforts to solve the climate issue in global shipping through the donation. Looking back, it’s really a continuation of the family’s decades-old engagement in decreasing shipping’s impact on the environment – from championing the use of low-sulfur fuel in the 1980s and pioneering the first-double hull oil tankers in the 1990s to minimize the risk of oil spills to today’s ongoing initiatives. And while the Center is located in central Copenhagen in the heart of the Danish maritime cluster, global engagement and relevance has been the point of departure from the very beginning.

How is the Center structured? Does it revolve around specific projects?

It’s structured to help accelerate the zero carbon transition through projects and programs whose results are accessible to the public. We’re establishing a transition strategy framework, identifying the main swing factors and organizing programs to ensure that our resources are invested to help accelerate the transition.

We have the manpower and resources to execute our own projects but will also partner with other organizations for specific projects. We can work with companies on projects where they protect their intellectual property. But when we invest not-for-profit resources in an activity, there needs to be a value for the greater good. For example, the Center recently announced two projects with external partners – a solid oxide fuel cell (SOFC) project in Europe and an ammonia bunkering demonstration project in Asia.

Who are some of its founding members? What is their role?

The Strategic Partners, including the Founding Partners, are absolutely key to the success of the Center. The fact that we can work with leading companies across the globe, yet maintain our independence, is critical.

The Center’s Founding Partners are ABS, Cargill, MAN, Maersk, MHI, NYK and Siemens. Since the launch last year, Alfa Laval, Haldor Topsoe, Norden and Total have also joined the Center as Strategic Partners. Their role is active collaboration with the Center and other Center partners to create confidence in and then drive acceleration of decarbonization for the shipping industry. In practical terms, the partners act on our Advisory Board and contribute secondees with relevant technical expertise and other resources.

How big will the Center eventually be in terms of employees and staff? Is the A.P. Møller Foundation providing all the funding?

The Foundation has generously provided base funding to establish the Center, which in the future will seek other funding sources as well as funding for dedicated projects – for example, from the E.U. The Center is expected to employ about 100 people in the central staff including secondees. This team will be engaged in projects across the globe with many more participants. In other words, the initial base funding from the A.P. Møller Foundation will be significantly geared by partners and other sources.

How would you describe the relationship between the Center and the Maersk Group, which has already announced plans to launch the world’s first carbon-neutral liner vessel by 2023? Will the company’s ships be a testing ground for the Center’s solutions?

The Center is an independent research and development center. We’re not part of the Maersk Group but a separate legal entity, working for and with the entire maritime industry. Maersk is one of seven Founding Partners who have been instrumental in developing the Center. Besides the vision of zero carbon shipping, we share an urgent need for real action with our partners and, accordingly, part of the commitment we ask from them is to second resources to the Center, both people and test facilities, where relevant.

It would be natural to work with Maersk to help establish scalable solutions and leverage learnings from the containership project to the benefit of the entire sector – for example, by establishing the necessary standards and regulations. Similar projects and opportunities will be identified with the other partners. We believe that investing real resources across the supply chain, in a structured and facilitated manner, will accelerate the development of solutions for the benefit of the entire sector.

What is meant by “decarbonization”? Why is it so important to the future of shipping?

Our interpretation of decarbonization is simple: It’s the transition to a new societal system that sustainably reduces greenhouse gases (GHGs or CO2 equivalents) from vessels and their supply chain to the long-term goal of a climate-neutral global economy. With 70,000 ships globally consuming 300 million tons of fuel a year, shipping accounts for around three percent of global CO2 emissions or about one gigaton .  

Even if shipping is not part of the Paris Agreement, we’re as morally obligated as anyone else to contribute to the one-and-a half to two degree objective. Moreover, as we become increasingly aware of the consequences of climate change, it’s very likely that carbon neutral operations will become a “license to operate” in the future – if not by regulation, then by society demanding it.

Decarbonization has been called “a race against time.” Is that a reference to the 2030 and 2050 goals put forward by the IMO and contained in the Paris Agreement?

Given the long economic life of cargo vessels as well as the long lead times needed to implement new infrastructure on land, it will take a long time to replace the existing fleet of 70,000+ fossil-fueled vessels with zero emissions vessels and establish the necessary fuel supply chain. To meet the timeline laid out in the Paris Agreement, it’s critical that certain efforts to decarbonize shipping be implemented within this decade so they can be scaled up over the following two decades to become sector-wide.

Part of the Center’s program is to research new energy systems and technologies. How is that shaping up, and what are some of the proposed solutions?  

To support the Center’s view on a transition strategy for the shipping sector, it will establish an R&D portfolio with the objective to de-risk and accelerate implementation. The portfolio will focus on de-risking through the elimination of safety barriers, cost reductions through the scaling of technology and efficiency gains through maturation of energy systems. Solutions will focus on the availability and feasibility of GHG-neutral fuels and efficiency levers that minimize fuel consumption.

Looking down the road a bit, how will shipping source enough low-carbon hydrogen, ammonia and biofuel to replace its current fuel mix?

Primary energy for the production of e-fuels and biofuels is a scarce resource. The current growth of installed renewable energy generation is insufficient to meet the demand associated with the decarbonization of industry segments and societies and must be accelerated. Unlocking the feasibility of new, dedicated giga-size renewable power generation plants is essential.

This requires an understanding of the new supply chains to be developed as well as a closer look at how to minimize risk throughout the entire value chain from biomass or green electrons to the wake of the vessel. Recognizing the scarcity of renewable energy adds focus to the efficiency levers that lower demand for primary energy.

A recent report from ABS suggests that reduced ton-mile demand may be a part of the solution. For example, by eliminating coal and oil from the energy mix you reduce the need for bulk carriers and tankers. Does this match with industry expectations? Most reports we’ve seen forecast a roughly 50 percent increase in ton-mile demand by 2050.

We expect that total shipping volumes will continue to increase over the coming decades. Coal and oil transportation can be expected to decrease in relative terms and perhaps even in absolute terms if decarbonization accelerates. However, this will likely be more than offset by increased volumes of other traded goods. It’s obviously very hard to predict futures growth rates of the various shipping segments, but fortunately our fundamental assumption that zero-carbon solutions will be urgently needed on a large scale is not jeopardized by the uncertainty of future growth rates. It’s a very robust proposition! 

Are there other initiatives underway at the Center in addition to zero-carbon fuels and propulsion?

At this point, we’re focusing on accelerating the necessary supply chains of powering vessels, which is of course about energy and technology. But it’s also about being innovative and solutions-oriented when it comes to financial instruments, regulations and enabling the customer to demand zero carbon shipping. The scope therefore becomes rather large as shipping needs to work in multiple contexts with heavy legacies. 

Compliance for ship operators is already an expensive proposition in terms of STCW-95, ballast water treatment systems and low-sulfur fuel mandates. What type of feedback are you receiving for the zero carbon shipping agenda and its anticipated costs?  

We get almost exclusively the feedback that solving the decarbonization challenge is critically important and that the shipping industry must be proactive in solving it. The cost of transportation is likely to increase and ultimately that cost will be passed on to the consumer, which will hardly change the demand for shipping. We’re seeing small segments where the customers – sometimes the public sector –  are willing to pay a premium for zero carbon shipping. But it’s generally acknowledged that we need global regulation to secure a level playing field. And while developments at the IMO show progress, it’s also very clear that there is not yet a global consensus on how to best get there.

Okay, give us the big picture here. What’s the goal for shipping in the future? Why is it important, and how will we get there?

Shipping needs to be part of the solution for global decarbonizing. More than two-thirds of the global community has signed on to radical decarbonization by 2050. We’ll get there by a combination of new fuels, new technology, new financial instruments, new business models, private-public partnerships, regulation and customer demand. The cost of shipping is likely to increase, but with all of the above it’s possible to decarbonize and manage both the commercial and technical risks.

What’s your biggest challenge right now?

We’re receiving an enormous number of requests from organizations right now wanting to join to collaborate on establishing future solutions. But we need to balance interaction with potential new partners with the need to focus on the establishment of a core Center organization that includes all the necessary competencies across the energy and maritime value chain and works in a structured manner to deliver the results that are so urgently needed.

We haven’t mentioned COVID-19 yet. How has that impacted the Center’s efforts? Will the shipping industry and the whole decarbonization effort be different when we go back to “normal”?

Despite the fact that we launched the Center in June 2020 – in the middle of the first COVID wave – we’ve experienced incredible interest in and support for our objectives. It’s very obvious to us that, despite COVID-19, the climate crisis is at the very top of the agenda for the industry along with acknowledgment of the urgency to act. If anything, I think the COVID crisis has reinforced the realization of the need to initiate the transition toward a more sustainable and CO2-free global economy.

What’s a typical day like for you? How has the virus changed your routine?

It’s no exaggeration to say I get up every morning looking forward to getting to work – and I work very long hours. It’s been like that every single day since I started in March 2020. COVID has taught us that we don’t always need to meet physically, so we can effectively work with our Asian colleagues in the morning, our European colleagues midday, and our colleagues in the Americas in the late afternoon and evening.

What excites you most about your job?

The fact that we're working on the most meaningful mission – that there’s still a window of opportunity to actually solve this problem. That extremely professional individuals have joined the mission from expert to leadership and board-level; from professor to CEO – we’re all in the same boat and we all believe it’s possible. That we work with leading companies and individuals across the globe – and all want to contribute.

That we will work with a business and scientific approach and with a sense of urgency to establish real solutions that are implementable on a grand scale. That we work with an overall narrative and strategy for the entire sector and at the same time in depth with new sciences that have the potential to radically change the energy picture.

When you put all of that together, it’s just a lifetime opportunity.

Wow! That is exciting! Any final thoughts for our readers?

Just stay tuned and reach out if you want to join the party! 

Tony Munoz is Publisher & Editor-in-Chief of The Maritime Executive.