Interview with Don Maier, Associate Professor of Business, University of Tennessee
Most of the clothes and gadgets you buy in stores today were once in shipping containers that sailed across the ocean. Ships transport over 80% of the world’s traded goods. But they have a problem – most of them burn heavy sulfur oil, which is a driving force behind climate change.
While cargo ship engines have become more efficient over time, the industry is under increasing pressure to reduce its carbon footprint.
EU lawmakers agreed to demand an 80% drop in the greenhouse gas intensity of marine fuels by 2050 and to require shipping companies to pay for the greenhouse gases their ships emit. The International Maritime Organization, the UN agency that regulates international shipping, also plans to strengthen its climate strategy this summer. The IMO’s current goal is to reduce shipping emissions by 50% by 2050. President Joe Biden said on April 20, 2023 that the United States would instead push for a new international goal of zero emissions by 2050.
Maritime industry researcher Don Maier discusses whether the industry can meet these tougher targets.
Why is it so difficult for shipping to switch away from fossil fuels?
Economy and the lifespan of ships are two primary reasons.
Most of the major shippers’ fleets are less than 20 years old, but even the newer designs do not necessarily have the most advanced technology. It takes about a year and a half to come out with a new build of a ship, and it will still be based on technology from a few years ago. So most of the engines still run on fossil fuel oil.
If companies buy ships that run on alternative fuels, such as hydrogen, methanol and ammonia, they run into another challenge: There are few ports so far with the infrastructure to supply these fuels. Without a way to refuel in all the ports a ship might use, companies will lose their return on investment, so they will continue to use the same technology instead.
It is not necessarily that the maritime industry does not want to move in the direction of cleaner fuels. But their assets – their fleets – were bought with longevity in mind, and alternative fuels are not yet widely available.
Ships are being built that can run on liquefied natural gas (LNG) and methanol, and even hydrogen is coming online. Often these are dual-fuel – ships that can run on either alternative fuels or fossil fuels. But so far, not enough of this type of ship has been ordered for the cost to make economic sense for most builders or buyers.
The cost of alternative fuels, such as methanol and hydrogen fuels made with renewable energy (as opposed to being made with natural gas), is also still significantly higher than fuel oil or LNG. But the good news is that costs are starting to come down. As production increases, emissions will decrease further.
Can tighter regulations and CO2 prices effectively push the industry to change?
A little pressure on the industry can be helpful, but too much, too quickly can really make things more disruptive.
Like most industries, shipping companies want standardized rules that they can count on not changing next year. Some of these companies have invested millions of dollars in new ships in recent years and are now being told that these ships may not meet the new standards – even though the ships may be almost brand new.
Another concern with the EU’s action is whether it addresses all “what if” scenarios. If, for example, the EU has stricter rules than other countries, this has an impact on which ships companies can use on European routes. All vessels that they put on routes to Europe must meet these emission standards. If there is a greater demand for products in Europe, they may have fewer ships to use.
I think the change will come soon in the industry, but changes must also make financial sense for the shipping companies and their customers.
Economists have estimated that the cost of reducing emissions by 50% by 2050 is anywhere from $1 trillion to, more realistically, over $3 trillion, and full decarbonization would be even higher. Many of these costs will be passed on to charterers, shippers and ultimately consumers – meaning you and me.
Are there ways companies can reduce emissions now as they prepare to upgrade their fleets?
There are a number of options that shipping companies are now using to lower emissions.
One that has been used for at least 10 years is to apply higher quality paint to the hulls, which reduces the friction between the hull and the water. With less friction, the engine doesn’t work as hard, which reduces emissions.
Another is slow speed. If ships travel at higher speeds, their engines work harder, which means they use more fuel and release more emissions. So shippers will use slow steaming. Most of the time, ships will go slow when close to shore to reduce emissions that cause smog in port cities like Los Angeles. On the open sea they will go back to normal speed.
Another option, common in the US and Europe, is to turn off the ship’s engines while in port and connect to port electricity. It is called “cold ironing”. It avoids burning more of the ship’s fuel, which affects air quality. Ports of Los Angeles and Long Beach, where smog from idling ships has been a health concern, have been a major driver of electrification. It is also cheaper for shipping companies than burning their fuel in port.
As simple as they sound, they have made huge improvements in terms of emissions, but they are not enough on their own.
Will a higher target set by the IMO be enough to push the industry to change?
I used to work in shipping and I know that the maritime industry is a very old fashioned industry from centuries ago. But the industry has invested millions in new ships with the most efficient technology available in recent years.
When the IMO began requiring all ships using heavy fuel in global trade to switch to low-sulphur fuel, the industry pivoted to comply, even though retrofits were expensive and time-consuming. Many shipping companies complied by installing “scrubbers” that essentially filter the ship’s engine, and new ships were built to run on low-sulfur fuel oil.
Now the industry is being told that the standards are changing again.
All industries want consistency so they can be sure to invest in a new technology. The shipping companies will follow what the IMO says. They will push back, but they will still do it. This is partly because the IMO also supports the maritime industry.
This article originally appeared in The Conversation. Click here to read the entire article with associated data.
The opinions expressed herein are those of the author and not necessarily those of The Maritime Executives.