October 23, 2021

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Maersk points the way to a lower-carbon future

Shipping updates

When it comes to cutting carbon emissions, global shipping presents particular problems. A significant emitter, it is also a fragmented, cross-border industry whose ships spend a lot of time in international waters — making it hard to regulate on a national or regional basis. Vessels have a commercial life of 20 to 30 years, so ones ordered today may still be around in 2050, by when many countries have pledged to hit net-zero emissions. But alternatives to high-carbon bunker fuel are costly or not fully developed. So Maersk’s order of eight ships that can also run on “green” methanol is to be commended — even as it throws a spotlight on how much the industry still needs to do.

Shipping produces about 2.4 per cent of annual global CO2 emissions, and on current trends is forecast to contribute a larger proportion by 2050 as other sectors decarbonise more quickly. One of the best zero-carbon options to replace bunker fuel may be “green” hydrogen, made from clean energy. But that needs to be stored as a liquid at -253C, and the bulky refrigeration takes up important cargo space.

Hydrogen can be combined with nitrogen to produce ammonia — denser in energy, but costlier to produce. Britain’s Institution of Mechanical Engineers has suggested that fitting giant sails to boost the power of existing ships might be a better option for now.

Another interim solution could be liquefied natural gas. But while that could reduce emissions by about 25 per cent, it is still a fossil fuel, which the industry fears could soon be subject to strict regulation. Instead, Maersk is opting for ships that can run on both bunker fuel and methanol — the first shipper to order large carbon-neutral vessels capable of sailing from China to Europe. Methanol is double the cost of bunker fuel, but the Danish shipping line says it hopes customers such as Amazon and H&M will pay up for greener shipping.

With freight costs often accounting for only a small proportion of goods’ retail prices, some in the industry hope higher fuel costs can ultimately be passed on to climate-conscious consumers. But retailers’ and consumer goods companies’ readiness to shoulder what, for them, would be hefty upfront cost increases is largely untested. So the shipping industry will need to play a bigger role in bringing about a shift — potentially by embracing a carbon levy. Maersk has proposed a tax of $50 a tonne of CO2 starting in around 2027, rising to more than $150.

The International Maritime Organization, the UN agency that regulates shipping, has set a goal of halving the industry’s greenhouse gas emissions by 2050 from 2008 levels. But, hampered by divisions across its 174 countries, it agreed at a June meeting only on measures to reduce the “carbon intensity” of the existing fleet — dismissed by environmental groups as feeble.

Shipping companies fear a patchwork of regional carbon schemes. But with concerted industry moves lacking, the EU was right last month to propose extending its emissions trading system to the shipping industry. The scheme, under which companies that emit carbon exceeding allowances they are assigned must buy extra in the market, would be applied to all intra-EU shipping journeys, and 50 per cent of all trips to or from non-EU countries.

Targeting extraterritorial journeys was bold, but limiting the scope to half of emissions may have headed off the risk of retaliatory trade measures from China or the US. The EU has also thrown down the gauntlet to other countries to adopt similar plans — and to other shipping companies to invest, like Maersk, their current bumper profits in tomorrow’s technology.

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