Embarking on a Global Journey to Green Shipping
In international trade, where most goods cross the oceans, the shipping industry plays a crucial role in the global economy.
While it efficiently transports goods in terms of carbon emissions per cargo weight, it is a huge contributor to the planet's carbon footprint, responsible for 3% of worldwide greenhouse gas emissions. This is mainly due to the extensive movement of goods and the industry's heavy reliance on fossil fuels.
In the effort to move towards carbon neutrality, the International Maritime Organization (IMO) has updated its plan to reduce greenhouse gas emissions, aiming for net-zero emissions around 2050.
In response, major companies are ordering ships powered by alternative fuels. Stricter measures like the EU Emissions Trading System (ETS) and FuelEU Maritime initiative are also anticipated to raise costs for heavy emitters.
At the same time, initiatives like the US Inflation Reduction Act are opening opportunities to strengthen the clean energy value chain, especially for hydrogen, which is expected to fuel future vessels with zero carbon emissions.
Despite these changes, progress is not happening fast enough to meet net-zero targets. Decarbonising the shipping industry proves challenging due to technical difficulties and the costs of transitioning to cleaner alternatives. Key obstacles include:
- Limited alternative fuels: Despite exploring options like hydrogen, ammonia, methanol, biofuels, and fuel cells, no clear preferred choice has emerged.
- Low demand for green ships: The substantial investment and long lifespan of ships make shipowners hesitant to order new vessels without clarity on their fuel source.
- Slow development of assets and infrastructure: Insufficient demand slows the progress of new technologies and infrastructure for eco-friendly vessels.
- Uncertain regulations: The global nature of shipping requires unified industry efforts to prevent emissions from shifting to regions with less strict regulations.
- Multiple stakeholders: Disputes between shipowners and traders over carbon accountability add complexity to regulatory enforcement.
To bring change to the shipping industry, a three-step approach is proposed:
- Identify the catalyst for change: Focus on green ship technology, especially for deep-sea ships responsible for 85% of emissions.
- Innovate, test, and repeat: Join initiatives like the World Economic Forum's First Movers Coalition, establish a global shipping company with a future-ready fleet, and progressively advance to carbon-neutral vessels.
- Collaborate and build scale: Form partnerships, pilot programmes, and collaborations with various stakeholders, emphasising mass adoption and commercialisation of new technology, along with strong global regulations.
By adopting this strategy, the shipping industry can break the gridlock and pave the way for a new era of global shipping with reduced emissions.
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Source: Hanwha Group and World Economic Forum
