Pathway To Decarbonisation: The Maritime Sector’s Top Considerations

Last year’s COP26 conference has mounted more pressure on the shipping industry to work (quickly) towards net zero carbon emissions.

Much has been discussed about how global and regional policies and regulations should evolve to support industry players, the technologies that are available at the time and the challenges that sector players face on their journey, but while basic guidelines are provided by the International Maritime Organisation (IMO), there has been little progress on the concrete methods that can help industry participants achieve the desired decarbonisation targets.

The shipping industry has already begun to deploy innovative solutions and as smaller-sized vessels are being tested, it won’t be long until the sector can support autonomous vessel operations. However, shipowners cannot do so easily without incurring hefty costs and the inherent time associated with construction, operations, training, and risks.

In charting the course for decarbonisation, maritime sector participants must investigate the relevant costs and funding avenue for the construction and operation of new vessels. Last year, North Star Renewables secured US$110 million in funding from Allianz Global Investors to build three new hybrid service operations vessels. KiwiRail, which operates and maintains New Zealand’s rail network, has also completed the first-ever shipping green loan (US$220 million) awarded Certification under the Climate Bonds Standard to commission and upgrade two hybrid electric – diesel ferries. Meanwhile, shipping giant Maersk invested  US$1.1 billion for eight new container vessels that can be fuelled by methanol as well as traditional fuel.

Cost and funding aside, industry players should also examine new operational procedures and standards, compliance policies and the relevant training needed for management and ship crew. They must also consider the legal frameworks available, potential legal ramifications and insurance coverage. It’s a massive undertaking.

At this time, the use of alternative fuel is a key point of discussion. The three most common alternative fuels which could be used to help move towards zero emissions are ammonia, hydrogen, and methanol, with hydrogen being touted as the most favoured. Not all of the three are currently available in high volume.

Different types of alternative fuels will also best apply to different businesses depending on storage capacity, length of travel routes and types of vessels, there is no one size fits all solution. We have pulled together a brief comparison table coverage all three alternative fuels for your consideration below.

Switching to alternative fuel means huge investments in fuel production, storage and refuelling infrastructure and facilities, fuel tank modifications, to name a few. Shipowners are reluctant to invest heavily in the above as the availability of alternative fuels (and at a viable price) is unproven.

The pathway to decarbonisation for shipping industry player requires extensive planning and collaboration, if you have any questions about getting started, please do reach out to any member of our Shipping team.

JTJB has been advising the shipping industry for over 30 years. Based in Singapore and with offices and associated advisers in many major ports of the world, we can help with your decarbonisation journey. Speak to our lawyers for advice.