Emissions from international shipping are a key contributor to global climate change, with the International Maritime Organization (IMO) finding the sector responsible for approximately 2% of global emissions in 2018. Yet unlike the power generation sector, which can point to a host of low-emission technologies that make CO2 mitigation achievable in the short-term, the shipping industry is without a consensus on a green solution. This is a problem, as the IMO projects shipping’s business-as-usual emissions will increase 50% above 2018 levels by 2050, despite the IMO’s goal of cutting greenhouse gas emissions in half from the sector by 2050.
The transition away from fossil fuels will be the greatest industry upheaval since shipping’s conversion to oil from coal in the early 20th century, and will make the industry’s recent transition to low sulfur fuels look like a mole hill. Shipping is currently dominated by very low sulfur fuel oil (VLSFO), a petroleum product which made up 68% of global marine fuel demand in 2020, according to data compiled by ClipperData. The remaining demand is split between alternative fossil fuels like marine gasoil, high sulfur fuel oil and liquified natural gas (LNG). And while a series of innovative pilot projects and audacious first movers have made headlines in recent months, consumption of eco-fuels, defined by zero-carbon and carbon-neutral fuels, is marginal at best.
The 2020s will prove pivotal for decarbonization of the shipping industry, with this decade’s research and development supporting sector-wide uptake of eco-fuels in the decades ahead. According to ClipperData’s 2030 marine fuel forecast, eco-fuels will make up only 0.4% of marine fuel demand by the end of the decade. While that level of consumption will still relegate eco-fuels to the periphery of global demand, it will not come at the expense of progress.
Public and private sector investment over the next decade, combined with commercial pressures from shippers seeking to trim their environmental impact, will contribute to a buildout of the necessary infrastructure to support the industry move towards eco-fuels, while continued research and development will bring down currently inhibitive fuel costs. Moreover, while eco-fuel adoption is the best way to phase out shipping’s GHG emissions, operational and technical measures can chip away at shipping’s CO2 emissions in the interim. In line with the IMO’s goal of reducing CO2 emissions per transport work by 40% by 2030, these measures, including route optimization, engine power limitations and other efficiency upgrades, will become increasingly commonplace in the decade ahead.
The road ahead for eco-fuels will be long and expensive, with a 2020 study finding that reducing emissions from shipping in line with the IMO’s 2050 goal would require between $1-1.4 trillion of land-based and ship-based investment between 2030-2050. Still, recent years has spurred considerable momentum behind eco-fuel development, and there is no shortage of fuels and technologies vying for a fraction of shipping’s future carbon-conscious mix. Sustainably-produced ammonia and hydrogen are among the most looked to zero-carbon options, while synthetic fuels and biofuels could offer a path to carbon neutrality. Then there are carbon-emitting “bridge fuels” like LNG, methanol and liquified petroleum gas, all of which purport a CO2 reduction relative to VLSFO, but are incompatible with a zero-emission future.
Meeting current IMO GHG targets will require a holistic and innovative approach, and the decade ahead offers a unique opportunity for one of the hardest to decarbonize sectors. Neither the technology nor the infrastructure can currently support a global transition to eco-fuels, and the emphasis over the next decade should accordingly be placed on research and development and supply chain expansion. Adequate investment and preparation over the next few years can be the support on which global shipping can pivot to sustainable eco-fuels, building the foundation for the most consequential industry change in the history of shipping.