Lloyd’s Register issued a report, highlighting that global trade is at risk of disruption without urgent action on zero-carbon shipping.
Specifically, leaders from across the global supply chain are calling for immediate action on maritime decarbonisation if a successful energy transition to zero-carbon supply chains is to be achieved.
Currently, around 80% of goods transported worldwide rely on shipping and the maritime sector accounts for almost 3% of global greenhouse gas emissions.
However, despite widespread commitment to addressing the decarbonisation of the sector, a lack of regulatory certainty and support from policymakers could see a rushed and uncoordinated transition, potentially leading to significant supply chain disruption.
As explained, developing, launching and scaling sustainable fuel alternatives and the necessary landside infrastructure is one of shipping’s leading barriers to decarbonisation.
It’s time for the maritime industry to deliver decarbonisation. Not only that, but the pace of change needs to accelerate. The industry is no longer asking ‘if’ or ‘when’ decarbonisation should take place, the question that remains is ‘how’ will the maritime industry deliver meaningful change during this crucial decade of action.
….Nick Brown, Chief Executive, Lloyd’s Register, said.
According to the report, for a sector that must take 25-year bets on its vessels, a successful Decade of Action relies on the entire maritime ecosystem aligning in pursuit of the five critically urgent pathways mapped out:
- Global regulation to support industry-wide action
There is consensus that global regulation and market-based measures (MBMs) are vital to drive forward change. But the current rate of progress may not dissuade national and regional regulators from taking their own initiatives.
The risk of fragmentation in terms of policy objectives and regulation is already expected to be realised in the EU from 2023. It is critical for the International Maritime Organization (IMO) to take advantage of its plan to accelerate a review of its Initial GHG Strategy by 2023, and work on measures designed to increase the uptake of low- and zero-carbon fuels.
It will be increasingly difficult to defend global regulation as the preferred alternative to proactive national or regional initiatives if this opportunity is not taken.
- Overcoming barriers to scale infrastructure
While much of the infrastructure and technology needed to decarbonise shipping could be available or is in development, it often remains commercially unviable, even for leading global organisations. Fixing this issue, with a particular focus on fuel alternatives, will help to catalyse change across the wider supply chain.
- Finance and investment to drive uptake
Finding finance for new innovations and technologies is seen as a key challenge – but there is a flip side, as money is moving fast into ‘green’ funds and climate is becoming a filter through which investments are being considered.
Mounting pressure from consumers and society will continue to deliver new paths to finance and investment. But the longer the sector waits to act, the higher the cost of decarbonisation will be.
- Data and analytics to deliver efficiency and innovation
Finding finance for new innovations and technologies is seen as a key challenge – but there is a flip side, as money is moving fast into ‘green’ funds and climate is becoming a filter through which investments are being considered.
Mounting pressure from consumers and society will continue to deliver new paths to finance and investment. But the longer the sector waits to act, the higher the cost of decarbonisation will be.
- Cross-industry partnerships to harness momentum
To unlock global potential, ensure sector-wide alignment and take advantage of new ideas, partnerships must extend beyond shipping and its supply chains. If shipping can build collaborations within and beyond the maritime economy and avoid a silo mentality, it will maximise resources, eliminate duplication of effort and accelerate progress.
The industry needs uniform rules
Market-based measures (MBMs) – carbon pricing in particular – will help to ensure that decarbonisation is commercially viable.
MBMs place a price on carbon dioxide emissions, or the carbon dioxide equivalent emissions of other GHG like methane and nitrous oxide, providing an economic incentive to pursue less GHG intensive behaviours; reducing fuel consumption and GHG emissions.
“The good news is that it is no longer a question of whether there will be a price on carbon or shipping,” says Lasse Kristoffersen of Torvald Klaveness. “Now, it is a question of who would regulate it and who would benefit from the proceeds.”
MBMs can also play a role in allowing the industry and individual companies to manage change, reducing the risk of regulatory shocks that could be associated with an approach reliant on prescriptive controls on fossil fuels and GHG emissions. Notwithstanding, combining MBMs with, for example, sustainability criteria on marine fuels and energy sources would serve to avoid MBMs encouraging unsustainable fuel selection behaviours.
“The IMO adopted binding measures that will ensure achieving the 2030 carbon intensity reduction target in the [IMO’s] Initial GHG Strategy, but it’s generally understood that market-based measures, carbon pricing and life-cycle GHG emission guidelines are the regulatory instruments that need to be put in place by the IMO to bridge the current price gap between fossil fuels and alternative zero/low carbon fuel options,” says Hoenders.
“At the same time, we need to make sure that certain regions, and particular island regions in the world, continue to have access to affordable maritime transport services, because they are entirely reliant on maritime transport while other developing countries also require equitable access to the world’s markets to safeguard their exports,” he says.
So a global approach is vital. “Uniformity is important to have a level playing field and that’s why we prefer global legislation to regional legislation,” says Andreas Sohmen-Pao, chairman of BW Group. “Otherwise, you get regulatory arbitrage because we’re in a global business where people can move to the place of least resistance.”
Concluding, Mark Lutes at WWF Climate & Energy has no doubts about the consequences if the industry is not proactive enough.
The global shipping sector risks becoming a pariah of the global economy if they don’t proactively address the emissions issue. The rest of the world will end up looking for alternatives to shipping as a whole, not just those with different kinds of emissions levels.
VIEW LLOYD’S REGISTER REPORT ON SHIPPING’S ‘DECarbonization HERE
