A new discussion paper from the Global Maritime Forum (GMF) and the Energy Transitions Commission (ETC), argues that Spain has promising conditions for action on zero-emission shipping and Green Corridors.
For signatories of the Clydebank Declaration, primary routes of interest for decarbonization initiatives may include domestic shipping such as ferry routes. Such routes may also be of interest for Spain.
However, as this paper will argue, Spain has a unique opportunity related to the production and bunkering of zero-emission fuels for international shipping, and this paper focuses on the develop of Green Corridors as a means to seize this opportunity.
There are four critical building blocks that need to be in place to establish a Green Corridors.
- Cross-value-chain collaboration: A Green Corridors requires stakeholders that are committed to decarbonisation and are willing to explore new forms of cross-value-chain collaboration to enable zero-emission shipping from both the demand and supply side.
- A viable fuel pathway: The availability of zero-emission fuels and bunkering infrastructure to service zero-emission vessels are essential factors.
- Customer demand: Conditions need to be in place to mobilise demand for green shipping and to scale zero-emission shipping via the corridor.
- Policy and regulation: Policy incentives and regulations will be necessary to narrow the cost gap and expedite safety measures.
A first assessment of the conditions in Spain suggests that the country has strengths related to each of these four building blocks.
#1 Cross-value-chain collaboration
- Cargo owners: Approximately 70 percent of cargo handled in Spanish ports can be classified as either liquid bulk (e.g., the transportation of liquid or gas) or container trade (e.g., the transportation of manufactured goods in intermodal containers). The latter category has been widely discussed in terms of its role in mobilising demand: Manufactured goods tend to be able to bear “green premia” and can, therefore, contribute to early action on supply chain decarbonisation.
- Vessel operators: While there are limited Spanish vessel operators operating in the global market, several international players that service the Spanish market have made initial inroads to decarbonise their fleets. First movers include containership giant Maersk, which has already declared that it will have 12 zero-emission vessels operating by the middle of the decade.
- Fuel producers: Any scalable zero-emission maritime fuel is likely to be a green hydrogen derivative and will require significant investment in green hydrogen infrastructure. Spanish industrials have been at the forefront of green hydrogen investment with major players such as Fertiberia investing creating new green ammonia production capacity, while steel major ArcelorMittal has invested in a 250,000 tonne steel plant designed to utilise green hydrogen.
- Regulators: Regulatory bodies have a crucial role to play in creating the enabling ecosystem required to create Green Corridors. Spain has a robust regulatory framework in place, led by the Ministry of Ecological Transition and the Demographic Challenge, which has put together a green hydrogen roadmap that will be key in upscaling fuel production infrastructure.
#2 Determining the fuel pathway
Spain has the potential to be among the cheapest production locations in the world and a hub for European production. A key component to producing green hydrogen will be ensuring the availability of sufficient renewable resources. Spain is blessed with excellent solar and wind resources, as well as a strong industrial base for project development, making it among the most attractive locations in the world for green hydrogen production. For all scalable, zero-emission fuels, the production costs for zero-emission hydrogen will be the primary factor determining competitiveness.
Moreover, the first mover advantage could help Spain gain a share in future maritime fuel markets. Given these advantageous conditions, Spain has an opportunity to establish a foothold in the future market for zero-emission shipping.
However, despite significant reductions in zero-emission fuel costs, a gap of around 25-45% is forecast to remain by 2030. Production of zero-emission shipping fuels today would have a cost base between 200-300 percent of that of fossil fuels.
#3 Mobilising demand
As noted, a cost gap exists between fossil fuels and zero-emission fuels, and will continue to exist for some time. This gap is meaningful for ship owners and
operators, with fuel already accounting for between 25-40% of the costs of a given journey and expected to be even higher as zero-emission fuels are adopted.
Yet, viewed in light of the service delivered – that is, the provision of final goods to the economy – the cost impacts of zero-emission shipping are small: usually under 10% for most traded goods.
#4 Policy and regulatory environment
Leveraging demand for zero-emission shipping services will likely be a necessary component of any successful Green Corridors, but it is unlikely to incentivise the full engagement of the value chain unless the cost gap is partially reduced.
Policy action will be essential to zero-emission shipping on many fronts: establishing and regulating safe operating procedures for the storage and handling of future fuels; regulating markets through Guarantees of Origin and green fuel certification; incentivising zero-emission fuel use; and, most importantly, reducing zero-emission fuel production costs.
EXPLORE AT GMF’S REPORT ON SPAIN’S GREEN CORRIDORS
