Carbon ambitions remain all at sea
The shipping industry needs firm rules on how to calculate the lifecycle emissions of alternative fuels before it can start to build a low-carbon future, according to ABS
Fresh from complying with the International Maritime Organization (IMO) 2020 regulations on low sulphur fuel, the shipping industry is facing the challenge of reducing CO2 emissions of its fuels by at least 40pc by 2030 and 70pc by 2050. This will require energy efficiency gains and decarbonisation measures at the very least—and, later, adopting entirely new types of fuel.
Georgios Plevrakis, director of global sustainability for US maritime classification society ABS, is at the centre of this challenge. His global sustainability team is spread across four centres in Singapore, Athens, Copenhagen and Houston. It aims to support shipping companies with practical guidance to meet the sustainability targets mapped out by the IMO and the UN, identifying which strategies and alternative fuels would have the greatest impact on emissions.
Before joining ABS, Plevrakis was a business development manager at marine services organisation Rina and has held various other roles related to the shipping industry. He has a Masters of Engineering from the National Technical University of Athens and an MBA from the Athens University of Economics and Business.
How significant is the decarbonisation challenge for the shipping industry?
Plevrakis: Decarbonisation is probably the biggest challenge facing our generation, and this certainly does not exclude the shipping industry. The European Parliament voted in mid-September to revise the bloc’s Emission Trading System (EU ETS) and, according to the adopted text, from 2022 the shipping industry will have to report and trade emissions in a cap-and-trade system.
A number of other regulations are coming up or are being proposed. We are following all of them closely and have a team of experts to identify the challenges and emerging risks—and there are a lot of them. The shipping industry will have to make critical decisions in response to the challenges it faces, especially to meet the IMO’s decarbonisation goals for 2030 and 2050.
“Decarbonisation is probably the biggest challenge facing our generation, and this certainly does not exclude the shipping industry”
What measures are facing the shipping industry?
Plevrakis: There are short- and long-term measures. Short-term, technical measures are being proposed that could impact both existing and newbuild vessels—and it will be challenging for some vessels to comply with these. Towards 2030, we are looking at carbon-intensity reduction factors.
The whole industry is actually looking at these measures and wondering where it stands. Owners, operators and managers of every vessel are looking at how well they would stand up against these challenges and are considering the available options to improve their assets.
How is this affecting the commissioning of new vessels?
Plevrakis: The industry has to consider what kind of assets to invest in over the next couple of years to ensure it meets the emerging requirements. The options being explored are energy efficiency improvements and alternative fuels.
When considering new construction—of terminals and vessels—the question is how to create a pathway to the next decarbonisation milestone. How can money be invested so that it is futureproofed at least into the mid-term? What types of fuel-related and other technologies should shipping companies be looking at? To help with this process, ABS has created a matrix of possible pathways for the transition over the short, medium and long term.
There are several alternatives to bunker fuel that are less carbon-intensive. Which is the most viable?
Plevrakis: At this point, we are looking at fuel solutions that are more-or-less mature, certainly ones that are more mature than the zero-carbon fuels being proposed such as ammonia and hydrogen that have been receiving so much interest. We are focusing on the first steps towards decarbonising the industry and reducing the carbon-intensity of operations.
LNG is the most mature fuel and the only one that has, from a technical perspective, gone through a learning curve. The equipment for LNG-fuelled vessels has already accumulated millions of running hours. We have mapped this experience in our recently released advisory note.
Which other fuels are in the running?
Plevrakis: We have seen the first owners opting to use LPG as fuel. The first vessels, which will to be delivered this year, will utilise their cargo as fuel. The expectation is that all LPG-carrying vessels are going to use LPG as their fuel by 2030.
70pc – IMO target for reduction of carbon emission by 2050
The other fuel that has accumulated some running hours and gone down something of a learning curve is methanol. Again, this mainly concerns methanol carriers, but there are also a couple of applications in passenger vessels. LNG is the most mature followed by LPG and methanol. Those are our main starting points.
Is there a role for biofuels?
Plevrakis: Fame biodiesel was introduced in ISO 8217 2017, but that only involves a 7pc blend. Now we are starting to see tests at much higher levels, 20pc or even 100pc. We are also looking at hydrotreated vegetable oil and expect to see this pathway develop. We also expect to see a greater use of waste as a raw material and for production to scale up.
We will see whether any of these fuels can serve the demands of shipping, both in terms of quantity and pricing. They will have to be competitive with other fuels, and shipping has to compete against other means of transportation.
How do the economics of these options compare with bunker fuel, and with each other?
Plevrakis: We started talking about LNG back in 2013, discussing whether it could be viable. The hurdle for LNG was not so much associated with opex—the fuel cost—but capex. The cost of the installation is so much greater than conventional technology, so for many owners it did not make sense.
There is a delta in pricing between LNG and IMO 2020 compliant fuel, but that delta was not actually enough to create a business case for the owners. In addition, there remains a lack of clarity regarding small-scale onboard delivery of LNG—the small-scale supply chain has not been developed to the level that ship owners need to feel safe.
What needs to happen to resolve this issue?
Plevrakis: We are moving from an established landscape to something new, so alternative fuel technologies are more expensive. But this may change as we go through the transition.
LNG was considered as a solution for IMO 2020, and now it is back in the game as a solution for 2030 and 2050. But LNG will have its own carbon-intensity challenges after 2040. There are currently discussions around blending biostreams of methane into the existing fossil methane in LNG supply, to reduce its overall footprint.
To what extent can the footprint of LNG be reduced?
Plevrakis: The challenge is that there are no regulations for a lifecycle approach to the carbon footprint of fuels. There are discussions, there are some proposals, but they are not going to be rolled out as regulations in the short term.
At this point, the regulations look at the contribution of each fuel from a ‘tank-to-wake’ perspective [emissions from combusting the fuel]. Therefore, anything that has a carbon-neutral footprint [but releases emissions from a funnel, such as biofuels] cannot be assessed as emissions-free from a regulatory perspective.
We are looking at lifecycles because we need to prepare our pathway to 2050. The only way to get there is by looking at carbon-neutral fuels including bio-LNG and other biofuels. There is regulatory gap that needs to be developed. It does not make sense to talk about biofuels if we do not have a framework that looks into lifecycle carbon footprints.
How do you account for the carbon footprint of a vessel that operates, for example, 50pc fossil LNG and 50pc bio-LNG? These things need to be developed, clarified and mapped out. We need to move from ‘tank-to-wake’ to ‘well-to-wake’.
Given the long lead times—including conceptual, design, building and delivery phases—and long service life of vessels, combined with the looming 2050 target, how can companies confidently commission LNG ships? Is there a danger that a hugely expensive asset could be rendered obsolete?
Plevrakis: That is why the lifecycle, well-to-wake approach to emissions is so important. If we do not start introducing a bio or synthetic aspect into the energy stream then, yes, you would probably find that LNG becomes unviable. From a regulatory perspective, LNG assets will require something to change if they are to continue as a solution after perhaps 2035.
We just have a statement for 2050, which is very, very ambitious. But we do not have a trajectory—what is the carbon-reduction trajectory that a vessel needs to follow to meet the requirements of 2040?
In our recent study, we could see only 50pc CO2 emissions reduction by 2050—so shipping is not going to make it unless we have a rapid, accelerated decarbonisation scenario that goes across across the value chain. We need a rapid introduction of carbon-neutral strains and blends, as well as zero-carbon fuels, in the mix.
“It does not make sense to talk about biofuels if we do not have a framework that looks into lifecycle carbon footprints”
It sounds like the IMO needs to act quickly.
Plevrakis: Yes, proposals have been submitted to the IMO. Its regulatory assembly should be looking at how lifecycle approaches can be implemented and how emissions could be calculated for the carbon-neutral portion of the blend, and the entire fuel.
When do these decisions need to be made for the industry to be able to hit the 2030 and 2050 targets?
Plevrakis: As soon as possible, these things need to be clarified. At the IMO Maritime Environment Protection Committee (MEPC) meeting, we hope that we will get more clarity. Due to Covid-19, the MEPC scheduled to start in March was postponed until 16-20 November. This is where we are going to get a clear idea of where the short-term technical measures are heading, including a carbon-intensity indicator on operations that could create a trajectory towards 2030.
Beyond this meeting, we will be working with the IMO on the medium- and long-term measures that could create a framework to align the shipping industry with the 2030 and 2050 decarbonisation goals. That is when we hope this type of approach is going to be investigated, explored and then give us a better idea of how to carbon-account solutions.
There are already a number of initiatives being discussed in groups, forums and panels outside of the IMO, but have an influence on the IMO. These are looking at the lifecycle approach and the carbon-neutral portion of the fuel spectrum so we can implement well-to-wake approach and select the right fuel for the right purpose.
Looking further ahead, is hydrogen a viable shipping fuel?
Plevrakis: Again, we have to discuss the lifecycle approach. From a well-to-wake perspective [blue and green] hydrogen is a zero-carbon fuel. One of the hydrogen-carriers that has been at the centre of attention is ammonia, which still has some ground to cover in relation to its maturity but is picking up pace.