Shipping is rapidly changing – regulations are driving innovation and new technologies offer new ways of moving cargo.
It’s been widely reported that the United Nations’ International Maritime Organisation (IMO) has mandated IMO 2020, which goes into effect on January 1, 2020. Under IMO 2020, ships will have to sharply curtail the sulphur content of their fuel to no more than 0.50 percent sulphur, down from the current limit of 3.50 percent sulphur, to help reduce atmospheric pollution.
What has not been as widely reported is that the IMO has called for another major change for shipping that is perhaps even more far-reaching. The agency has mandated that total annual marine greenhouse gas (GHG) emissions be cut by at least 50 percent by 2050 (compared to 2008 emissions).
Moreover, the IMO “Vision Statement” on this issue states, “IMO remains committed to reducing GHG emissions from international shipping and, as a matter of urgency, aims to phase them out as soon as possible in this century.”
The IMO’s “Initial Strategy” notes that “technological innovation and the global introduction of alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition.” Steps that the international shipping community can take to achieve lower GHG levels include decreasing the “carbon intensity” of ships by implementing further phases of the “energy efficiency design index for new ships.”
According to well-known raconteur Dr. Martin Stopford – who is also the president of shipbroker Clarksons – “peak oil” (the use of oil as a vessel fuel) took place in 2013 when Maersk launched the maritime industry into the era of ultra-large container ships, with the construction of the Triple E series, capable of handling 18,000 twenty-foot equivalent (TEU) units.
But Stopford said the maritime industry must progress from oil (also known as “bunker fuel” in shipping) to low-carbon fuels if the industry is to meet the IMO’s 2050 carbon targets. He notes that move will be much more difficult than the shift from coal to diesel in the last century.
The center of shipping has moved from Europe to China, said Stopford, and the way that shipping as a business is managed must change. The introduction of digital technology is moving at a great pace and the priority of dealing with the IMO mandate on GHG emissions driving further change.
According to Stopford, McKinsey & Company produced a report 50 years ago that suggested containerization would speed up the movement of cargo, reduce the cost of moving freight significantly, change global trading patterns and usher in the era of door-to-door deliveries.
“The first three of these predictions have been realized, but the shipping industry has never really managed to move away from the quay-to-quay business. However, with digital technology there is now a chance to establish shipping as a door-to-door business,” explained Stopford.
Today, industry has a much better knowledge of trade, greater insights into the management of ships, the carbon footprint of their vessels, as well as the ability to determine the “carbon cost” of cargo. Using digital technology, the maritime industry must begin to explore and implement methods to achieve the carbon targets set by the IMO.
Stopford also noted that those IMO targets are more onerous when you look deeper into the requirements, than when they are initially seen. The maritime sector emits 940 million tonnes of carbon per year. By 2050 that will need to be reduced to 470 million tonnes. However, because shipping is growing at an annual rate of 3.2 percent, maritime vessels will actually pump 3 billion tonnes of carbon into the atmosphere if the current path is maintained over the next 30 years. That means shipping will need to cut more than 2.5 billion tonnes of carbon emissions by the IMO’s target date.
Stopford believes that there are three ways that shipping and the global economy will need to change for those targets to be met. First, the growth rate must be reduced to 2.2 percent to cut the 3 billion tonnes by 40 percent; then ships must be fine-tuned with supplemental power (such as solar energy, wind power and the use of larger vessels with the slowing of ship speed to an average of 10 knots from 12 knots) to save a further 40 percent; and a new zero emission fuel will need to be developed to achieve the final 20 percent – and that will prove the most difficult element, said Stopford.
The innovations that will allow the maritime industry to achieve the IMO’s 2050 target has yet to be developed. Though Stopford believes that the most likely progress will come in the area of environmentally friendly hydrogen (hydrogen produced from “green” sources). Exhaust from hydrogen burned in an internal combustion engine is just water, but the production of hydrogen is far more problematic with significant amounts of energy used in the process of splitting water atoms to isolate the hydrogen.