According to the Environmental Defense Fund (EDF), “ships transport roughly 90% of world trade and account for 3% of global greenhouse gas emissions.” The International Maritime Organization (IMO) is having a large impact on sustainable operations for ocean freight. Here are five environmental sustainability trends coming in 2021.
Potential decarbonization and ETS
The Marine Environment Protection Committee (MEPC) met last week to discuss the new IMO short-term draft amendments that would require ships to adjust their operations and equipment to reduce carbon emissions intensity by 40% by 2030 compared to 2008. More details and criticisms of this draft are available here. Though the MEPC agreed on the amendments, the final adoption decision will happen in 2021 at the MEPC 76 session. If passed, all ocean freight carriers would have to assess and adjust their operations to meet the goals of these new amendments.
Because these regulations aren’t strict enough for the European Union’s (EU) ambitions, the EU is still considering a regional Emissions Trading System (ETS). This would only be possible if all EU members agree. If the IMO cannot agree on guidelines that all governments approve of, there could be several regional ETSs over the next few years, causing higher costs on various trade routes.
Low-sulfur fuels
Sulfur emissions lead to environmental degradation, premature deaths due to air pollution and economic damage. IMO 2020 went into effect this year and requires that carriers use fuels with less than 0.5% sulfur oxide (SOx) by mass such as very low sulfur fuel oil (VLSFO) and marine gas oil (MGO).
In the first quarter this year, VLSFO prices were high, but COVID-19 triggered lower VLSFO prices while sulfur heavy fuel oil (HFO) prices stayed relatively constant. Many ship operators switched to VLSFO this year. Some ship operators are also looking to use liquefied natural gas (LNG) as an alternative.
Will scrubbers make a comeback?
Vessels can continue to use 3.5% sulfur HFO and meet IMO 2020 standards if they have scrubbers installed to reduce sulfur emissions. The pandemic has narrowed the price gap between VLSFO and HFO. In response, fewer vessels are being fitted for scrubbers because the price advantage is much smaller. Though demand for scrubber installations has decreased this year, things could change as new COVID-19 vaccines are expected to become widely available in 2021.
As economies return to normal, demand for fuel will increase. This would lead to new price movements for fuel. If the price gap between VLSFO and HFO grows to levels where the return on investment (ROI) for scrubbers makes sense for carriers again, more scrubber installations are likely. HFO prices have to be much lower than VLSFO prices for this to be feasible.
Shore-to-ship power
“Overall pollutant emissions can be reduced by up to 98% when utilizing power from the regional electricity grid,” according to an EPA assessment.
Depending on the location, ships at berth might have the option to use their own power, resulting in emissions, or use shore power. Plugging a ship into an electricity grid on shore can reduce local and overall emissions, especially if renewable energy sources such as wind, tides or solar are used to power the grid. According to the EPA, shore-to-ship power, also known as alternative marine power (AMP) or “cold ironing,” improves air quality around ports because “shore power typically produces zero onsite emissions.”
In August, the California Air Resources Board (CARB) authorized a new regulation to reduce emissions and pollution from ocean vessels. It builds upon a 2007 At-Berth Regulation that has reduced harmful emissions from over 13,000 vessels by 80% since 2014. Starting in 2023, auto carriers and tankers will be required to meet emissions standards through plugging into the shore for power or by using an approved capture-and-control system.
Digital transformation
The pandemic is forcing supply chains to problem solve when it comes to safety and efficiency. Shipping is turning to digitalization from customs forms to order confirmations as new trade agreements take effect. Making documents digital saves time, decreases risks of spreading COVID-19 face to face, reduces reliance on paper and saves money.
According to a FreightWaves story earlier this year, the new EU regulation that takes effect in 2021 will require hundreds of millions more declarations to be made each year. Brexit alone could cause declarations to increase by half a million per week. The technical director for Metro Shipping in the U.K., Simon George, stated that “collaboration and data exchange are absolutely required for a sustainable solution.”
The Digital Container Shipping Association (DCSA) is aiming to eliminate paper from shipping transactions through the use of a standard e-bill of lading (eBL). DCSA claims that “paper bill processing costs 3X as much as eBL processing.” Though maritime has plenty of room for growth in going digital, the COVID-19 pandemic is speeding up the transition.
Click here for more FreightWaves articles by Alyssa Sporrer.
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