When the coronavirus pandemic struck in early 2020, international shipping was dealt a harsh blow. The container shipping industry was left scrambling as businesses around the world were forced to close, causing major supply chain issues.
Then quickly they were dealing with another challenge: unprecedented global demand for goods. Prices for container shipping have skyrocketed in response to rising demand and supply chain bottlenecks. The stranding of a huge container ship in the Suez canal in March this year also drove up shipping costs, said Diane Gilpin, CEO of the Smart Green Shipping Alliance, which develops technological solutions to help the shipping industry decarbonise.
“It shows us how brittle the supply chains are, with ripples of such an event going on for months and months,” said Gilpin, adding that ships are burning more fuel as they have been travelling faster to meet demand. “The container industry is going to make a hundred billion dollars this year. Are we going to invest that in the environment?”
Cleaning up shipping
There is an urgent need for the shipping industry to clean up its act. Ships emit around one billion tonnes of greenhouse gases every year, or 3% of global emissions. According to the World Economic Forum, if shipping were a country it would be the sixth largest polluter in the world. Without further action, shipping emissions are expected to reach 90-130% of their 2008 levels by 2050.
Shipping would be the sixth largest polluter in the world if it were a country.
While governments around the world have pledged a green recovery from the pandemic, shipping experts are not holding their breath. The shipping debate has “languished” since the Kyoto Protocol in 1997, which set targets for countries to reduce their carbon emissions, said Tristan Smith, an expert in shipping and energy at University College London’s Energy Institute.
“It’s absurd that governments have left it this long. Current policies are completely inadequate [to tackle] the scale of the climate crisis,” said Smith.
Shipping emissions were excluded from the Paris Agreement in 2015 because they are difficult to allocate to individual countries. This leaves regulating shipping emissions in the hands of the International Maritime Organization (IMO), the UN body responsible for shipping.
Stalling shipping negotiations
The IMO has long been criticised for failing to address the urgency of the climate crisis, introducing weak measures that will do little to curb emissions.
Under pressure from small island states threatened by rising sea levels, the IMO set a goal in 2018 of bringing emissions down by at least 50% by 2050, compared to 2008 levels.
But since then campaigners have accused the organisation of kicking the can down the road with ineffectual short-term measures. At the latest IMO meeting in June, member states agreed to reduce carbon intensity from ships by 2% every year between 2023 and 2026.
Bryan Comer, senior marine researcher at the International Council on Clean Transportation (ICCT), said the measure “doesn’t bend the emissions curve” and is equivalent to business as usual. According to ICCT analysis, a 6–7% annual reduction in carbon intensity is needed to be compatible with a 1.5C global warming limit.
“The longer we wait, the steeper the trajectory. In a few years 10% is going to be needed,” said Comer.
The pandemic also hindered negotiations and temporarily slowed down decision-making. “We lost eight months of progress,” said Comer.
One of the most contentious issues that keeps surfacing at IMO meetings is whether the industry should introduce a carbon tax to tackle its climate impact.
At the June meeting, Pacific Island nations, which are particularly threatened by rising seas and other climate impacts, called for a carbon price of $100 per tonne on bunker fuels. Emerging economies, such as South Africa and India, opposed the measure, while EU countries have called for carbon pricing in some form but did not endorse the Pacific Islands’ proposal.
Meanwhile, the International Chamber of Shipping, which represents shipowners, has put forward a proposal for a tax of $2 per tonne of bunker fuel, which works out at just $0.7 per tonne of CO2 emitted. The tax would be used to fund research and development projects worth $5 billion over the next decade.
Maersk has called for a levy of $150 per tonne of CO2 to help the industry shift away from fossil fuels.
A carbon tax would help “level the playing field,” said Comer. “Currently, the [price] gap between running a ship on zero emissions fuels and fossil fuels is pretty large – the economics don’t make sense.” But it is “politically difficult” for governments to set a carbon tax, especially for developing countries who argue that it will make exports more expensive, he said.
Slashing shipping emissions requires new technology, vessels and fuels. Replacing fossil fuels with hydrogen, which does not produce any carbon dioxide or sulfur oxides when burned, is one of the most promising solutions.
“International shipping needs hydrogen fuels. They have scalable production, no shortage of renewable electricity capacity [to produce them] and are cost competitive. But we are a couple of years away from the technology being available,” said Smith.
“We have to get over the innovation hump,” said Gilpin. “Many shipowners are concerned about climate change and want to do something but the lack of political structure makes it really difficult.”
Attracting funding remains an enormous challenge. “Financiers expect to see returns on their investments within a timeframe we cannot deliver,” said Gilpin, noting that new shipping technology and fuels will not come to market within a year.
“The shipping industry has been pushed into a corner and is looking for innovation but nobody wants to be the first mover in making changes when there is no infrastructure,” said John Kartsonas, founder of Breakwave Advisors, which offers asset management services to the shipping industry.
The sustainability push within capital markets that drove the vehicle industry to innovate and produce electric cars is missing for ship owners, Kartsonas said. “In shipping, most of the push came through regulations, the IMO regulations.”
“Despite all this rhetoric, there is no money to do any of it,” said Gilpin.
Rather than making the giant leap to building low-carbon ships, owners should focus on retrofitting their bulkers and tankers with sails to help them slash emissions, she said.
A pilot project carried out by Smart Green Shipping found that a cargo ship could save 20% in fuel every year when fitted with automated, retractable steel and aluminium sails, on a voyage from Baton Rouge to Liverpool.
When there are more success stories, “the market will show more confidence,” said Gilpin.
Clean shipping on the horizon?
Despite the lack of leadership from the IMO, governments are ramping up their climate ambition around shipping.
The UK, which is hosting the COP26 climate talks in November, said it would include emissions from international aviation and shipping for the first time in its sixth carbon budget, which sets out legal five-year targets under the Climate Change Act.
As the host of COP26, the UK is in a strong position to highlight the need for global action on shipping emissions, said Smith.
Meanwhile the EU has pledged to crack down on polluting ships by voting to include maritime CO2 emissions in its emissions trading scheme from 2022.
From the start of next year, shipowners will be forced to buy carbon permits to cover emissions during voyages in Europe and international voyages that start or finish at a European port.
“We continue to see the EU making faster progress than the IMO and now the US is starting to show climate leadership,” said Comer.
The US included shipping emissions for the first time in its updated climate plan, which it submitted to the UN in April. US climate envoy John Kerry has called on the IMO to set a zero emissions goal for 2050.
And when President Joe Biden brought together world leaders for a climate summit, also in April, he announced a zero-emissions shipping mission, in collaboration with Denmark and Norway. The goal is for zero-emission ships to make up at least 5% of the global fleet by 2030.
“With the EU and US pushing for higher ambition, the IMO might be dragged along in the process,” said Comer.
“At the COP, I’m hoping that the US will explore the potential of zero emission corridors with other countries,” he said, adding that modelling shows this is feasible.
As the UN falls short on action to slash shipping emissions, experts say the onus is on governments to decarbonise the sector.
“Governments have to catch up for a lot of lost time and remedy for the IMO which is rapidly deteriorating in its position,” said Smith.