Why Clean Shipping Fuels Need Solar-Industry Style Support
Shipping receives nowhere near the media coverage given to aviation, yet the sector also accounts for around three percent of global energy-related carbon dioxide emissions. Its footprint must be tackled rapidly if international climate targets are to be met. Solutions to decarbonize shipping exist, most notably in the form of green methanol, and some shipping firms are investing heavily in a greener future. However, the regulations and financial support needed to scale up the sector and push down costs are still found wanting.
The wind and solar industries are today mainstream players in the power sector. Costs, in particular for solar, have fallen massively everywhere. However, this positive trend would not have happened without significant government backing as these industries were starting out. The shipping industry has been used to accessing cheap fuels and, without similar financial and legal assistance, cleaner shipping fuels will remain an expensive pipe dream.
The shipping sector must reduce its emissions by 45 percent by 2030 compared with 2010 to come in line with the Paris Agreement commitment to keep global heating below 1.5°C above pre-industrial levels, says the Copenhagen-based Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, a not-for-profit research center. Meeting this target will be challenging, but the technology to achieve it exists and companies are engaging with the transition.
First, the technology. Methanol is a chemical compound that has long been in great demand for a variety of industrial applications. It is a relatively benign substance and, as a light liquid, it is easy to transport and store at room temperature. Almost all methanol today is, however, produced from coal and natural gas. Green methanol, on the other hand, is generated from clean energy sources either as bio-methanol or e-methanol. Bio-methanol can come from biogas or the gasification of sustainable biomass sources like agricultural and forestry residues and municipal waste, while e-methanol is produced from green hydrogen from renewable electricity and captured carbon dioxide.
Danish company Maersk has leapt ahead of global regulatory requirements through a commitment to procure only vessels compatible with green fuels and is taking steps towards retrofittings. As part of this transformation, the company has ordered 25 green methanol vessels it expects to come into service in the next three to four years. These decisions will help drive the creation of new green methanol supply chains as Maersk develops extensive off-take partnerships with energy companies.
Maersk is not the only company changing the way it does business. The global order books for low emissions vessels grew six-fold from 2019 to 2022 and changes to bunkering and fuel supply are also beginning to happen. In 2016, there were almost no shipping ports planning green fuel bunkering; by the end of 2022, ports representing around 16 percent of global shipping volume had announced plans to build out green fuel bunkering.
Green methanol supply has also been growing rapidly with total global production capacity increasing by 450 per cent from 2020 to 2023. This figure may sound impressive, but it comes from a very low base. Today, there are less than 0.2 million tonnes of green methanol on the market; we need at least 20 million tonnes by 2030. Further, production costs remain high, leaving large numbers of projects stuck in early-stage development. They will remain there unless we can secure long-term offtake at a price that makes these projects viable — but shipping companies cannot simply pass all of these higher costs to the owners of the cargo they move.
Governments can help solve this affordability gap between the cost of production and customer willingness to pay through "demand pull" initiatives, like the mandates for green hydrogen in the EU’s Fit for 55 package. Such policies create a clear demand signal and the industry can examine how to meet that at the lowest cost. We also need "supply incentives" like the EU's Hydrogen Bank and the US Inflation Reduction Act to help bridge production cost gaps.
Corporate leaders surveyed for Global Corporate Stocktake carried out by We Mean Business, with support from the UN Climate Champions team and consultancy Bain & Company, ahead of the COP28 climate summit, cited the lack of infrastructure to support fuel production and bunkering, commercial constraints and uncertainty surrounding technology pathways as important blockages to system change in the shipping industry. They also emphasized the need for governments to support collaboration between different actors in the shipping sector to push initiatives like "green corridors" where low-emissions vessels are incentivized.
Ultimately, green methanol will not be the only solution to decarbonize shipping. In the coming years, other low-emission fuels, like ammonia, are likely to come onto the market, with the end result being a complementary patchwork of solutions. For the moment, though, governments, and industry, should be focused on green methanol as a proven, easy-to-use solution that, with the right support, can be scaled up immediately.
Brian Davis is CEO of C2X, a standalone company founded by A.P. Moller Holding (APMH) and its shipping arm Maersk to "defossilize" the fuel used by shipping.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.