At a Riviera webinar on the future of cargo shipping, DNV GL executive vice president for business development Jan-Olaf Probst took on the impact of the ongoing Covid-19 pandemic on climate change-related regulation and how cargo shipowners are being affected.
Noting that IMO was continuing to make progress on developing its greenhouse gas [GHG] reduction regulations in spite of the pandemic, Mr Probst discussed the wider maritime fuels landscape with regard to availability, production and relative energy density to examine the potential case for uptake of several different fuels.
“All these initiatives are not stopping because of Covid-19. IMO are always working on this. Working groups are now meeting; there are team meetings to bring this forward,” he said.
“These steps for regulations on existing tonnage as well as future newbuildings are not disappearing due to Covid-19. And in this regard, the long-term, burning question is how to reduce greenhouse gases. Is this only by speed reduction or is it not the long-term view of [using] different fuel? And if so, then the question is, which is the best fuel?”
While some alternative fuels could meet demand in the 2020s if the rise in demand for fuel overall remains small, Mr Probst said a rapid increase in demand would necessitate production capacity growth for all fuels except LNG.
“Looking at the HFO demand of the whole maritime industry compared to the total production of different fuels: if you, for example, take biofuel then the total biofuel production would be able only to serve 60% of maritime if no one else – such as the car industry or airline industry – use biofuel,” he said.
The reality of the maritime industry having an entire fuel supply all to itself is unlikely, but even if that were the case, Mr Probst said, that still leaves 40% of shipping’s tonnage, at current fleet levels, forced to use other options.
Unfortunately those other options, including methanol and hydrogen, face the same or even more restricted limits on supply as the market currently stands. Only one contender remains viable to meet demand as a transition fuel that also reduces emissions, as Mr Probst sees it.
“The only available fuel, of which there is plenty, is LNG. And that is quite often considered as a transition fuel. No one believes it [gets us to] the end line, but it gives us the possibility to make the step up to 2030 and then through to 2050, especially if you are considering conversions and [installation on] newbuilding vessels” he said.
Mr Probst’s recurrent message was that climate change will not wait for the world to recover from the coronavirus pandemic or any other concurrent crisis. It stands on its own as a crisis that must be addressed immediately and with careful planning for the longer term.
“In this moment, the world is fighting against Covid-19 considerations. The maritime industry has to cope and find its way out of those kind of situations, as does the worldwide economy. But climate change is not standing on the side, and the kind of challenging role of environmental [regulation] for the maritime industry will not disappear due to Covid-19,” he said.
“And that should be kept in mind because the goal of IMO is to reduce greenhouse gas emissions from maritime through 2030 by 40% and in the long-term through 2050 by 70%. And then later on to zero,” Mr Probst said, underscoring the magnitude of the shift the shipping industry faces when it comes to decarbonising.
IMO, he said, have outlined certain steps they believe will allow the maritime industry to achieve the dramatic carbon reductions it is facing.
“One that is already present in the short term is speed reduction,” he said. “On the long-term side, you may have [some form of] carbon pricing. There are different opinions within IMO and the EU. And the ultimate goal is the development of zero carbon fuels,” Mr Probst said.
Back to LNG’s role in moving the industry in the direction it must travel, Mr Probst discussed the maturity of LNG in terms of regulation and technology, particularly when compared against still emerging fuels.
“There is another aspect to [the benefits of LNG], and that is on the regulatory side … how you order a newbuilding,” he said. “In the present IGF code, LNG is the only described fuel.”
Similarly, for technology, Mr Probst said the immediacy of the climate crisis requires fuels that do not face a technological barrier to entry and whose use can be quickly scaled.
“If you are thinking about different kinds of fuel that are already in the market, that means LNG and biofuel. These are available from the main engine side, as well as in IMO regulation. If you were to step over to methanol, you would have to wait for the main engine to be developed. The same is true for ammonia. On the regulatory side, methanol is still in an interim guideline phase and ammonia requires an alternative design. This means methanol and ammonia development are currently slightly arrested. This wait and see position is not the best, as the goals of IMO are not being postponed owing to Covid-19, with regard to emissions reduction.”
To Mr Probst’s final point, he also alluded to the precedent of emissions regulations coming into force in a timely manner in the form of IMO’s global cap on sulphur levels in maritime fuels which came in on its scheduled implementation date of 1 January 2020.
“We have seen that before for cargo owners, that [regulators] are focusing on ensuring their transportation will happen in a greener way,” he said.
In his concluding remarks, Mr Probst reiterated that owners must prepare themselves to fight concurrent crises. Yes, several segments of shipping, including the cargo sector, are facing economic pressure even after a prolonged period of consolidation. Yes, the pandemic has created difficulty and perhaps even a paradigm shift for world trade. But neither of those realities give shipping or cargo vessel owners an out. Climate change simply will not wait for calm economic waters. It demands to be addressed immediately. And regulators will continue to push for change.
“So the conclusion is that, yes, the present situation of Covid-19 is hitting the maritime industry, but climate change is not going away,” he said.
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