- The shipping sector represents about 3 percent of total CO2 emissions—an amount that, if unchecked, could rise by as much as half by 2050.
- The International Maritime Organization (IMO) has mandated emission reductions of 50 percent for all vessels by 2050.
- One way to accelerate decarbonization is to implement “green corridors”.
The shipping sector is the lifeblood of global trade, accounting for approximately 80 percent of all trade, with further growth expected, says an article published in Manifold Times.
IMO emission reductions mandate
Recognizing the need for climate action, the International Maritime Organization (IMO) has mandated emission reductions of 50 percent for all vessels by 2050. A number of countries—including Japan, the United Kingdom, and the United States—have declared a target for net-zero shipping emissions in the same time frame.
Ways to achieve
To reach these goals, because ships have a 20- to 25-year operating life, the sector would need to implement comprehensive zero-emission programs over the next decade. The necessary technologies are available, but they would need to be deployed at not only greater scale and speed but also at a lower cost. Zero-emission fuels cost significantly more than conventional fuels, increasing the total cost of vessel ownership by between 40 and 60 percent, depending on the route.
Navigating to net-zero via green corridors
Green corridors would establish favorable conditions for decarbonization, for they would allow policymakers to create an enabling ecosystem with targeted regulatory measures, financial incentives, and safety regulations. Green corridors could create secondary effects that reduce shipping emissions on other routes. For example, once the infrastructure to provide zero-emission fuel for one green corridor is in place, it can then be used for shipping on other, adjacent routes.
These corridors would ideally be large enough to include all relevant value-chain actors, such as fuel producers, cargo owners, and regulatory authorities.
Zero-emission fuels have a major effect on the total cost of ownership (TCO) of vessels on the route. TCO includes all capital expenditure and operating expenses incurred during the lifetime of the ship. Elements include fuel cost, depreciation of the ship, cost of capital, daily running cost, voyage cost, and opportunity cost for lost cargo space if larger fuel tanks are needed for zero-emission fuels.
The Australia–Japan iron-ore route
In 2019, some 65 million metric tons of iron ore were exported from Australian mines to Japanese steelmakers, making this the third-largest dry-bulk trade route in the world. A total of 111 bulkers on the route burned approximately 550,000 metric tons of fuel oil in 2019—equal to 1.7 million metric tons of CO2 emissions. It would take 41 fully dedicated zero-emission vessels to decarbonize all iron-ore trade between Australia and Japan.
With the relative simplicity of the stakeholder environment, as well as strong existing political collaboration, the transformation of this route into a green corridor appears feasible. There is growing consensus among stakeholders on this route to decarbonize: already, 90 percent of the Australian iron ore exported to Japan is mined by companies with net-zero commitments, and Japanese steelmakers are exploring options to introduce green steel and to decarbonize their supply chains—which should allow for collaboration among miners, vessel operators, steel mills, fuel producers, and policymakers.
The Asia–Europe container route
This route is the largest of the three major East-West containership routes and offers the greatest potential to reduce emissions. In 2019, approximately 24 million twenty-foot equivalent units (TEUs) were traded on the route, on 365 vessels. The ships burned approximately 11 million metric tons of fuel, accounting for roughly 3 percent of global shipping emissions—more than any other global trading route.
The Asia–Europe container route has a complex stakeholder environment, involving many vessel operators. The nature of container shipping, where one vessel might carry cargo from multiple owners, creates additional complexity. Nonetheless, the low cost of fuel and an enabling regulatory environment on the European leg of the route means that this is a viable green corridor. Shipping decarbonization is a growing priority for policymakers, especially in the European Union, and European policy interventions affect the entire route.
Stepping stones
In general, changes required to promote zero-emission container shipping include setting major milestones, aligning on a common fuel pathway, and mobilizing demand. Policymakers can also consider regulations and incentives that would further support the shift to green shipping. Establishing them in this corridor would send a clear demand signal through the supply chain and set the stage for the global adoption of green shipping practices.
The pre-feasibility studies of potential green corridors show how stakeholder collaboration can establish these corridors, helping the shipping industry to reach its goal of full decarbonization by 2050. Success will be built on credible fuel pathways, value-chain initiatives, and mobilized demand. Partnerships are crucial: the entire value chain—including cargo owners, fuel producers, and vessel operators—needs to come together, based on a shared commitment to zero-emission shipping. Policymakers can also consider various targeted changes that would encourage a transition to zero-emission shipping along particular corridors. If stakeholders agree on a credible, ambitious green-corridor plan and implement it together, the industry can contribute to the world’s progress toward net-zero.
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Source: Manifold Times
