- Carbon pricing could rise to meet the 2050 decarbonisation target.
- LNG powered vessels, which emit the potent methane gas, could see costs rise even higher.
- In the 100% decarbonisation scenario, the average carbon price would be around $191/tonne CO2.
According to research released by the Getting to Zero Coalition (GtZC), carbon price might reach $360 per tonne in the 2030s as reported by The Loadstar.
Partnership
But the addition of LNG powered vessels, which emit the potent methane gas, could see costs rise even higher.
Closing the Gap offers an outline of the policy options available to regulators that will encourage vessel operators to switch from carbon-based fuels to zero-emission energy.
The Getting to Zero Coalition is a partnership between the Global Maritime Forum, the Friends of Ocean Action and the World Economic Forum, however, the report was written by a team of experts from the University College London’s UMAS shipping research unit and GtZC.
Closing the Gap investigates two possible scenarios, where emissions are reduced by either 50% or 100% by 2050, and in each case, the carbon price would be applied from 2025, with GHG emissions peaking in 2030.
GHG emission
Achieving a 50% reduction in GHG emissions by 2050, the carbon price level averages $173/tonne CO2.
In the 100% decarbonisation scenario, the average carbon price would be around $191/tonne CO2.
“In both scenarios, according to the model, the price level begins at $11/tonne CO2 when introduced in 2025, and is ramped up to around $100/tonne CO2 in the early 2030s, at which point [GHG] emissions start to decline.”
However, one of its authors, UMAS’s Isabelle Rojon, told The Loadstar: “We see the report as a conversation starter on the different policy instruments and some of the design options, and hopefully as a useful input to the IMO’s work plan on the mid-and long-term measures.”
Ms Rojon pointed out that policy preferences on the mechanisms to reduce greenhouse gas (GHG) emissions to zero would still need to be “thrashed out”, including all GHG emissions from all carbon-based fuels, such as LNG and NOx, throughout the fuel’s lifecycle, “and not just operational emissions”.
Cost assumptions
As such, the cost of GHG emissions for a fuel such as LNG, or the NOx emissions from burning hydrogen or ammonia, will need to be measured and the carbon price calculated.
Carbon dioxide currently accounts for 98% of shipping GHG emissions, known as CO2 equivalents, or CO2e.
However, Ms Rojon explained: “This is because during the 2020s, under the cost assumptions applied, the fuel [LNG] is not competitive relative to oil-derived fuels, and during the 2030s, as the regulatory pressure to decarbonise strengthens, the high GHG emissions of this fuel strongly disincentivise its use.”
“One tonne of CH4 [methane] or N2O [NOx} has a much greater warming impact, so their multipliers are greater than one.”
Effectively, the calculation made to put a price on CO2e emissions could drive the price of LNG, which is around 80 times more potent as a GHG, too much higher levels.
“Technologies to control CH4 and N2O exist and, depending on whether combustion or fuel cells are used, may be needed, she concedes.”
Uncertainty margin
“We have an uncertainty margin on the Capex figures we use in the modelling, which is inclusive of the cost of these technologies where they turn out to be needed.
On that basis, for these scenarios, the control of CO2 in the modelling is under those assumptions, also representative of control of CO2e, which would follow the same trajectory.”
There are close to 200 LNG-powered vessels of all types on order: CMA CGM is a major operator of LNG containerships, with some 14 on order; Hapag-Lloyd has ordered up to 12 gas-powered ships, and non-operating owner Seaspan has 25 LNG ships on order.
Last year, the Intergovernmental Panel on Climate Change, a body of scientists and others from 195 countries, warned that methane was a key component of LNG and must be curbed to meet the Paris goals of maintaining global warming to 1.5˚C or below.
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Source: The Loadstar
