The shipping sector will not be able to reach net-zero emissions by 2050 without a fuel levy to encourage the use of alternative bunkers, according to the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, says an article published in Argus Media.
Closing the price gap
The group has identified five “critical levers” that must be applied to make net-zero a reality, the most important of which is policy and regulation. To level the economic playing field between current and future marine fuels, regulation is needed as market forces will not drive decarbonization alone, it said. The group suggests that a flat levy of $230/t of CO2 implemented in 2025 would close the price gap and also generate around $4 trillion to go towards decarbonization.
Willing to pay extra
Next month the International Maritime Organisation (IMO) will consider a 2019 proposal from the International Chamber of Shipping (ICS) for a $2/t levy on all fossil marine fuel purchases around the world. But the Maersk Mc-Kinney Center believes such levies will only work if other levers are applied, namely consumers being willing to pay extra for their fuel, a scale-up of production of new fuels onshore, development of on-vessel technologies to use these fuels, and mobilization of the finance sector.
Although willingness among customers to pay for zero-carbon shipping is growing, the center thinks that by 2030 less than a third of the maritime industry will be willing to pay a premium of just below 10pc for alternative fuels compared with the cost of current bunkers.
GHG emissions will be higher
Meanwhile, the technical readiness to produce new fuels is already high, the group said, pointing to the many projects that are looking into developing propulsion technologies for new fuels such as ammonia-fuelled engines. But commercial readiness is low, it said. If shipping sticks to current fuel usage, which is almost entirely low-sulfur fuel oil and LNG, GHG emissions will be higher in 2050 than they are today, it said.
Argus assessed LNG bunkers in northwest Europe at $1,274/t on a 0.5pc sulfur fuel oil-equivalent basis in the week to 22 October, over double 0.5pc fuel oil in Amsterdam-Rotterdam-Antwerp (ARA). Future zero-carbon marine fuels such as green ammonia cost significantly more than LNG.