The International Maritime Organization (IMO) has set a goal for the maritime sector to achieve net-zero emissions by 2050, with an interim target of 5% to 10% of shipping energy from alternative fuels by 2030. To meet these targets, the adoption of alternative fuels is essential. However, significant gaps exist in the current regulatory frameworks governing these fuels, posing new risks to vessels, crews, and the environment. A robust regulatory and risk mitigation framework is crucial for facilitating the maritime sector’s transition to sustainable practices, reports Global Maritime Forum.
Introduction
Conventional bunker fuels used in the maritime sector, such as heavy fuel oil, marine diesel, and gas oil, contribute significantly to environmental pollution and social damage. Greenhouse gas (GHG) emissions from international shipping account for approximately 3% of global emissions annually. To address this, the IMO introduced the 2023 IMO Strategy on Reduction of GHG Emissions from Ships, setting a target for net-zero emissions by 2050 and an interim goal for zero- or near-zero-emission fuels to constitute 5% to 10% of the total energy used in international shipping by 2030.
Alternative fuels, including biofuel, green and blue ammonia, green methanol, and green hydrogen, will play a pivotal role in achieving these goals. However, progress in technology, supply, policy, and finance for these fuels is currently insufficient to meet the 2030 target. Additionally, significant infrastructure updates are required to support the use of alternative fuels.
Regulatory and risk mitigation frameworks are essential for the practical and feasible adoption of these fuels. Unanswered questions from an insurance perspective, such as the impact of new sustainability standards on coverage and the risks posed by new technology and alternative fuels, need to be addressed to prevent delays in the maritime sector’s green transition.
Regulatory Frameworks for Conventional Fuels
Maritime incidents involving conventional fuels are governed by several regulatory frameworks that determine liability and compensation. These frameworks, such as the Civil Liability Convention (CLC), the Bunkers Convention, and the Wreck Removal Convention, ensure that shipowners are held liable for pollution damage and provide compensation through mandatory insurance and established funds. However, these conventions do not cover the risks posed by alternative fuels, leaving a regulatory gap that must be addressed.
Risks Posed by Alternative Fuels
Alternative fuels introduce new risks, including increased explosivity, flammability, and corrosivity, which raise safety concerns for the environment, people, ports, and infrastructure. For example, ammonia is toxic and combustible, methanol is corrosive with crew safety concerns, and hydrogen fuel has explosive risks. Current international regulations do not specifically address these issues, leading to uncertainty and potential delays in the adoption of alternative fuels.
Addressing the Gaps
To close the regulatory gaps, comprehensive trials, international cooperation, and robust frameworks are necessary. The ratification of the Hazardous and Noxious Substances (HNS) Convention should be a priority, as it would provide strict liability, mandatory insurance, and a second-tier fund structure for incidents involving alternative fuels. Additionally, developing an ‘alternative fuels convention’ or a protocol to existing conventions could reduce uncertainty and ensure better financial protection for incidents involving alternative fuels.
Marine insurers play a critical role in understanding and mitigating the risks associated with alternative fuels and supporting the decarbonization of the international shipping industry. Collaboration with stakeholders from across the industry, including insurers and policymakers, is essential for creating or modifying regulations to achieve IMO climate goals and support the net-zero transition. Proactive measures are necessary to address the risks and regulatory gaps associated with alternative fuels, ensuring a smooth transition to sustainable maritime practices.
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Source: Global Maritime Forum
