Shipping, as the backbone of international trade, is highly efficient and emits fewer emissions compared to other transport sectors. However, meeting the emissions reduction targets set by the IPCC within the proposed timeframe poses challenges for the industry. While improvements in vessel energy efficiency are an option, the primary solution for decarbonizing shipping lies in transitioning to alternative fuels. Achieving this goal will necessitate investment across the entire value chain, from fuel production to bunkering infrastructure and vessel design and propulsion changes.
The chicken and egg problem
The challenge of fuel switching resembles the chicken and egg dilemma. Shipowners are reluctant to invest in retrofitting or changing their fleet without a stable and accessible fuel supply. Similarly, fuel producers and ports hesitate to invest in low-carbon fuel production and bunkering without a clear indication of increasing demand.
The cost of Alternative Fuels
The adoption of alternative fuels in shipping faces the hurdle of higher costs compared to conventional fuels, which significantly impact ocean freight rates. While a survey indicates consumer willingness to pay a premium for zero-carbon shipping, it lacks the necessary commitment, specific price points, and locations to drive investments in higher-cost fuels. Cargo owners face challenges in obtaining assurance regarding fuel sustainability and have difficulty consolidating their demand due to fragmented cargo across shipping lines. These factors impede the concrete expression of the demand for low-carbon shipping solutions.
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Source: Energy Post