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DECARBONISATION: PROGRESS SO FAR AND FUTURE DEVELOPMENTS
Published: 1 September 2022
Updated: 11 September 2022
In recent years decarbonisation has become one of the most common words in the shipping news media. The United Nations’ Paris agreement on climate change in 2015 made a commitment to keep the global mean temperature increase at below 2°C of pre-industrial levels by 2100, while making efforts to limit warming to 1.5°C.
In April 2018, the International Maritime Organisation (IMO adopted its initial strategy on the reduction of greenhouse gas (GHG) emissions from ships, which sets out the ambition to reduce carbon intensity by at least 40% by 2030, moving towards 70% by 2050, and to reduce GHG emissions by at least 50% by 2050. There is also a strong desire from many countries and within the shipping industry to reduce emissions by 100% by 2050.
It has become clear to the industry that the goal is to end the use of fossil fuels, requiring commercially-viable zero emission vessels to enter into service in the near future. With the majority of the world’s merchant fleet burning fossil fuels, consideration will need to be given to how ships, which are currently being financed, designed and built, would be able to operate or switch to an alternative non-fossil fuel later in their operational life.
ALTERNATIVE FUELS
As a result of these changes, the market for alternative non fossil fuels has seen a rapid increase in recent years, and a number of alternative fuels are now being tested as possible solutions to to help decarbonise the shipping industry. At the moment it is hard to identify which fuels will be the most realistic alternatives to fossil fuel as this will depend on the results of the large scale testing currently taking place, as well as other factors such as being able to secure a global supply of
any new fuels.
AVAILABILITY – Lack of availability could result in operational disruption, and in the worst cases, lead to a ship becoming inoperative if it is unable to use other available fuel types. For ships on charter, this could result in disputes as a ship may be unable to fulfil its charter party obligations.
For chartered tonnage, where a Member as charterer is responsible for providing fuel to the ship, this will require more detailed long term planning to ensure that sufficient fuel is available at the required locations, and to avoid excessive deviations, which the charterer may be held liable for.
INFRASTRUCTURE – Significant investment will be needed to develop the necessary infrastructure to ensure the adequate supply of fuel. The University Maritime Advisory Services estimates that 87% of the expected USD1.65 trillion cost to decarbonise shipping by 2050 will need to be dedicated to creating the supply and fuelling infrastructure¹.
The biggest challenge will be in the tramp trade, where ships do not operate according to a predetermined schedule. Obviously the most popular alternative fuels will become more readily available around the world but, if the infrastructure is not in place, Members will need to plan ahead carefully to ensure that sufficient fuel can be provided to their ships. Failure to do this may result in off hire disputes as the ship would need to deviate to a suitable fuelling location or lie idle while waiting for fuel to become available.
QUALITY – There is a lack of international standardisation for most alternative fuels, for example, regulations such as the ISO 8217 standard which covers fossil fuels. This could lead to an increased risk of fuel disputes, as it may become difficult for Members to claim that the alternative fuel was not within the required specifications.
Members will need to provide a clear and detailed fuel specification to their fuel providers to ensure that only fuel suitable for use on board is delivered. Members should also establish suitable test parameters to determine the quality of the alternative fuel delivered to them, and the specifications must also be agreed with the charterer.
FUEL MANAGEMENT– The use of alternative fuels will require Members to identify any operational risks associated with the use of such fuels properly. They should provide the crew with the proper practical training and understanding to sufficiently mitigate these risks sufficiently to prevent off hire charter party disputes due to engine failure.
HEALTH, SAFETY And ENVIRONMENT – Potential health concerns relating to the use of alternative fuels vary considerably depending on the fuel type. All fuel supplied should be accompanied by a Material Safety Data Sheet (MSDS), which should form the basis of a thorough risk assessment to ensure that appropriate safety barriers are in place to mitigate against any identified risks to the crew. For example, Ammonia is known to be very toxic and therefore any leakage could be lethal for an exposed crew member.
Another notable safety concern relates to the flash point temperature of certain fuels, which may be below the current SOLAS requirement of 60°C. The use of such fuels will require a rigorous approval process, including Flag State consultation, as well as increased robust safety means to ensure that the fuel is handled safely on board.
FUEL PRICING – Another factor which may become a commercial risk for Members is the pricing of alternative fuels compared to fossil fuels. Currently, alternative fuels tend to be more expensive than fossil fuels, and there are also local and regional variations in price and availability. However, as the market for alternative fuels grows, there is potential for cost reduction, as technology improves and more fuel is produced.
CONCLUSION
It is still too early to say which will be the preferred alternatives to fossil fuels as this will depend on a number of factors. One is the obvious environmental benefits of each alternative fuel, but the greatest challenges will relate to the availability, supporting infrastructure and price of the alternative fuels. All these elements need to be in place before these fuels are likely to become realistic industry-wide alternatives.
Also, there needs to be an increase in large-scale testing in order to determine and confirm the operational suitability and reliability of alternative fuels. In choosing
the right fuel, Members will need to conduct a thorough operational assessment, including consulting various stakeholders to determine which alternative fuel best
suits the requirements of their operation.
From an insurance liability perspective, the greatest concerns are about the possible lack of availability and infrastructure which could lead to supply issues. Members would need to make detailed plans to make sure that their ships could be sufficiently and efficiently supplied. In addition, the variation between the different types of alternative fuel together with the lack of standardisation may lead to an increased likelihood of fuel disputes. Members will need to review their safety management system (SMS) thoroughly and implement robust procedures, as well as provide training to key personnel, to ensure that these risks are properly managed.
REFERENCES
¹umas (2020). aggregate investment for the decarbonisation of the shipping industry.