10/05/2022

Zero-carbon fuel

Now it is time for decarbonisation in shipping to set sail. A global carbon levy has failed to gather favour in the past, having first been proposed as a market-based measure – and roundly rejected – in 2013. But just in the last few months, a slow-moving tide for sea change has finally been gathering pace. Thanks, amongst others, to Trafigura’s ongoing engagement, the debate has been accelerated among global policy makers and on the International Maritime Organisation’s (IMO) agenda, with the Marshall Islands becoming the first member to propose a global price on carbon.

The key issue here is long-term sustainability and how we get there sooner rather than later, ideally on a global level playing field.

The Marshal Islands and Solomon Islands made a proposal to the IMO in March 2021 for a change of USD100 per tonnes of CO2e emitted to be imposed by 2025. This pushed the zero-carbon levy discussions forwards by at least six to 12 months and led to more informed discussions during COP26.

One of the key points is that a large majority of the revenue collected should be returned directly to the industry through a cost neutralisation of the low- and zero-carbon fuels.

Chartering a path to zero

As trade volumes grow, actions need to be taken to ensure scalable zero-energy sources now, which means a huge commitment to developing their production, distribution, storage and bunkering. The Getting to Zero Coalition is gathering pace having brought together more than 150members from across the maritime, fuels and infrastructure industries. In September Getting to Zero coalition launched the call to Action calling for governments to act. More than 200 companies including Trafigura have now signed the Call to Action, calling the IMO to raise its ambition to set a zero-carbon shipping emissions target by 2050; commit to ZEVs on the water by 2030; and bridge the significant cost gap of carbon versus non-carbon fuels through regulation. Together the members have also committed to share insights and push for incentives and partnerships that will deliver economic, political and technological progress for zero-carbon fuels.

Production of green ammonia

Looking to the future

Green methanol and green ammonia are widely seen as the next generation of clean, hydrogen-based maritime fuels. They can be produced using renewable electricity, water and air, while providing sufficient energy to haul goods and materials across the ocean. But today’s vessels are not equipped to use these fuels, and they are not widely available. Green ammonia is currently on a forward basis significantly more costly than low-sulphur marine fuels in use today. A price on carbon would spur the necessary investment in green ammonia production and infrastructure, whilst most importantly creating a competitive and level playing field for the global industry.

The change of attitude towards shipping’s decarbonisation and re-energised discussion around a zero-carbon levy represent a possible break to the chicken and egg conundrum. Projects for hydrogen-based fuels need financing – and financing becomes available when there is certainty on offtake.

So it will comes down to the actions taken now. The industry is increasingly ready and willing to decarbonise and that is obviously the message to policymakers. But this time, people are ready for the next stage of discussions. And there’s plenty of work to do.

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