Reducing barriers to maritime fuel projects is key to decarbonizing shipping

Today, more than 80% of the world’s traded goods travel by ship and maritime transport accounts for 2–3% of global greenhouse gas (GHG) emissions. Direct emissions from shipping are an integral part of supply chain emissions.

The shipping industry is making strides to reduce emissions. For example, carriers have placed orders for over 200 dual-methanol vessels (a viable fuel for a zero-emission pathway to decarbonization).

However, methanol and other zero-emission fuels are already in short supply, and the current outlook for supply projects raises concerns: over 95% of maritime fuels project plans have not yet reached the final investment decision (FID), which is needed for construction to begin.

The First Movers Coalition (FMC), the world’s largest demand signal for zero emission technologies across hard-to-abate sectors, published the Key Barriers to Scaling Zero-Emission Fuel Supply Insight Report in December 2023 with the Boston Consulting Group.

The report draws input from more than 20 organizations along the maritime value chain. It articulates what needs to be solved to ensure that the supply of zero-emission fuels scales to support the decarbonization needs of the shipping industry.

Here's how FMC members, as well as suppliers, are leveraging the paper’s findings to inform their investments in zero-emission shipping fuels:

Garett Ripa, Senior Manager Strategy (Marine & Logistics), Rio Tinto:

“The identified barriers within the report help inform our investment assessment in low-carbon shipping fuels, especially considering the competing sectors that need to decarbonise as well as the lack of clear near-to-midterm mandates for a global price on carbon. Global market-based measures, led by the IMO, and regional initiatives which connect value-chain partners and government, such as targeted green corridors, are essential to accelerate shipping’s energy transition.”

Murali Srinivasan, SVP & Commercial Head, Yara Clean Ammonia:

"This report identifies barriers and offers potential solutions in a concrete manner with the target of accelerating the decarbonization in shipping. Partnership, proactive collaboration, and demand aggregation are at the heart of these potential solutions, which are fully aligned with Yara Clean Ammonia's approach of addressing the development of ammonia as a credible zero-emission maritime fuel."

Joost Weterings, Commercial Director, Liquid Wind:

“This is a significant report that delves into the core issues causing bottlenecks in the offtake of e-fuels. Its immense value lies in its ability to highlight specific challenges, shedding light on each one individually. By doing so, it becomes evident that these obstacles, when addressed on a case-by-case basis, are more manageable and definitely not insurmountable, thereby breaking down the anecdotal negativity surrounding zero-emission fuels often adopted by many in the maritime industry.”

Concepción Boo Arias, Director Global Partnerships & ESG, Public & Regulatory Affairs, Maersk:

“Barriers included in this report are spot-on and based on inputs from those first movers taking tangible steps towards decarbonization. The shipping industry holds the key to dramatically reduce its carbon footprint, but it requires here-and-now concrete regulatory actions to bridge the price gap between fossil and green fuels when more needed, at the current initial phase of the green transition. The International Maritime Organization, IMO, needs to work hard in shaping a pricing mechanism that makes green fuels financially viable by reallocating fees from fossil fuels usage while roping into the production of new maritime fuels growing and developing economies.”

Some examples of how actions are already being taken include:

Integrators pulling the supply chain together to accelerate action. In January, Maersk, the city of Yokohama, Japan and Mitsubishi Gas Chemical signed a Memorandum of Understanding to develop green methanol bunkering infrastructure at the Port of Yokohama. This is just one example of how stakeholders across the value chain getting together to build enabling infrastructure. Further carriers can leverage the aggregated demand for alternative fuels to steer the port’s bunkering infrastructure choices, kicking off a virtuous cycle.

Similarly, in October 2023, The Maritime and Port Authority of Singapore launched an RfP to six short-listed consortiums to develop low or zero-emission ammonia solutions on Jurong Island for power generation and bunkering. A major port like this playing a central role in aggregate demand opens new opportunities. There will be a synergetic effect of the availability and scalability of the fuel by combining the demand not only for shipping but also for power generation.

Public–private demand aggregation to drive offtake agreements. In 2023, the Zero Emission Maritime Buyers Alliance launched a collaborative procurement RfP to ship goods on zero-emission vessels, with the potential to reduce emissions by 1 million tons of CO2.

Other sectors have launched similar initiatives. For example, the Rocky Mountain Institute’s Sustainable Steel Buyer’s Platform, launched in September 2023, has a Request-for-Information out to suppliers for the purchase of up to 2 million tons of near-zero emission steel. The Sustainable Aviation Buyers Alliance similarly launched a collaborative procurement effort in April 2023 for the purchase of Sustainable Aviation Fuel certificates. Opportunities remain for demand aggregation in shipping, particularly for the procurement of zero-emission shipping fuels.

These barriers show the risk of delayed transition if value chain partnerships and business models with cost and risk sharing are not unlocked. While it may seem daunting, many initiatives already in progress prove that zero-emission shipping can be achieved and unconventional partnerships and collaboration across sectors must be further explored.