An expert explains the route to carbon neutral shipping

The next time you sit down to eat, consider what’s on your plate. Many of the ingredients that make up your meal may have travelled by ship to get there.

In fact, the global shipping industry is responsible for 90% of world trade by volume. And without it the import and export of food and manufactured goods would not be possible.

Today, there are more than 50,000 merchant ships transporting all kinds of cargo between 150 nations and manned by more than a million international seafarers. World seaborne trade is expected to grow almost 4% a year between 2018 and 2023.

Like all industries, shipping doesn’t come without an environmental price tag, but plans are in motion to engineer a carbon neutral shipping industry.

Together with the Global Maritime Forum and Friends of Ocean Action, the World Economic Forum is collaborating on the Getting to Zero Coalition, with the goal of speeding the development of zero-emission vessels by 2030 as a key step towards decarbonizing shipping.

Here, Johannah Christensen, Managing Director and Head of Projects & Programmes at the Global Maritime Forum, explains how we can achieve the goal of having a carbon neutral shipping.

Shipping accounts for somewhere between 2% and 3% of global greenhouse gas emissions – it's often compared to Germany in terms of the scale of emissions. The big thing that's underappreciated is that shipping emissions grow along with global trade. So they are set to rise significantly over the coming decades if left unchecked. As other parts of the economy decarbonize, we could see shipping’s share of emissions grow quite significantly over time.

The International Maritime Organization target is to reduce emissions by at least 50% by 2050. Is that an ambitious target?

Yes, absolutely. A lot of people might not think it sounds ambitious, but because of trade growth, the way to think about the figure is that it could represent a reduction of up to 85% in carbon intensity [the emission rate of a pollutant relative to the intensity of a specific activity].

Firstly, the sector needs to introduce deep-sea zero-emission vessels (ZEVs) by 2030, and that's part of the impetus for this initiative we're working on with the World Economic Forum. Any vessel that's put into operation in 2030 will be operating for at least another 15 years. So the only way to meet this goal is to have ZEVs operating at some scale in 2030 already.

For short-sea shipping, like ferries, electrification is a possibility and hybrid and electric ferries already exist in Norway, Denmark and Sweden. There's effectively been an exponential growth in deployment of electric ferries over shorter distances, but it's really not an option for deep-sea vessels, due to the size of batteries that would be required. So we have to look for an alternative.

The simplest solution that’s been identified so far is a form of liquid fuel to replace heavy fuel oil. Big ships are not hi-tech in any way, they run on the dredge that can’t be used for anything else, the lowest quality fuel that's left over once you've refined products for other sectors, including what burns in our cars. And there are three options being explored:

Biomass-derived fuels, so biofuel or biogas. Hydrogen and synthetic non-carbon fuels, like ammonia, for example, which are derived from renewable energy or from fossil fuels combined with CCS (carbon capture & storage).Synthetic fossil fuels, like e-methanol, that can be carbon-neutral based on the production process.

But each comes with its challenges. Biomass-derived fuels are being tested as drop-in fuels on certain routes because they can burn on existing combustion engines. But they're most likely only a transition solution. They have capacity constraints as production of biomass is in competition with food production. And, as other industries transition away from fossil fuels, the competition is going to be high – and it's not one that shipping is necessarily going to win.

So hydrogen and other synthetic non-carbon fuels seem like the highest potential long-term solution.

Financial institutions are helping to steer the industry towards a zero-carbon future. How significant is it that banks have signed up to the Poseidon Principles?

To my knowledge, it’s the first sector-wide agreement between financial institutions looking at how they can tackle one sector. And it’s made possible by the fact that shipping, much like aviation, has a global regulator in the International Maritime Organization. So there's a shared standard that cuts across shipping globally, and that the banks can use as a benchmark.

The signatories commit to publishing the carbon intensity of their portfolios on an annual basis, in the context of a set of trajectories that show whether the vessels in their portfolio are aligned or misaligned with the target set by the IMO.

Every time they refinance an old vessel or finance a new build, they consider what its carbon footprint will be. Over the lifetime of the loan, which could be around 10 or 12 years, what impact will the vessel have? This creates an incentive for banks to finance greener and greener vessels which are essentifor carbon neutral shipping.

We launched the principles in June with 11 signatory banks, whose combined portfolios make up about 20% to 25% of global shipping loans, and we’re talking to many others. One of the signatories said any responsible bank should be willing to sign up to these principles. We hope they will become the universal standard for shipping.

The reason we’re launching this Getting to Zero Coalition is because to make ZEVs a reality by 2030, the shipping sector and the fuel supply chain – the supply side and demand side – need to move in tandem. And there are other stakeholders that are going to be critical, such as ports, which will be a huge factor in making the fuels actually accessible.

A transition needs to take place, requiring government incentives, investment in R&D, investment in infrastructure. The role of the financial sector is going to be incredibly important in financing that transition. Figuring out how we make this investible is going to be a big part of it, what kind of policies can help shape and make it easier for those investments to take place?

We need the whole system to move together in order for this moonshot for shipping to actually be possible. And what’s exciting about it is shipping can be a showcase for other sectors. It can say, look, if it's possible for us, for the whole system to work together to make this transition towards carbon neutral shipping possible, surely it can be possible for others.

It’s just a question of working together to make it a reality.