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Fortescue Metals Group founder and Chairman Andrew Forrest, one
of Australia's richest people, has his eyes set on decarbonizing
maritime transportation as his company begins to eradicate
emissions across its value chain.
Earlier this month, Perth-based Fortescue said it plans to achieve
net-zero Scope 3 emissions by 2040, becoming the first mining major
to make a firm commitment to tackling the largest part of the
industry's carbon footprint.
The iron ore miner in March announced a target of operational
carbon neutrality by 2030, 10 years earlier than its previous goal,
set in June 2020.
Speaking at the Global Maritime Forum held in London this week,
Forrest said the shipping industry can lead the industrial world
out of global warming as it is experiencing a "great industry
revolution" in decarbonization.
"Unlike countries, the shipping industry can move so much
faster," said Forrest in the runup to COP26, where government
leaders are hoping to find ways to curb climate change. "Whether or
not it has the will, that's the issue."
UN climate talks generally spend little time on maritime
transportation. The 2015 Paris Agreement did not directly mention
shipping.
But Forrest said companies like his "are entertaining [spending]
tens and tens of millions of dollars" to accelerate shipping
decarbonization. "We know that the technology is there…We're going
to move heaven and earth to ensure the shipping industry cannot say
it didn't have the molecules to go green," he added.
Fortescue, the world's fourth-largest iron ore producer, plans
to develop hydrogen-based technologies to reduce emissions from
shipping, iron- and steel-making in the coming decades.
As part of the decarbonization pathway, its green energy
arm—Fortescue Future Industries (FFI)—is tasked with
producing 15 million metric tons (mt) of hydrogen from renewable
power annually by 2030. The company recently announced it will build a
2-GW-per-year electrolyzer factory in Gladstone, Queensland in
2022, with an initial investment of A$114 million ($85.9
million).
Separately, FFI is set to make the final investment decision on
a 250-MW green hydrogen plant
in Bell Bay, Tasmania by the end of this year.
When it comes to FFI's planned hydrogen production, Forrest said
some will be converted to green ammonia to fuel marine engines
currently under development. "We are not yet at 100%, but around
60%, 70%, or 80% [technically]," he added.
Fortescue announced in June a partnership
with K-Line, JERA, Vale, Trafigura, and another 18 companies in a
joint study on using ammonia as marine fuel.
Fortescue's Scope 1 GHG emissions from its assets reached 2.06
million mt of carbon dioxide equivalent (CO2e) in fiscal year 2021,
which ended 30 June, and Scope 2 emissions from electricity
purchases amounted to 160,000 mt, according to the company.
Its Scope 3 emissions reached 252 million mt of CO2e, including
246 million mt from crude steel manufacturing and 3.48 million mt
from shipping. But decarbonizing steelmaking would
require huge investments from Fortescue's clients in electric arc
furnaces and renewable electricity.
The miner is targeting a 7.5% cut to the emissions intensity of
its steelmaking clients by 2030 from fiscal year 2021 levels on the
way to a 2040 target of 100%. Its near-term target for maritime
transportation is more aggressive: Fortescue wants to halve the
emissions intensity of transporting its ore by 2030.
The company will seek to build vessels capable of running on
green ammonia, and Forrest said Fortescue's fleet of eight very
large ore carriers (VLOCs) will be converted to be powered by the
zero-emission fuel.
The vessels are on long-term financial leases from
CDB Leasing, so their emissions are technically Scope 1. But they
are only responsible for 12% of Fortescue's total shipping
requirements—emissions from the remaining operations are Scope
3.
"We need to convert our 'heavy-pollution' ships. We have eight
of some of the longest ships in the world," said Forrest.
The company estimates that 300,000 mt of hydrogen will needed to
be converted to ammonia to power the vessels every year.
The magnate added that Fortescue will discuss decarbonization
projects with the shipowners transporting its iron ore cargoes.
With around 190 VLOCs worldwide, Forrest estimated 7 million mt of
hydrogen will be required to make 40 million mt of ammonia annually
for all of them.
"We're going to need to do a great deal more…The quicker we
start to decarbonize, the quicker it's going to happen," he said.
"The global shipping industry needs to start changing."
Tough pathway
Fortescue has set more ambitious climate targets than its peers.
A group of 28 mining firms—including Glencore, BHP, and Rio
Tinto—committed 5 October to net-zero Scope 1
and 2 GHG emissions by 2050. They have yet to establish a Scope 3 target as a
group.
But shipowners are facing additional pressure from
consumer-facing brands to decarbonize their operations. IKEA,
Amazon, Unilever, Michelin, and another five companies recently pledged to only ship their
goods on vessels powered by zero-carbon fuels by 2040.
The shipping industry has been mired in the debate over its
decarbonization pathways after the International Maritime
Organization (IMO) in 2018 established a target to halve GHG
emissions from cross-border shipping by 2050, relative to 2008
levels.
In June, the UN agency finalized initial technical and
operational rules for reducing vessel emissions. But many
environmentalists and shipping professionals believe the
regulations are not rigorous enough to trigger
industry-wide decarbonization.
"If you want to do things now, you need crazy people," said
Alexander Saverys, CEO of Belgian shipowner Compagnie Maritime
Belge, referring to shipping decarbonization. "Waiting for
subsidies, waiting for feasibility, [or] waiting for financial
analysis doesn't work."
Saverys, whose company owns some small hydrogen-powered ships
and is considering building ammonia-fueled ships, was speaking at
the same forum as Forrest. "Sometimes you need to have someone who
comes with his own money. And Andrew [Forrest], that's exactly what
you're doing," he said.
"Seeing is believing. So, if you do things with the crazy person
that does it, you can prove it to others this is really possible,"
he added.
Many shipowners have been willing to order LNG-fueled ships,
which cost more to build but have lower CO2 emissions than
conventional vessels and can meet the IMO's sulfur-reduction
standards, which went into effect on 1 January 2020. But energy
experts said the reliance on natural gas could lead to more methane
leakage and delay the transition to zero-emission fuels.
Major trade bodies proposed a carbon levy of $2 per mt of
bunker fuel to fund the research and development of low-emission
shipping, but environmentalists said the scale was too small to
result in meaningful emissions reduction.
Andreas Sohmen-Pao, chairman of Singapore-headquartered BW
Group, which owns maritime and renewable assets, said he hopes
shipowners can receive more encouragement rather than
criticism.
"Everything starts with small steps… At the emerging space we
should be encouraging these things, and then iterating and
improving instead of bashing them," he said.
Regulatory progress
During the IMO's Intersessional Working Group on Reduction of
GHG Emissions from Ships 18-22 October, member states proposed
several decarbonization measures that would begin to price vessel
emissions.
Those included a GHG levy, a cap-and-trade system, and a green
fuel standard. IMO members are still discussing regulatory details
and planning to finalize them in 2022 or 2023.
Many environmentalists and shipping professionals believe a
price on emissions is required to trigger the shift to low- and
zero-carbon fuels.
"It was exciting to see a growing number of countries last week
speaking favorably for new, more ambitious climate measures,"
nonprofit Opportunity Green CEO Aoife O'Leary said. "Many countries
recognized that the revenues from such a new measure can be used to
boost economic development across the world through investments in
decarbonizing the shipping sector."
Simon Bennett, deputy secretary general of the International
Chamber of Shipping, a London-based trade body, said the progress
to begin developing a market-based measure to expedite the
transition to net-zero emissions is welcome.
"The next important step will be for proponents of different
mechanisms to submit assessments of the likely impacts on the cost
of maritime trade," Bennett added.
The IMO was designated the regulatory body for emissions from
international shipping in the 1997 Kyoto Protocol, which expired at
the end of last year. There are hopes that COP26 participants will
formally ask the IMO to set a decarbonization target that can meet
the Paris Agreement's ambition in limiting global warming to well
below 2 degrees Celsius compared with pre-industrial levels.
During the IMO's 77th Marine Environment Protection Committee
meeting 22-26 November, a joint proposal from the Marshall Islands
and the Solomon Islands to achieve zero-emission shipping in
absolute terms by 2050 will be discussed. The Japanese government
said it will propose a net-zero
target in the same timespan with Costa Rica, Norway, the US, and
the UK. The EU's 27 members are expected to support one or the
other.
Posted 29 October 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability