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US “back at the table” on net-zero shipping at COP26, but funds needed: panel

08 November 2021 Cristina Brooks

Net-zero shipping needs more US support and funding, speakers at a COP26 side event in Glasgow hosted by the International Chamber of Shipping (ICS) said 6 November.

Shipping, which accounts for 2-3% of man-made emissions globally, has long dodged the stricter GHG emissions rules faced by many other sectors.

Countries that are members of the International Maritime Organization (IMO) are debating a way to solve the problem by rolling out a market-based mechanism such as a carbon tax that would incentivize and fund green fuel use.

But the US was a "drag anchor on the IMO" under the Trump administration when it came to climate policy, said the International Chamber of Shipping (ICS) panel's moderator and Chair of the UK-based Energy Transitions Commission, Lord Adair Turner.

US politicians are wary of a carbon tax policy, he said. "What you sometimes find … is that political processes don't like things called carbon pricing or taxing, but they're quite willing to accept fuel duty mandates, which any economist will tell you are going to have the same effect as a carbon price," added Turner, continuing: "But they're just more politically acceptable because the US Congress doesn't say, 'oh, that's an international tax.' It is accepted as an international regulation."

When Turner asked what the US thought of IMO-led market-based instruments, Andrew Light, US Department of Energy Assistant Secretary for International Affairs, did not signal American support, but said the US would "look seriously at whatever solution is going to get us across the finish line."

Global collaboration on carbon pricing is needed to grow the use of green hydrogen, a potential component of green fuel for ships, said Chilean Minister of Energy and Mines Juan Carlos Jobet. "I think it's good to have the US back at the table," said Jobet.

Chile in January signed an agreement with the Dutch government to cooperate on green hydrogen exports and the EU is considering limiting shipping emissions under its Emissions Trading System. "More broadly, on the climate agenda, Europeans have been progressive for a long time, [and] very consistent," Jobet said.

Chile aims to be one of the largest producers of hydrogen and in April put out a tender to incentivize its production in the country.

Hydrogen, electricity, e-fuel needed

The ICS on 8 October called for the IMO to adopt a net-zero GHG target for 2050, doubling the IMO's 2018 target of 50% below 2008 levels, on the condition new funding instruments are in place.

The ICS' push for net zero came despite trade body the European Community Shipowners' Associations (ECSA) actively lobbying to weaken efforts to include the sector in EU-level regulations on carbon neutrality, according to a report by think tank InfluenceMap.

To reach net zero for shipping, the ICS called on the IMO to create a global fund collected from shipowners globally with $5 billion for R&D on technologies that use cleaner shipping fuels, set to be called the IMO Maritime Research Fund (IMRF). "If adopted by governments at the IMO, these measures could lead to regulation that will swiftly move the shipping sector and associated industries towards a zero-carbon future," said the ICS in a statement.

The private sector has taken the first steps. For example, Japanese shipping company NYK used its own cash to fund R&D for fuels like hydrogen, methanol, and ammonia, for which commercial engines have not been developed yet. It has also ordered ships that run on lower-emissions LNG fuel.

The fuels most suited to decarbonizing international shipping are biofuels and e-fuels, i.e. methanol and ammonia, according to the International Renewable Energy Agency (IRENA). While they are currently expensive to produce, in the next few decades technological advances should make production cheaper, IRENA predicted.

While the International Energy Agency has said that current policies on shipping fuel are not sufficient to meet global carbon neutrality goals, the IRENA report predicted that in the short term, advanced biofuels will play a key role in the reduction of CO2 emissions. But by 2050, e-fuels like ammonia could represent as much as 43% of the mix.

E-fuel technologies are expensive due to not being proven at scale, as well as a lack of demand for e-fuel. These factors, taken together, mean e-fuel infrastructure is not currently profitable for investors, Carlo Raucci, a marine decarbonization consultant at classification body Lloyd's Register, wrote in an October blog.

Even if these problems are solved, there won't be enough renewable electricity to meet shipping's fuel demand. "That is 2,250 terawatt-hours of electricity, which would be about 10% of the total electricity currently being produced in the world. That's a lot of green electricity demand we need to support this decarbonization," said Turner.

The CEO of American classification body ABS, Christopher Wiernicki, said in the ICS statement: "Securing the required quantities of zero-carbon fuels to power our industry's transition will require significant scaling up [of] global renewable energy sources. Green hydrogen will certainly have a critical role to play, but we are starting from a very low base and increasing production is an urgent global priority."

Decision-making impasse

The IMO's working committee on marine environment protection published a path for uniting its member states behind one financing instrument in June.

The organization is considering either a carbon tax or a trading system or a fuel standard that would collect revenue for green fuel technologies while penalizing the use of high carbon fuels.

"I think we all recognize that we don't need to go through an almighty step change. Some kind of gradual trajectory ramp where we are gradually closing the gap is something that, broadly across the industry, there's wide support for," said Nick Brown, CEO of Lloyd's Register.

Brown also implied that in the IMO, governments were failing to advance the ball. "You know, trying to get 175 member states aligned on that market-based measure is not an easy task for anybody," he said.

Posted 08 November 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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