Global shipping gets a kick in the rudder to decarbonize

Climate Economy

Global shipping gets a kick in the rudder to decarbonize

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Big players are investing in transition, as maritime goals and regulations get tougher

Capitalizing on a tried-and-true technology from ancient times, the future of maritime shipping looks a little like this: In late August, the Pyxis Ocean, a 42,000 ton bulk cargo vessel under contract by agro-giant Cargill is on a maiden voyage, sailing from Shanghai to Singapore and then Brazil — under wind power. Its 123-foot tall “WindWings” are a high-tech version of the canvas sails that propelled most trading vessels until about 100 years ago, and could save as much as 30% of the fuel needed for the trip. The initiative is just one sign of an industry beginning to decarbonize in the era of a climate crisis.

This is a desperately needed course correction. Shipping has evolved into one of the world’s dirtiest businesses. The lumbering, mostly diesel-fueled cargo vessels that traverse the world’s oceans with everything from grain to handbags collectively cough up more greenhouse gasses than most nations. As a country, shipping would be the sixth biggest contributor to climate change — and global trade just keeps expanding.

Clear marching orders

When the International Maritime Organization (IMO) revised its greenhouse gas strategy in July, under mounting pressure from island nations on the frontlines of climate change, it set significantly more ambitious and specific targets for reducing emissions than when it was drafted five years earlier. The IMO, which is the UN agency overseeing the vast majority of international shipping, sent “clear marching orders” to the industry with its revised agreement, says expert Eirek Nyhus. “The course is set, the speed is set. A very clear signal has been sent as to what is expected of us as a sector.”

The most important changes to the strategy, Nyhus says, which targets 2050 for net zero emissions in the maritime sector, are:

–Setting ambitious interim carbon reduction goals for 2030 and 2040. 

–Putting in place “well-to-wake” emissions accounting rules which means that carbon footprint includes the origin of the fuel, not just what is burned onboard the ship (“tank-to-wake”). This avoids incentivizing a shift to fuels like brown hydrogen that are clean burning, but carbon intensive in production.

Bolstering these changes is the EU regulatory regime that, as of 2025, will impose a cost for greenhouse gas emissions in the shipping sector, with increasingly strict standards in coming decades. Meanwhile, in the U.S. major new funding through the Inflation Reduction Act is aimed at electrification in ports and building out the supply chain for clean alternative ship fuels. 

Nyhus says, “Operators need to get up to snuff on understanding their emissions — for legal reasons — but it will also be ‘business critical’.”

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The shift faces some major challenges. Alternative fuels currently under development for ships are significantly more expensive than traditional fossil fuels, massive investment is needed for ship retrofits and port infrastructure upgrades, and making the transition work requires a global negotiation of regulation and enforcement that is just beginning to take shape. But the leading solutions are coming into focus — and the money is beginning to follow.

“For 2030, (the IMO agreement) means a rapid increase in energy efficiency, sustainable biofuels possibly supplemented by increased uptake in wind power would be expected to play the most significant role,” says Nyhus.

Pyxis Ocean’s WindWings. Shanghai, China. August 2023. Credit: Cargill.

A whopping reward for improved efficiency

Conventional cargo ships are too expensive to retire and replace quickly — but the good news is they can be altered to make enormous efficiency gains. In the short term, this is key for cleaning up the shipping industry, says Project Drawdown, a global climate solutions resource nonprofit. According to the organization’s analysis, 17 technologies and “slow steaming” (reducing travel speed) can cut fuel consumption of ocean-going vessels in half. Some of the fuel-saving/greenhouse gas saving innovations include “flat extensions called ducktails at the rear of a vessel that lower resistance and compressed air pumped through the bottom of the hull that ‘lubricates’ passage through the water.” Some of the suggestions are low-tech and low-cost — no-brainers like “removing debris from propellers.” “Slow steaming” alone accounts for more than one-quarter of the potential efficiency gains. (If you’re American, you might recall the 55-mph speed limit imposed during the oil crisis of the 1970s. It was a great idea for fuel saving, though reviled by many, and short lived.)

These efficiency moves promise to save ship operators money over the long term — and some in the short term — particularly when oil prices are high. According to Drawdown, if 50–75% of international ships adopted the changes they suggest, at an upfront cost of $720 billion–$1.01 trillion, they would save $2.48–$3.54 trillion in operating costs over the lifetime of the vessels. That is not chump change. Meanwhile, CO2 emissions from shipping would be reduced by 6.72–9.83 GIGATONS by 2050. 

According to Drawdown, if 50–75% of international ships adopted the changes they suggest, at an upfront cost of $720 billion–$1.01 trillion, they would save $2.48–$3.54 trillion in operating costs over the lifetime of the vessels.

Kickstarting the use of renewables on the high seas

There’s still the challenge of finding the right substitute for diesel fuel, but the quest is on — with a focus on advanced biofuels and e-fuels like methanol and ammonia made using renewable energy. 

Dutch shipping giant Maersk last month took delivery of the first of 24 methanol container ships on order, at a cost of $175 million each. (Click here to see the progress of that first methanol-fueled ship on its maiden voyage.) Although most methanol is currently made with the use of natural gas, a fossil fuel, Maersk says it is using only “green methanol” produced with the use of renewable energy from the outset. The good news for methanol (and chemically similar biomethanol ) is that the fuel does not need to be stored under pressure — unlike hydrogen — and many ports already have the necessary infrastructure to handle it. Not to be left in the wake, Maersk competitor Evergreen recently awarded contracts for 24 methanol-fueled vessels worth a total $5 billion. 

These leading companies have laid a bet on methanol while acknowledging that the supply of green methanol falls far short of their needs, never mind that of the tens of thousands of ships on the seas. But creating demand can help drive supply.

With Maersk, Evergreen and others preparing to operate more dual-fuel containerships, the industry is demonstrating demand so the green-methanol supply chain can develop, and hopefully soon,” says Don Maier, associate professor of business at University of Tennessee/international association of maritime port executives. 

There are challenges associated with each of the alternative fuels under exploration. Burning green methanol, although it has a much lower carbon footprint than traditional shipping fuel, does generate some greenhouse gas emissions. The trick with sustainable biofuels is access to feedstock that doesn’t impact food security and land availability. That places the focus on the use of materials like waste fats, oils and greases to produce fatty acid methyl ester (FAME) biodiesel, according to a report by the International Renewable Energy Agency (IRENA). And the shipping sector faces competition from aviation and ground transportation for these biofuels.

A race for ammonia-fueled ships

In the medium to long term, IRENA and other industry experts project that renewable ammonia — with zero carbon emissions — will be a critical component of the maritime transition. Cost is currently a barrier, though it should continue to decline as green hydrogen required for production expands. Meanwhile, a global race to develop an ammonia-burning seagoing ship engine is nearing the finish line, with companies from China, Singapore, Japan, Norway and Greece in the lead.

If the course is in fact climate corrected, what the shipping world will look like in 2050 will be a patchwork of novel fuels for crossing the ocean, new infrastructure in ports and new practices like strategic “slow steaming.”

As elsewhere in the quest for carbon drawdown, the maritime industry is all abuzz about the use of hydrogen fuel in ships. This is certainly part of the overall solution — there are hydrogen-fueled vessels and hydrogen port infrastructure under development. But, huge caveat, the only type of hydrogen fuel that ultimately passes the sniff test under the IMO’s new “well-to-wake” accounting is green hydrogen — that produced using renewable energy and not fossil fuels. 

What the future of clean shipping is not

In what could turn out to be a very costly misstep — and is certainly a controversial trend — major shipping companies have laid huge bets on the use of liquified natural gas (LNG), with proponents touting it as a lower-carbon “transition” fuel for the industry. There are now thousands of ships that can burn LNG or are “dual-use” (capable of burning oil or LNG) and bunkering infrastructure to serve these vessels. 

See our related story What’s needed to scale green hydrogen.

But according to industry publication Freightways, after a decade of contracts for new LNG and “dual-use” (LNG or oil) ships, orders for new ships have this year abruptly shifted towards methanol. The chorus of voices against LNG, which is lower carbon, but leaks methane — an even more potent greenhouse gas — puts the future of these vessels in question. These ships, which are expensive to build and subject to the volatility of international gas prices, also face uncertainty about how they will be treated in future regulation, both in the EU and IMO initiatives.

A 2021 World Bank report concluded that the problem of methane leakage and the risk of stranded assets, “..LNG is unlikely to play a significant role in decarbonizing maritime transport,” and that “new public policy in support of LNG as a bunker fuel should be avoided, existing policy support should be reconsidered, and methane emissions should be regulated.”

More to the point: “LNG proponents are gaslighting the shipping industry, policymakers, and investors down a dead-end path,” says the campaign “Say No to LNG.” 

The International Energy Agency’s most optimistic scenario for 2050 envisions half of global shipping fueled by ammonia, followed by biofuels (20%), hydrogen (15%) and fossil fuels (15%).

In other words, if the course is in fact climate corrected, what the shipping world will look like in 2050 will be a patchwork of novel fuels for crossing the ocean, new infrastructure in ports and new practices like strategic “slow steaming.” And, it seems likely that there will be a revival of sailing with the help of wind power, like our seafaring ancestors. 

Featured photo: the Pyxis Ocean. Credit: Cargill 

Written by

Kari Huus

Kari Huus is a writer and editor based in Seattle. She was a staff reporter for from 1996-2014, with stints covering international business, foreign policy, and national affairs. Earlier, she reported on China for the Far Eastern Economic Review in Hong Kong, and Newsweek in Beijing. From 2015 to 2020, she was managing editor for the website Money Talks News.