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2024

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OPINION | We’re running out of time to put hydrogen shipping regulations in place — it all hinges on the next 18 months

Author:

Hydrogeninsight


 

Governments must not only drive uptake of clean fuels in maritime sector but ensure steady H2 supply, writes Stuart Neil of the International Chamber of Shipping

 

The UN’s International Maritime Organization (IMO) set out a net zero target by 2050 for global shipping in its revised greenhouse gas (GHG) strategy in July 2023, with emissions reduction checkpoints for 2030 and 2040.

 

While this represents the will of all governments to set an ambition for the maritime sector to decarbonise, which will require an energy shift from heavy fuel oil (HFO) to new low- and zero- emission fuels and technologies, the IMO’s member states must now spend the next 18 months thrashing out the details of the technical and economic measures that will apply to all ocean-going shipping from 2027.

 

These regulations will have to address both the financial and technical challenges inherent in changing traditional practices, given shipping current consumes approximately four million barrels of oil a day — 4% of global oil production. However, the beauty of a global regulation is that everyone has to adhere to the mandatory rules, which, if structured properly, will provide a clear driver for the adoption of new fuels.

 

This week’s Marine Environment Protection Committee (MEPC) meeting at IMO headquarters in London is an opportunity to kickstart the process. The IMO’s member states will discuss the merits of a number of proposals, including one set out by the International Chamber of Shipping (ICS).

 

Our proposed Zero Emission Shipping Fund sets out a framework for mandatory contributions from shipowners based on the amount of fuel used by each ship in a year.

 

 

 

 

 

This will create a significant fund that will then deliver a rebate to those shipowners who have purchased low- and zero-emission fuels based on the CO2-equivalent emitted, and reduce the significant cost gap between zero-GHG fuels and conventional fuel oil, by providing financial rewards (“feebates”) to ships for the GHG emissions prevented by use of these new marine fuels.

 

A detailed impact assessment conducted by Clarksons Research for ICS highlights that under the Zero Emission Shipping Fund, which would add between $20 to $300 per tonne of fuel oil consumed, there would be no disproportionately negative impacts on national economies in terms of delivered cargo prices.

 

In the view of the ICS, this transparent and straightforward proposal provides certainty for shipowners and will also provide significant levels of support for the production of zero-emission and near-zero-emission marine fuels, the roll-out of new bunkering infrastructure in developing countries’ ports worldwide, and supporting training in the safe use of new fuels — a win-win outcome for everyone to make sure that no-one gets left behind.

 

But beyond supporting the transition away from heavy fuel oil, governments and the shipping sector must develop an integrated plan for how hydrogen-based fuels will be produced and transported, as well as used.

 

The world will need 50-150 million tonnes of low-carbon hydrogen by 2030, but there is a major gap between this and what is planned to date. Already-announced projects will only produce 24 million tonnes by 2030, according to the IEA, and worryingly, only 4% of these have reached a final investment decision.

 

Transportation of fuel is another key consideration. While shipping uses 4% of global oil production today, the sector also transports 36% of all traded volumes of hydrocarbons. As we move toward net zero by 2050, at least 50% of the new low- or zero-emission fuels could be moved by ships, according to the International Renewable Energy Agency (Irena).

 

Given the pace of change needed, we do not have time to wait. Ships need to be built, but there is a backlog at shipyards so this cannot be ramped up quickly, which governments and project developers will need to plan around. Shipowners will not invest in new capacity until they know there will be demand, but we do not want to be a bottleneck.

 

Similarly, ports have significant constraints that need to be managed — not least of these are the local planning and safety requirements.

 

With ammonia being a prime candidate medium for the transportation of hydrogen, we will have to ensure safety systems are agreed and harmonised for the transportation of this fuel.

 

Of course, shipping will also want to be an offtaker for some of this valuable cargo, which means governments will also need to address the trade-off between using ammonia as a fertiliser versus ammonia as a hydrogen transport medium, since industrial end uses may distort the market for food production. Care will need to be taken, especially in a supply constrained market.

 

In a world where governments are concerned about meeting their nationally determined contributions, as agreed under the UNFCCC process, we may see a merit order for the new zero-emission fuels emerge. Shipowners need to be cognisant of this as they transition their fleets to use the new zero-emission, hydrogen-based fuels to ensure that shipping has fair access to market.

 

Extreme weather events and geopolitical crises in recent years also demonstrate that any infrastructure system that is put in place to handle alternative fuels needs to be resilient. Droughts in the Panama Canal, the war in Ukraine, and the Houthi attacks in the Red Sea have all forced vessels to re-route, which is shifting trade patterns and likely increasing emissions.

 

We need to consider how these scenarios would play out if vessels were using alternative fuels — particularly since these have a lower calorific density than heavy fuel oils and already require more frequent stops for bunkering. This is why alignment across the entire energy-maritime value chain is so important.

 

This is why shipowners and ports are working with energy ministries under the umbrella of the Clean Energy Ministerial to help accelerate plans for the transportation and use of low-carbon fuels at scale as an essential component of the global energy transition, while ensuring shipping’s fuel needs are understood and incorporated in the context of a net-zero future.

 

The Clean Energy Marine Hubs initiative aims to ensure that in the rush to develop production capacity or decarbonise industrial uses we do not forget the important bit in the middle: transportation.

 

Decarbonisation is bigger than any one industry or government but what is clear is that to move net-zero fuels from producers to consumers, and to succeed in meeting global climate targets, the world will need shipping. We do not have the luxury of time so whatever proposals are implemented need to be certain, simple and transparent.

 

The IMO meetings over the next 18 months are going to be crucial to getting mid- and long-term measures in place to achieve these goals. These measures are also important for the development of the hydrogen economy but what is clear is that with careful planning we can create opportunity for all.

 

Stuart Neil is director of strategy and communications at the International Chamber of Shipping, a trade association that represents around 80% of the world's merchant tonnage.

 

Source:Hydrogeninsight

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