Shipping Decarbonization Weekly Insights -- How shipping moves ahead to run on zero-carbon fuels

2022-06-28 11:48By： Breakwave Advisors

Latest Trends on fuel transition, shipyard actions, government, ports, financing and industry players

There are growing calls for a carbon tax on shipping emissions. One of the first countries to put forward a landmark proposal for a carbon shipping tax was the Marshall and Solomon Islands, proposing a levy of $100 per tonne of carbon dioxide (CO2) in early 2021. The proposal was met with a lukewarm response from other countries, and various tax proposals have been made since.

In May 2022, Japan proposed a financial incentive to decarbonize shipping. Japan called for a global carbon tax that would see the shipping industry pay $56 per tonne of CO2 starting in 2025. If imposed, the tax is forecast to raise over $50 billion a year. The current proposal that Japan has put forward would see the tax increase every five years, to $135 per tonne of CO2 in 2030, $324 per tonne in 2035, and as high as $637 per tonne by 2040 Japan's proposal also suggests that the carbon tax for bunkers would be three times higher, given that each tonne of bunker fuel produces about three tonnes of CO2.

The proposal was considered as part of a bucket of carbon reduction options at Marine Environment Protection Committee meeting 78, which took place between 6-10 June 2022 Decisions on the various proposals to reduce greenhouse gases, including carbon levies, are due to be taken at MEPC 80, in July 2023.

Japan's approach would see the proposal implemented on a global scale, but other jurisdictions have looked at region-specific approaches. For example, the EU has also sought to tackle the issue of the carbon package which sets out a plan to reduce emissions in the bloc from 2023. The Fit for 55 plan proposes to introduce a carbon tax on shipping emissions.

When the measures in the package come into force, regardless of the flag they fly vessels will be required to purchase carbon allowances to cover all emissions produced during voyages within the EU, and half of the emissions generated by international voyages that start or finish at an EU port. In 2023, companies chartering large vessels will be required to purchase allowances for 20% of their emissions from ships that call at EU ports, increasing to 100% by 2026. It is worth noting one problem with the EU carbon tax package is that operators may look for shipping hubs outside the EU to lower their costs. It is possible, therefore, that operators may dock their large cargo ships outside of the EU, and then transfer their goods into Europe on smaller vessels, which have a lower carbon output.

New Alliances for Decarbonization

Oil players join forces to develop ‘one of the largest CCS facilities in the North Sea’: In pursuit of its strategy to go beyond net-zero, oil and gas company Neptune Energy has teamed up with several firms – ExxonMobil, Rosewood, and EBN – to pool resources for the development of a carbon capture and storage (CCS) project in the Dutch sector of the North Sea. Neptune Energy revealed that it has signed a cooperation agreement with ExxonMobil's subsidiary XTO Netherlands, Rosewood Exploration, and EBN Capital to progress the L10 large-scale offshore CCS project in the Dutch North Sea.

SEA-LNG coalition welcomes ZIM: A member of the Clean Cargo Working Group (CCWG) since 2013, ZIM has been engaged in improving the environmental performance of marine container transport and recognizes the LNG pathway as central to achieving this. ZIM is striving for zero environmental impact in its operations, as the shipping industry aims for a net-zero carbon future. LNG is a fuel in transition from fossil through bio towards renewable synthetic LNG, able to meet existing and expected regulations.

U.S. classification society, American Bureau of Shipping (ABS), has teamed up with Texas A&M University at Qatar (TAMUQ) to launch a study into carbon capture and the global supply chain: ABS revealed that it will work on a project in collaboration with TAMUQ to research the potential of carbon capture technology at sea. The project's aim is to explore CO2 reduction strategies as well as emerging onshore CO2 reduction technology and establish a model for effective CO2 capture on an LNG vessel. ABS informed that this study will examine the effect on processing, emissions, and shipping, which the energy transition toward a hydrogen-based economy is having across Qatar as an energy exporter.

Industry Actions

Wärtsilä moves forward with smart port ecosystem vision: Wärtsilä Voyage, part of the Finnish technology group Wärtsilä, has decided to acquire PortLink Global, a Canada-based port solutions company. As explained, the move will speed Wärtsilä Voyage along its path towards creating an end-to-end connected maritime ecosystem in which intelligent port logistics solutions play a nodal role. The transaction was signed and closed in June 2022. PortLink and Wärtsilä Voyage have already collaborated on projects including the co-development of a next-generation Port Management Information System (PMIS) for the largest Mediterranean and African port, Tanger Med, the Callao Port Authority (Peru), and the delivery of Brazil's first Smart Port Solution at Porto do Acu.

Germany pioneers a new form of green recycling: A world-first operation is underway to pioneer a near emissions-free recycling of a vessel. Cuxhaven-headquartered Leviathan is behind the groundbreaking process with a small construction vessel earmarked for the first trial. The founders of Leviathan have a long track record as surveyors in the maritime industry and have been working for more than 10 years on sustainable recycling technologies for ships. If proven effective, the new technology could give Europe some needed further compliant ship recycling options.

MOL creates a Philippine subsidiary to drive shipping decarbonization: Japanese shipping company Mitsui O.S.K. Lines (MOL) has decided to establish a wholly-owned subsidiary called EcoMOL, which will tackle immediate GHG emission reduction by ships' operational efficiency through digital solutions. MOL has set a target to improve 5% fuel efficiency by end of 2024, in line with MOL Group Environmental Vision 2.1. In the short-term plan, improving ship operational efficiency, including ship's energy sailing device (ESD installations, is said to be the most effective and realistic solution. MOL aims to take dynamic and innovative actions in daily operation, leveraging a big data analysis and constant actual operation performance review.

Navigare Capital Partners inks green tech deal with NJORD: Danish investment company Navigare Capital Partners and NJORD, a green technology business venture between Cargill, Mitsui, and Maersk Tankers, have entered into an agreement for the latter to design and install a package of fuel-saving technologies on four Navigare-owned vessels. As informed, the agreement is part of the companies’ work to cut emissions. The goal is to achieve fuel and emission reductions of between six and 14 percent per vessel on an annual basis. The NJORD team will design and install a custom-made solution for each of the four vessels. Usually, an owner tends to choose from one or two fuel-saving technologies, but NJORD is providing the solution, selecting from a portfolio of more than 15 technologies that will optimize each vessel's fuel performance.

ICS summit brings Clean Energy Marine Hubs initiative: The International Chamber of Shipping's Shaping the Future of Shipping Summit was held in London and was attended by energy ministers and development finance institutions as well as industry. The summit agreed to progress a Clean Energy Marine Hubs Initiative (CEMH) which would coordinate decarbonization efforts between stakeholders by developing collaboration between the energy sector and maritime industry. The vision for the hubs will also enable policymakers to unlock the potential of clean energy development. In the absence of international fund to support research and development of green technologies, attendees agreed on unilateral moves to prioritize R&D for low- and zero-carbon fuels.

Investments for ZERO Carbon Future

A.P. Moller Foundation invests $45M in zero-carbon shipping centre: The Mærsk Mc-Kinney Møller Centre for Zero Carbon Shipping has received a second donation from the A.P. Møller and Chastine Mc-Kinney Møller Foundation valued at DKK 320 million ($45 million). As explained, the investment aims to accelerate the maritime industry's decarbonization through collaboration. This donation comes on top of the DKK 400 million ($56.4 million) the centre received as start-up funding when it was launched in June 2020.

Technology

Leclanché announces the development of a third-generation marine battery system for electrification of a broad range of vessels: Leclanché, one of the world's leading energy storage solutions companies, has completed the development of a third-generation marine battery system designed to support the needs of shipbuilders in producing 100% electric and hybrid marine vessels. Called the Navius MRS-3TM (Marine Rack System), the new system improves upon Leclanché's popular and award-winning MRS-2 – already powering a broad range of ferries, container ships, and specialty vessels in service around the world. The newest version features significant improvements in battery energy density, modularity, and safety making it the maritime industry's most flexible and powerful vessel electrification system ever created with the lowest carbon footprint.

Mitsubishi Corporation picks BAR Tech's wind propulsion system for its bulker: Japanese trading company Mitsubishi Corporation has revealed that its bulk carrier will undergo installation and deployment of BAR Technologies' (BAR Tech) wind propulsion system WindWings, delivered by industrialization partner Yara Marine Technologies. As disclosed, the 80,962 dwt bulk carrier Pyxis Ocean is the first to undergo such an installation process. Two WindWings will be delivered by Yara Marine and installed on the bulk carrier, with one of those wings funded by the European Union as part of EU Horizon 2020 Project CHEK. The project is dedicated to demonstrating solutions for decarbonizing international shipping. It proposes to decarbonize long-distance shipping by disrupting the traditional way ships are designed and operated today.

Next Generation of Vessels

First methanol-powered tanker delivered to Stena Proman joint venture: The development of the methanol-fueled world fleet took a key step forward today in China with the delivery of the first of six new mid-range methanol-fueled tankers for Stena Bulk and Proman Shipping. Initially ordered in late 2019, the companies believe that the new class of vessels with set a new benchmark for MR tanker sustainability and hopefully encourage more shipping companies to follow their example.

Other major shipping companies including Maersk and recently CMA CGA have followed suit also ordering methanol-fueled containerships while others are also adopting dual-fuel technologies capable of future methanol operation. One of the key questions, however, has been the availability and supply of methanol especially to meet the near-term needs of the shipping industry. Stena Proman however points out that methanol is already available at over 100 ports worldwide, including at all major bunkering hubs. They are confident that methanol will become a key part of the environmental transition for the shipping industry.

First of three sustainable shuttle tankers chartered by Petrobras arrives in Brazil: Brazilian state-owned oil and gas giant Petrobras has welcomed the arrival of the first of three purpose-built, Suezmax second-generation dynamic positioning (DP2) shuttle tankers, which will carry out operations offshore Brazil. The other two are expected to join the energy player's eco-type fleet by the end of 2022. Petrobras disclosed that it has been investing in the contracting of sustainable ships, known as eco-type, which already represent around 37 percent of the fleet of ships contracted by the company. The Brazilian firm says that these vessels were built from 2015 onwards to comply with the energy efficiency improvement measures established by the International Maritime Organization (IMO/IMO), which aim to reduce fuel consumption and gas emissions in the atmosphere.

LR approves K Shipbuilding's LNG-fueled containership design: Maritime classification society Lloyd's Register (LR) has granted an approval in principle (AiP) for K Shipbuilding's design of a 7,700 TEU liquefied natural gas (LNG)-powered containership. The AiP certification is a procedure to verify the suitability of the ship's basic design. In order to minimize the loss of space in the existing containership design, the South Korean shipbuilder put the living area in the front, as part of the ship's design, and an LNG storage tank of about 6,800 cbm was placed below it.

SeaShuttle hydrogen-fuelled containership project wins Enova funding: SeaShuttle, the ambitious project to build two hydrogen-powered, remotely controlled and autonomous-ready containerships, has secured NOK 150 million (€15 million) in funding from Norwegian state enterprise Enova. The bold scheme, led by Dutch multimodal transport and logistics group Samskip and the U.S.-based marine robotics specialist Ocean Infinity, envisages two SeaShuttle ships operating emissions-free between Oslo Fjord and Rotterdam, with each powered by a 3.2MW hydrogen fuel cell. The funding means the partners can move forward to contract the two new 500 TEU ships installed with the main propulsion solution that can be adapted to run on hydrogen fuel.  A diesel-electric propulsion plant will be on board as a backup.

Ferry / Catamaran/Cruise Vessels

An all-electric ferry sails 90 km on a single battery charge, setting a world record: Ellen, the world's longest-ranging fully electric ferry, set a new world record on 9 June in Sønderborg, Denmark, during the International Energy Agency (IEA) 7th Annual Global Conference on Energy Efficiency. On its return from the conference, Ellen sailed 50 nautical miles – 92 kilometers – on a single battery charge. This is the longest recorded distance for an electric ferry able to carry passengers and vehicles to date anywhere in the world, according to the Danish engineering company Danfoss.

Swedish energy systems provider Echandia picked for 2nd emission-free catamaran in Stockholm: The Swedish energy systems provider Echandia has received a second order from compatriot company Green City Ferries AB. The Beluga24 is the world's first fully emission-free, high-speed, carbon fiber catamaran, and Echandia has been chosen to provide energy solutions for the vessels. The order is worth approximately SEK 7.5 million (EUR 702 thousand). Late last year, Echandia announced its first order for a fuel cell energy solution to power the first Beluga24 vessel from Green City Ferries.

MSC Cruises' LNG newbuilds mark construction milestones: The cruise division of MSC Group, MSC Cruises, has marked two important milestones for the first two liquefied natural gas (LNG) vessels under construction in Chantiers de l'Atlantique's shipyard in Saint-Nazaire, France. MSC World Europa, the first LNG vessel to join the cruise line's fleet and set to become the biggest LNG-powered cruise ship in the world, completed its first set of sea trials in the Atlantic Ocean. The trials included testing the performance of the ship's engines, manoeuvrability, fuel consumption, safety systems, speed, and stopping distances.

Wärtsilä and Stena to build the world's largest hybrid vessels: The technology group Wärtsilä will supply its hybrid propulsion system for three new RoPax vessel currently built for Stena RoRo, Europe´s largest ferry company. Two of the ferries will have a battery capacity of 11.5 MWh, making them the marine industry's largest hybrid vessels to date. This battery power is approximately double that typically being used currently for hybrid propulsion. The order was placed in May 2022.

Shipyards

Kawasaki Heavy wins LPG/ammonia carrier order: Japanese shipowner Kumiai Navigation has ordered a liquefied petroleum gas (LPG) and liquefied ammonia gas (NH3) carrier powered by LPG fuel from compatriot shipbuilder Kawasaki Heavy Industries (KHI). The vessel will have a capacity of 86,700 cbm. It has separate cargo tanks designed to carry LPG and ammonia at the same time. Moreover, this is the first LPG/ammonia carrier for Kumiai. This contract represents the 77th LPG carrier, 14th LPG-fueled LPG carrier, and seventh LPG/ammonia carrier to be constructed by Kawasaki. Kawasaki plans to complete the construction of the vessels at its Sakaide Works in 2025.

Fincantieri cuts steel for TUI Cruises' 1st LNG-powered cruise ship: Italian shipbuilding company Fincantieri has held a steel cutting ceremony for the first of two new liquefied natural gas (LNG)-powered cruise ships for TUI Cruises, a joint venture between TUI AG and Royal Caribbean Cruises. The steel-cutting ceremony was held on 22 June in San Giorgio di Nogaro (Udine) at Centro Servizi Navali, a company that specialized in logistics and production of sheet metal for the Fincantieri yards located in northeastern Italy. The new ships, described as being the “backbone” of the future TUI Cruises' fleet, will have about 160,000 gross tons and will be able to operate on LNG as a fuel. Furthermore, the Italian shipbuilder is exploring possibilities to make them operate in the future with low-emission biofuels.

Fuels

ESL Shipping to start using revolutionary low-emission fuel: Finnish shipping company ESL Shipping will become the world's first shipping company to start utilizing new low-emission Neste Marine 0.1 co-processed marine fuel in its vessels in Finland and Sweden. The ISCC PLUS certified marine fuel enables up to 80% reduced greenhouse gas emissions over the life cycle compared to fossil fuels, the fuel's developer claims. Neste Marine 0.1 co-processed marine fuel is currently in the piloting phase and it is produced at Neste's refinery in Porvoo, Finland, where part of the fossil raw materials have been replaced with renewable raw materials in the conventional refining process. The drop-in fuel can be taken into use without any fleet modifications as it has a similar composition to conventional bunker fuels.

ZeroNorth unveils a new Vessel Selection service for fuel consumption estimates: The Technology company has unveiled its new Vessel Selection decision-making support service for charterers, which is powered by industry-leading analytics and data within the ZeroNorth Platform. The new service enables charterers to improve fuel consumption predictions by simulating various operating conditions for the vessels they are considering chartering. They can then select the right vessel for the specific route and conditions and negotiate more precise performance guarantees with owners to reduce the likelihood of cost overruns.

Shipfinance

Swiss charterers and shipping firms beat UK rivals to green trade finance: More than half (54%) of Switzerland-based carriers, forwarders and charters obtain preferential green trade finance by demonstrating compliance with banks' carbon and sustainability requirements, compared with 46% in UK, revealed new research by Pole Star, the global leader in vessel-tracking and sanctions screening for maritime and risk intelligence.

Ports

Georgia Ports Authority is a new member of Green Marine: The top U.S. container port by loaded export volume is the newest participant in Green Marine, a voluntary environmental certification program for North America's maritime industry. Operating the deepwater ports of Savannah and Brunswick along with two inland terminals, GPA is active on various fronts when it comes to sustainable development, winning an EPA Clean Air Excellence Award for its efforts.

Ports of Rotterdam, Baie-Comeau to collaborate on port development: The ports have agreed to execute a master plan study including cargo flow analyses and technical port infrastructure assessments. The study will also include an analysis of the production and use of the potential of green energy in the industrial zone, such as wind and solar power, bioenergy, and green hydrogen.

Long Beach City Council OKs resolution calling for 100% zero-emissions shipping: Long Beach City Councilmember Cindy Allen introduced the resolution on Earth Day, 22 April, calling on Long Beach's top maritime importers to commit to making all port calls to the San Pedro Port Complex, which includes the Port of Long Beach, on 100% zero-emissions ships by 2030. This resolution unites the U.S. largest ports, Los Angeles and Long Beach – and the largest U.S. seaport complex – in making the commitment of zero-emissions ocean shipping by 2030. It also calls on the Port of Long Beach to establish more green international ocean shipping corridors, building off the recently announced Shanghai to Los Angeles and Long Beach corridor.

Regulations

NGOs and industry leaders call for minimum H2 standard in FuelEU regs: Viking Cruises, Transport & Environment, Siemens, and other leading maritime businesses and NGOs have called on the EU to require a minimum share of hydrogen in the industry's fuel mix by 2030. The proposal would modify the EU's proposed FuelEU Maritime alternative-fuel plan by adding a "dedicated e-fuels sub quota" equivalent to six percent sustainable and scalable hydrogen. The group also called for targets for the construction of hydrogen-based fuel bunkering infrastructure in European ports to ensure availability.

The dozens of signatories to the proposal include prominent players in maritime technology and energy, including T&E, Yara, Siemens, Alstom, CIP, Ballard Power Systems, and Cummins, among others.

ECSA welcomes Parliament's strong support to Ocean Fund and ETS costs' pass-through to operators: European shipowners welcome the strong cross-party support by the plenary of the European Parliament for key provisions under the revised Emission Trading System for shipping. The European Parliament decided its position on the revision of the EU ETS in the run-up to the negotiations with the Council (trilogues). A key element of the Parliament's position is the enforcement of the ‘polluter-pays’ principle, by ensuring the mandatory pass-through of the ETS costs to the commercial operators of the vessels through contractual clauses. ECSA also welcomes the proposal of the Parliament to create a sector-dedicated fund and to earmark 75% of the revenues generated by the shipping allowances to the energy transition of the sector.

Governments

Danish govt to hold co-ownership in future CO2 storage licenses under new political deal: The Danish government has signed a new political agreement with eight parties which implies that it will have a 20% co-ownership in future carbon storage licenses in the North Sea. Danish parties Venstre, Socialistisk Folkeparti, Radikale Venstre, Enhedslisten, Det Konservative Folkeparti, Dansk Folkeparti, Liberal Alliance and Alternativet agreed that the government must have a co-ownership of the CO2 storage permits via the North Sea Fund. The parties also agreed that CO2 storage must be taxed in accordance with the general tax rules. At the same time, the government gets a share of the profits if carbon storage becomes a good business.

Banking on renewable energy, Norway outlines roadmap to turn into 'green industrial giant': The Norwegian government has presented a roadmap for a green industrial boost, setting out measures to bring the country into a low-carbon emissions era through the help of seven industries, which are seen as crucial to curbing emissions and achieving net-zero goals. Within this framework, renewable energy takes centre stage as the key enabler of the transition to a green industry.

Source: Maria Bertzeletou, Breakwave Advisors

The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.

Please Contact Us at：

media@xindemarine.com