Although emissions discussions focus on future fuels that will power shipping cleanly, energy efficiency remains the true and immediate enabler of decarbonisation, writes Aleksander Askeland of Yara Marine Technologies.
The pathway to decarbonisation has numerous hurdles including shifting environmental targets, economic recessions, and increased geopolitical uncertainty which affect the availability of fuels. However, from an environmental, cost and logistics perspective, energy efficiency remains the clearest way to progress decarbonisation. I believe that a focus on reducing fuel consumption is not a temporary interim measure, but a fundamental element of making decarbonisation affordable and practical.
Many operators are hoping to align their decarbonisation efforts with regulatory limits. However recent developments have shown that this is a complex landscape that is difficult to navigate.
The International Maritime Organisation’s (IMO) Marine Environmental Protection Committee (MEPC) intends to adopt revised GHG emission targets for 2030 and 2050 in June 2023. Although early indicators are that the 2030 targets to cut total emissions by 40% and carbon intensity (emissions per transport work) by at least 70% will not change, these targets are not considered ambitious enough by certain stakeholders.
The European Union’s Emissions Trading Scheme will require vessels’ commercial operators to pay for GHG and NOx emissions within Europe – and for half of the voyage beyond Europe – until 2027, after which the full voyage will be included. Similar schemes are being considered in Japan and China, with early discussions also taking place in the US.
With the industry and regional regulators pursuing a more aggressive green agenda, there is no doubt that there will be commercial advantages offered to those that can demonstrate low emission operations – and accompanying this will be the reputational risk for those who fail to evolve in pace with expectations.
The cost of waiting
But there are also tangible costs that must be considered by those still on the fence about changing their operations. Geopolitical instability in a variety of regions has pushed crude oil prices higher, with ship operators feeling the effect on bunker prices. These increases will only be worsened by emission trading schemes between now and 2050 that will make conventional fuels more expensive to use.
Rising operating costs will erode the investment budgets of operators that need to future-proof their fleets, as we enter a global recession on the heels of the COVID-19 pandemic. Therefore, the business case for upgrading a vessel to improve fuel and operation efficiencies in an immediate manner is clear. Shipping must seek steady and inevitable gains, rather than incurring increasingly larger costs while awaiting a silver bullet that may not be available in short term or fully supported by necessary infrastructure, notably for future fuels.
As the cost of conventional fuel rockets, ship operators will have increased motivation to look to the low- or zero-carbon fuels they will need to reach net-zero emissions – and could also explore renewable fuels. But this arena also faces investment delays, logistical challenges and spiralling costs.
Geopolitical conflicts, their impact on commodity supply and rising prices are weakening economies around the world. In such a climate, long-term investments in renewable fuel production could easily falter. If recession and inflation become long-lasting realities, countries and companies will need to rethink the pace at which they invest in future clean energy at the expense of making investments that can alleviate the impact of the economic downturn in the shorter term.
As an example, the European Parliament has recently classified LNG investments as ‘green investments’ to prolong use of the fuels while renewable investments are ramped up. This pragmatic move signals a longer lead time for clean fuel availability on a large scale than European lawmakers had initially estimated. In fact, it is more and more clear that many clean fuels will be available at scale only in the few years leading up to IMO’s 2050 target. This means that ship operators will either need to pay dearly for scarce clean fuels or be subjected to increasingly expensive fuel oil that is made even more costly by carbon taxes and other market-based measures.
Meanwhile, the IMO’s Carbon Intensity Indicator (CII) will come into effect next year and place a tightening requirement on vessel operators to show stepped improvements in operational efficiency. CII recognises that jumping straight to clean fuels will be an expensive and, in many cases, inaccessible option for maritime operators. The approach, which promotes constant improvement, is designed to encourage efficiency measures that will enable vessels to burn less conventional fuel now, and later to minimise the volumes of clean fuels they will need to meet the 2050 reduction target.
A continual process
While compliance with the moving targets of the CII may seem challenging, the logic of improving energy efficiency to cut fuel costs is sound. Streamlining energy use onboard is a continual process that is a far more reasonable investment than maintaining the status quo and having to absorb increasing fuel costs and fund high retrofitting costs.
The first step should be to improve both visibility and control of onboard energy use. In most cases, this simple operational measure can significantly reduce overconsumption without further measures. Incrementally building on smart energy control – with energy saving devices, hull resistance improvements and other measures such as wind-assisted propulsion – can ensure that operators gradually reduce their exposure to fuel costs.
Incentives for immediate action
As fuel prices increase, market-based measures kick in and clean fuels remain scarce and expensive, ‘wait-and-see’ is not a cost-neutral choice. Operators holding out for the perfect fuel to emerge will be faced with dramatically increased costs if they simply switch their vessels to these fuels on a like-for-like basis when they become available. They also risk missing emissions targets altogether. Meanwhile they will have to ride out any increases in the costs of conventional fuel driven by economic pressures and market-based measures.
The range of energy efficiency options already available today means there is no need for operators to be passive on the path to decarbonisation. A proactive approach to energy efficiency is the best hedge against future fuel costs and the demands of increasingly stringent environmental compliance.