DNV chief executive maritime Knut Ørbeck-Nilssen opened DNV’s How to shape maritime’s energy future debate noting this is the “decisive decade” with very little time left to achieve the minimum goals set by IMO
The How to shape maritime’s energy future debate featured a glittering panel of cargo interests, shipowners and a prominent ship financier, comprising RioTinto head of commercial operations Laure Baratgin, Atlas Corp president and chief executive and Seaspan chairman, president and chief executive Bing Chen, Cargill Ocean Transportation president Jan Dieleman, Borealis Maritime chief executive Christoph E Toepfer, and Societe Generale global head of shipping Paul Taylor.
Acting as moderator, DNV chief executive maritime, Knut Ørbeck-Nilssen addressed the urgency of decarbonisation in the shipping industry. Building on the recent actions taken by governments at International Maritime Organization (IMO), Mr Ørbeck-Nilssen stressed the need for accelerated ambition in the sector. While DNV’s report looks towards a marathon forecast of decarbonisation by 2050, Mr Ørbeck-Nilssen urged industry stakeholders to prioritise the shorter-term goal of 2030.
To achieve the 2030 target, which entails a significant 20% reduction in emissions, Mr Ørbeck-Nilssen acknowledged the immense challenge at hand. He highlighted the limited time available and the pressing need to decarbonise. Despite the scale of the task, Mr Ørbeck-Nilssen emphasised that even a 20% reduction should not be underestimated, considering the complex nature of the shipping industry.
One key aspect that demands attention is fuel supply diversification. Mr Ørbeck-Nilssen pointed out investment decisions in this area are lagging behind. While some suppliers are yet to consider providing fuels for shipping, the need to accelerate progress in this domain becomes increasingly evident. Collaborative efforts and partnerships between industry players are crucial to ensure the availability of better fuels for the sector.
Looking further into the future, Mr Ørbeck-Nilssen acknowledged the landscape becomes more open by 2050. With additional time available, the industry can explore new technologies that will facilitate the decarbonisation journey. While precise details on specific technologies remain to be determined, Mr Ørbeck-Nilssen expressed optimism that advancements in this area will drive the industry forward.
DNV’s call for ambitious decarbonisation targets echoes the growing urgency to address climate change in the maritime sector. As industry stakeholders grapple with the challenges ahead, collaboration, innovation and timely investment decisions will be crucial in realising a sustainable and carbon-neutral shipping industry.
Ms Baratgin highlighted the focus on energy efficiencies and put emphasis on the importance of energy-saving devices, acknowledging they require significant capital investment but yield short-term benefits. RioTinto is actively collaborating with customers to explore increasing vessel sizes to address the pressing issue of decarbonising steel-making. Ms Baratgin also acknowledged the potential need to share some of the associated costs with customers.
Mr Chen reiterated Seapan’s strong commitment to decarbonisation as an owner and operator. According to Mr Chen, any investment or improvement must demonstrate an immediate impact in terms of carbon reduction. The container ship fleet is relatively young, meaning Seaspan’s focus lies in continuously enhancing operations, vessel design and ship modifications.
It is actively exploring retrofit options using ammonia, methanol and LNG, collaborating closely with engine makers for the transition. Furthermore, Seaspan is leveraging artificial intelligence to monitor and optimise fleet performance. Collaboration with liner customers and stakeholders remains a priority, as the company strives to apply intelligent solutions for the decarbonisation transition.
Mr Toepfer said the company embodies a more traditional ownership model and holds a distinct perspective on the longevity of its assets. He noted that according to the DNV forecast, 30% to 40% of available alternative fuels would be required for the shipping industry to achieve its 2030 goals. However, unless companies can secure fuel supply partnerships such as Maersk’s assurance of green methanol or other alternative fuels, accomplishing these goals becomes exceedingly challenging. In fact, he said, it may be unattainable altogether.
Achieving a swift investment payback is crucial, and the introduction of the EU Emissions Trading Scheme will highlight the success or failure of investments in decarbonisation. This scheme could demonstrate that investing in vessel lifespan extension leads to substantial returns on investment and long-term profitability.
However, he had a major concern regarding the source of capital. Borealis Shipping relies on institutional capital and he has observed a significant capital diversion away from the shipping industry. This trend is particularly relevant for capital providers who must account for Scope 3 emissions in their reporting. Allocating capital to an industry such as shipping can swiftly consume a bank’s Scope 3 emissions allowance.
Mr Dieleman, the representative from Cargill, noted the importance of cost effectiveness in accelerating the transition. He pointed out regulatory measures need to strike a balance between being firm and fair. Additionally, Mr Dieleman highlighted the significance of transitioning to alternative fuels by mentioning Cargill’s commitment to utilising six Kamsarmax methanol-powered dry bulk carriers. He highlighted another key factor discussed was the elimination of inefficiencies in the supply chain.
On the banking side, there is a need for transparency and certainty in regulations and Mr Taylor expressed concern over the uncertainty surrounding IMO’s decision to delay changes to Carbon Intensity Indicator (CII) regulations until 2026, raising doubts about potential penalties.
Across the DNV panel, there was concern regarding the Scope 3 emissions and if its implications for shipowners and capital providers had been thoroughly examined and understood. It was established that capital providers are compelled to align themselves with projects that embrace Scope 3 emissions. ESG ratings will be crucial for clients, and capital will be directed towards the most environmentally friendly shipping ventures. However, given the choice between a shipping and non-shipping project, consideration will be given to greener non-shipping projects seeking funding.
Ms Baratgin noted that her company had overcome this issue by ’piggy-backing’ and integrating hydrogen and ammonia-powered shipping projects into larger initiatives like bilateral trades or green corridors for mineral commodities supply chains. This strategy facilitates cost minimisation and allocation of capital towards shipping.
Mr Taylor added capital providers are increasingly exploring ammonia and hydrogen projects further up the value chain for potential offtake and financing opportunities. Even if a project does not result in financing, it may lead to advisory mandates, partnership bonds and relationship building.
Key takeaways
Mr Toepfer stated that carbon capture on board is likely to become a reality within the next decade. He referred to a study conducted by DNV, which found attractiveness in this approach, even in high-case scenarios.
Mr Taylor highlighted the bank’s active involvement in CO2 shipping and collaboration with emerging tech leaders on onboard carbon capture. The bank’s focus is on green certification and financing, cultivating a long-term vision.
Mr Chen acknowledged the journey towards decarbonisation would not be a straightforward path. From a business standpoint, Seaspan can only work with the solutions currently available.
Mr Baratgin noted the significance of aligning on Scope 3 emissions and stressed the importance of producing regulatory metrics for the role of the regulators to become true integrators within the value chain.
Mr Dieleman noted that while there was positivity surrounding the outcomes of MEPC 80, particularly in terms of alignment with lifecycle emissions, concerns remain regarding the commitment to achieving the 1.5°C target by 2023. Achieving the 2050 goal seems more viable, yet doubts persist about meeting the 2030 milestone, he acknowledged.
Through this DNV panel debate, it becomes evident that shipowners are cautiously optimistic, aware of the challenges ahead, feel the wider significance of Sope 3 emissions has been overlooked, but recognise the need for collaboration between the private sector and regulators in driving the transition towards decarbonisation.
Riviera’s two-day Maritime Decarbonisation, Europe: Conference, Awards & Exhibition 2023 returns to Amsterdam on 26-27 September 2023, seeking to bring clarity to regulatory directions and decarbonisation pathways for both newbuilds and existing vessels
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