Why shipping should embrace the commoditisation of CO2

In my opinion, one of the shipping industry’s most significant strengths lies in its existing technological framework, and this can provide a solid foundation for the commoditisation of CO2.

The Northern Lights project in Norway exemplifies this progress. With partnerships with major industrial emitters like Norcem and Yara, the project demonstrates the feasibility and advancement of carbon capture and storage (CCS). According to Northern Lights JV shipping and commercial lead, Baris Dolek, speaking at the Riviera CO2 Shipping & Terminals Conference earlier this year, held in association with Societe Generale, the project’s milestones highlight the potential for large-scale CO2 collection and storage to meet climate targets. The critical role of CCS in decarbonising hard-to-abate industries cannot be overstated, especially when supported by policies such as the Carbon Border Adjustment Mechanism, which incentivises emissions reductions.

Furthermore, in my estimation, technological advancements in CO2 carrier design have significantly enhanced the industry’s capabilities. Bureau Veritas Marine & Offshore global market leader for gas carriers, Carlos Guerrero, has noted the innovations that will improve the reliability and performance of liquefied CO2 (LCO2) carriers and these advancements are essential for ensuring the safe and efficient transport of CO2, thereby supporting the overall CCS value chain.

However, I can see the path to commoditising CO2 is fraught with challenges. High initial costs for CCS infrastructure and technology present a formidable barrier. Mr Dolek candidly acknowledged the economic hurdles that must be overcome, stating that CCS is still not financially viable. The lack of standardised contracts and varying regulatory frameworks across regions further complicates the implementation process.

And I can only agree with Knutsen NYK Carbon Carriers chairman, Anders Lepsøe, who warned that any major incident could set the industry back significantly, delaying progress for years and highlighting the critical need for meticulous risk management.

Opportunities for the commoditisation of CO2 are vast, particularly through industry collaboration and standardisation. Partnerships with local entities experienced in logistics can enhance efficiency and foster innovation.

Commoditisation will provide the recognition outside of the sector, too, and attract the innovative financing mechanisms needed to play a crucial role in this nascent industry. Emerging financial tools and government support can make CCS projects economically viable, including structured financial products that can reduce the unit cost of CO2 - financial innovation is paramount to overcoming the significant economic barriers facing CCS projects.

Despite the promising opportunities, the commoditisation of CO2 is not without its threats. Market volatility and technological risks can significantly impact investment and project success, as highlighted by Societe Generale global head of maritime industries, Paul Taylor, who underscored the inherent risks in CO2 shipping projects, stressing the need for robust risk management strategies.

In addition, navigating the evolving regulatory landscape requires continuous adaptation and compliance efforts and there is a necessity of stringent regulatory adherence as the industry moves forward with CO2 shipping.

I believe the shipping industry’s ability to embrace innovation, collaboration, and standardisation will effectively commoditise CO2 and the time for the shipping industry to act is now, as the world can no longer afford to delay significant climate action.