Cargo Owners’ Responsibility to Request Greener Fuels
The global shipping industry accounts for a staggering annual emission of 1 billion tons of CO2, equivalent to the emissions of a G7 country or all the United States’ coal-fired power plants combined. This alarming statistic underscores the industry's pressing need to reduce its carbon footprint. One of the key drivers of this transformation is the responsibility of cargo owners to demand environmentally friendly fuel alternatives.
A Multi-Dimensional Web of Green Pressures
To fully grasp the intricate landscape of green pressures on cargo owners and their respective shipping companies, we must recognize that it is not a linear process. Cargo owners are not the sole actors capable of reducing shipping emissions. Instead, they are part of a complex network of stakeholders, including regulators, ship owners, and consumers, all contributing to the industry's transition. Shipping encompasses various forms, each with its unique customer profiles and green ambitions.
The Imperative of Net Zero Targets
At the core of the shipping industry's sustainability efforts lie Net Zero targets, which include scope 3 emissions. This extends the responsibility to the entire value chain, making CO2 efficiency a central consideration in cargo contracts, alongside freight prices. This shift opens the door to numerous competitive advantages, from financing options to enhanced market competitiveness.
Regulations like the EU Emission Trading System (EU ETS), which places a price on CO2 emissions, have stimulated the industry's drive toward greener practices. The EU Fit for 55 policies, a crucial element of the EU ETS, seeks to further enhance carbon reduction efforts by setting more ambitious targets for emissions reduction and expanding the policy’s reach. However, there remains a debate about where the ultimate responsibility for these emissions should lie - with either ship owners or charterers. Regardless, the cost of emission taxes is eventually passed down the value chain to end customers.
Transitioning to Greener Shipping
The transition to alternative fuels is multifaceted, with the main driver being the desire to achieve internal sustainability targets and Net Zero ambitions. When considering the means to attain these goals, two main pathways emerge. Around 50% of emissions can be attributed to fuel burn, while the remaining emissions savings result from technological advancements in ship design, weather routing, and intelligent cargo and logistics planning. Importantly, these changes can be implemented without requiring a complete overhaul of existing business models, enabling a phased approach that avoids excessive financial burdens.
Several shipping companies are investing in chartering ships designed to run on alternative fuels, such as methanol. This strategy extends beyond methanol and encompasses various other alternative fuel technologies.
The Role of Cargo Owners
Cargo owners are pivotal as drivers in the freight market and often hold ambitious sustainability goals. However, there is a notable gap in climate action within their supply chains. Despite this, several shipping companies have demonstrated the viability of methanol as a fuel, and e-methanol is increasingly viewed as a practical solution for reducing emissions and meeting sustainability targets. Cargo owners can play a significant role in accelerating this transition and ensuring that more shipping companies follow suit.
Societal Expectations and the Hard-to-Abate Challenge
Societal expectations are growing for hard-to-abate sectors to contribute to reducing their environmental impact. While coastal shipping can transition to electrification using battery power, the majority of cargo owners' global shipping involves long-distance transport, which relies on liquid fuel. Currently, approximately 99% of marine fuels are derived from fossil sources, significantly contributing to global carbon emissions.
Emerging Alternative Fuel Technologies
It's worth noting that emerging technologies such as hydrogen-based fuels and ammonia are gaining attention as potential solutions to reduce shipping emissions. These alternative fuels, along with advancements in energy-efficient ship design and the implementation of digital solutions for route optimization, are vital components in the journey toward greener shipping practices.
Championing Green Fuel Initiatives
The shipping industry's carbon emissions present a critical challenge for our environment, and addressing this challenge requires a collective and organized effort. Cargo owners, as influential stakeholders, bear substantial responsibility in advocating for green fuel solutions. Their proactive stance and commitment to sustainability goals can usher in a new era of environmental responsibility in this crucial global industry.
As cargo owners continue to champion green fuel initiatives and demand sustainable practices throughout their supply chains, they are not only reducing their own carbon footprint but also driving change in an industry historically reliant on fossil fuels. Cargo owners are positioned to influence ship owners, charterers, and end consumers, pushing the industry toward a more sustainable future.
Content contributor
Joost Weterings, Commercial Director, Liquid Wind