Shipping must embrace cleaner future or become 'uninvestable'

A leading figure in the shipping industry has warned that shipping “will become uninvestable” if the maritime sector does not tackle its environmental impact quickly. The warning comes as the major shipping companies DFDS, CMB and Viking Cruises, and T&E wrote to the European Commission to say that green hydrogen and ammonia are sustainable and can be produced in sufficient quantities to decarbonise the industry.

Shipping has long been the cheap form of freight transport that allows transporters to keep costs low for non-urgent products. But ships have traditionally been powered by residual oils, one of the dirtiest fuels. Shipping accounts for about 13% of greenhouse gas emissions from European transport, and progress on reducing this has been slow.

Now Rasmus Bach Nielsen, the head of fuel decarbonisation at the energy commodities trader Trafigura, has said “the whole [shipping] industry will become uninvestable” if an effective market-based measure to incentivise the use of low and zero-carbon fuel is not adopted. 

Bach Nielsen’s comments coincide with a call from T&E and four major shipping companies for the EU to create investment certainty for green hydrogen and ammonia as marine fuels. They say these fuels can deliver zero-carbon propulsion and can be produced in virtually unlimited quantities. However, they are currently expensive compared to fossil fuels.

In a letter to the EU climate, transport, energy and industry commissioners, T&E and seven other bodies with an interest in shipping are calling on the European Commission to use the forthcoming Fuel EU Maritime initiative to stimulate the deployment of green hydrogen and ammonia for shipping. They say production costs can be reduced with economies of scale, but that will cost around €1.4 trillion in capital investments globally.

T&E’s shipping programme director Faig Abbasov said: “After more than two decades of inaction in cleaning up shipping’s environmental impact, we finally have solutions on the horizon that offer a clean future for the maritime and fuels industry. But this opportunity will be lost if there is no incentive for investment in green hydrogen and ammonia. That’s why the Commission must use its upcoming maritime fuel law to require ship operators to progressive switch to these green fuels, as that will provide the investment incentives that will bring down fuel prices. Rasmus Bach Nielsen’s warning is therefore well timed.”

The eight signatories warned against any role for biofuels in cleaning up shipping, both on emissions grounds and on how much supply could be increased to meet demand. “Crop-based biofuels are more damaging than fossil fuels,” the letter says, “and while some advanced biofuels could provide emissions reductions, they are limited in sustainable bio-feedstock availability.”

The eight signatories to the letter were T&E; the shipping companies CMB, DFDS, Torvald Klaveness, and Viking Cruises; the association of hydrogen and hydrogen-based fuel producers Hydrogen Europe; the maritime classification society Lloyd’s Register; and the commodities trader Trafigura.

T&E is due to publish a study into decarbonising shipping next month, just before the Commission proposes its Fuel EU Maritime Initiative.