Written by: Mikael Lind, Wolfgang Lehmacher et al. , Article No. 89 [UNCTAD Transport and Trade Facilitation Newsletter N°94 - Second Quarter 2022]
The maritime industry is highly dependent on fossil fuels and emitted about 1.2 gigatons of carbon dioxide equivalents (CO2e) in 2020, equivalent to about 3% of global greenhouse gas (GHG) emissions. This is more than the world's 5th GHG emitting country. However, given the cross-border nature of the maritime sector, it is not addressed in the national determined contributions (NDCs).
The International Maritime Organization (IMO) has challenged the shipping industry to cut annual greenhouse gas (GHG) emissions by at least half by 2050, compared to 2008. According to the fourth IMO GHG study using 2008 as a basis and without major decarbonization, maritime GHG emissions will likely increase by 90% to 130% by 2050. Given the harmful effects of global warming, the shipping industry needs to act urgently, collaboratively, and comprehensively across multiple dimensions to put the shipping industry on a path to zero emission. The need for rapid action is recognized by many of the industry’s major stakeholders.
Several decarbonization enablers have emerged. These include energy technologies (like alternative fuels and improved energy efficiencies onboard ships), regulatory and financial measures (such as carbon-pricing), and integrative solutions (like just-in-time arrivals). All require extensive systems-wide thinking and digital technology to achieve their full decarbonization potential.
However, a variety of perspectives and solutions can cause decision confusion among the different stakeholders. The maritime industry requires high-level agreement on what to do and coordinated action to implement industry-wide agreed solutions. Using the strengths of organizations and an ecosystem approach are key to spur the right discussions and swifter action. There is no time for “wait and see” to green maritime transport.
The need to align efforts across three key value chains
The maritime industry is a complex ecosystem composed of various value chains that require efforts by all stakeholders. Three value chains are central to steering the sector’s decarbonization actions, as they affect other value chains and determine what is collectively achieved: the marine fuel value chain, the shipbuilding value chain and the maritime operations value chain.
1. The fuel chain
The well-to-wake marine fuel value chain encompasses exploration; transportation; processing; transportation of fuel to the fuelling spots and consumption by the ship operator. These are interdependent components that need to be functional simultaneously to avoid bottlenecks and shortages of equipment or fuels.
Today, maritime operators do not have sufficient price-competitive alternative fuels options to commit to charter agreements that include a premium for next generation dual-fuel engines. Some shipbuilders and engine manufacturers have responded, building ships with such engines (which can operate on methanol and fuel oil, or on LNG and fuel oil). Currently, due to the lack of alternative and cost-equivalent low-carbon / zero-emissions fuels, ships equipped with dual-fuel engines run primarily on conventional fuel oil. A wide range of low-carbon / zero-emission fuel is under development, such as green LNG, green methanol, green ammonia, and green hydrogen, with different timelines of availability on the market.
2. The shipbuilding chain
The key shipbuilding value steps are ship design, procurement of construction materials, ship assembly, post-production maintenance, refitting, and end-of-life recycling. All phases need to address decarbonization. Ships should be designed for minimal GHG emissions. These can be limited in a variety of ways, including but not limited to optimized hydrodynamic hull design, wind support when sailing, dual-fuel and multi-fuel high efficiency engines, digital systems to optimise routing and port arrival. Steel should be sourced from suppliers using low carbon production methods. Circularity principles should be applied to design and construction to maximize reuse when a ship has reached the end of use.
What kind of ships will be ordered, built, and retrofitted depends on which fuels and engines will be available to meet the goals of ship owners, ship operators and regulations. And taking into account specific trades, geographies, and expected length of ownership.
Reducing uncertainties that nurture hesitancy in respect to investments into decarbonization requires incentives and financing mechanisms. In this context, market-based measures such as carbon pricing can motivate a new era of shipbuilding that accelerates the transition to a low-carbon and zero emissions maritime sector.
3. The operations chain
The maritime operational value chain covers the steps of ships being operational in their activities of travelling between ports and making port visits. Consequently, steps along the maritime operational value chain are fuelling / provisioning, loading / boarding, voyaging, unloading / disembarking, and refuelling.
Ship operators have multiple levers to reduce CO2 emissions, including leveraging size and speed of ships and fleets, demanding hydrodynamic designs and dual-fuel engines or ships (partially) powered by biodiesel and electricity. This obviously applies to ships, but seaports are also a crucial part of the operational chain. Ports need to support, and have the possibility to accelerate, decarbonization in shipping through infrastructure for storing and bunkering of alternative fuels and onshore power supplies.
The members of the maritime decarbonization ecosystem, need to align their strategies to ensure that they work simultaneously on the critical enablers across the three key maritime value chains (Figure 1).
Figure 1: Value chains and selected decarbonization enablers
(Source and illustration: Mikael Lind and Wolfgang Lehmacher)
The required scope of decarbonization efforts involves the full cluster of critical value chains, and the decarbonization enablers are sitting across the cluster. Each enabler may be driving decarbonization in one, two or all the three maritime value chains.
One key enabler that cuts across all three maritime value chains is the availability of alternative fuel at market compatible prices. As an output of the marine fuel value chain, alternative fuels determine ship design, engines, and tanks, and ship operations.
Weather routing is another enabler that cuts across two value chains: first, the shipbuilding value chain as it needs sensors on ships, and second, the operations value chain as it requires the adoption of the systems by the operators.
Finally, enablers that support decarbonization in only one single chain are hydrodynamics and low carbon emission hull design in shipbuilding, green power-to-X technologies which refers to technologies used to produce green fuel, and operations controls utilizing collaborative platforms for energy efficient maritime operations.
Moving towards effective execution in a self-organized ecosystem
The maritime industry is a self-organized ecosystem (SOE) of many independent entities that cooperate as needed to achieve a common goal, such as berthing a ship. Achieving a higher level of continual collaboration for innovation and change is a challenge, as an SOE has no keystone organization that can command action by other organizations. Decision rights are distributed among the various players in the ecosystem and there is no one leader that sets the direction. Thus, adaption is not centrally directed but organic in response to each party's pressures.
In critical circumstances, we observe a more collaborative approach between some players, such as the container liners during the peak of the United States-China trade war or between ports and hinterland operators during heavy port congestion following the Suez Canal blockage.
Global warming is an existential threat far larger than any current or recent exigencies. But since players are only affected indirectly and potential solutions require concerted alignment, collaboration is not automatically materializing to the degree that is needed. Therefore, we must overcome our human propensity for solving immediate problems and ignoring major looming colossal threats.
A determined and unwavering partnership between industry and regulators will be crucial driving accelerated decarbonization of marine transportation. Regulations are necessary to ensure a level playing field. Voluntary agreements fail when some choose to operate outside them to increase their profits. For example, those avoiding a carbon tax have less costs.
Regulators can set targets, urge action, support experimentation, and use regulatory power and persuasion to support the most promising innovations. Most importantly, they should use their power to levy punitive fines on those who fail to comply with decarbonization requirements.
We recommend three steps to galvanize collaborative innovation to decarbonize the global maritime ecosystem.
Step #1: Initiating collaborative innovation
The initial step is to establish co-ownership of the problem by identifying and describing a common object of interest for the parties engaged. The commonality is decarbonizing shipping through the three value chains of fuel, ship, and operations. The goal is a zero-emissions maritime industry.
A common object of interest that unifies and fosters engagement across the ecosystem’s members is urgently needed to redress today’s increasingly fragmented world. This requires incentives to engage the major stakeholders, a high degree of transparency to ensure fair engagement, a self-regulating mechanism to reduce self-interested actions detrimental to others or the community, and financially commensurate penalties for non-compliance. The credibility, trustworthiness, and compliance of coalition participants are critical to achieving a multi-year goal.
Orchestrator(s) who represent and can act on behalf of the collaborative innovation alliance or even the ecosystem can drive the formation of partnerships, as we can observe with the multitude of decarbonization coalitions, such as the Blue Skye Maritime Coalition, the Global Centre for Maritime Decarbonization (GCMD), the Global Maritime Forum with the Getting to Zero Coalition, the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, and the Zero-Emission Shipping Mission. An orchestrator should ensure that knowledge is shared between the parties across the ecosystem. Knowledge is the currency for rewarding participation.
Collaborative innovation needs a shared and transparent measurement system to report milestone achievements. Real-time feedback and data analytics must be made widely available to inform the community and grease collaboration and innovation. IMO and UNCTAD are already engaging and bridging various industry interests and initiatives and would thereby be well placed organisations to take on such an extended responsibility.
Step #2: Establish regulatory alignment
Decarbonization requires supportive regulations. Regulators have the power and the mission to push the industry in new directions that benefit citizens. At the same time, this power must be wielded while keeping in mind the needs of the private sector. Regulators and corporate leaders should jointly promote new international policies for global regulatory convergence / harmonisation to ensure favorable conditions for the global shipping industry.
The maritime industry enables other industries to prosper by moving materials and energy across the globe. Its worldwide impact, thus, requires alignment across many policymakers. Mutual information, consultation and laws regulations are essential for collaborative global innovation and implementation of a green shipping industry.
Step #3: Leverage technology
Decarbonization will rely heavily on green fuels, with digital technology playing a contributory role to raise energy efficiency. Shipping needs to burn the least possible quantity of green fuels. Lately, the uptake of digital innovations within the maritime sector has accelerated, such as the emerging discourse on maritime informatics and maritime information technology and systems. Collaborative innovation supported by digital breakthroughs can connect people and organizations across the ecosystem to share knowledge. Other enablers are GHG emission calculators, digital twins of engines, ships, and port infrastructure.
Industry understands the pressing need to act. The Getting to Zero Coalition was established in 2019. At an intergovernmental level, the Zero Emission Shipping Mission and Green Corridors (The Clydebank Declaration) have followed. These initiatives need to be supported by action, innovation, and celebration
We know what is required: new fuels, new ships, and new ways of operating. We know we need to collaboration across the three key maritime value chains. However, knowing where you want to go and getting there are challenges of vastly different degrees. We need to accelerate the conversion of ideas into practical solutions by creating a cross-value chain coalition of the action-oriented leaders.
 43 % of maritime transports are occupied by moving energy across the globe (Source: trade data from Lloyd’s List Intelligence)
Contact the authors:
- Mikael Lind | Research Institutes of Sweden (RISE) & Chalmers University of Technology | email@example.com
- Wolfgang Lehmacher | Anchor Group | firstname.lastname@example.org
- Sara Åhlén Björk | Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping | email@example.com
- Sandra Haraldson | Research Institutes of Sweden (RISE) | Sandra.Harldson@ri.se
- Christopher Pålsson | Lloyd’s List Intelligence | Christopher.Palsson@lloydslistintelligence.com
- Risto Penttilä |Nordic West Office Oy | firstname.lastname@example.org
- Kirsi Tikka | Independent advisor | email@example.com
- Richard T. Watson | University of Georgia | firstname.lastname@example.org