Decarbonizing shipping – why now is the time to act

For the world to decarbonize, shipping must decarbonize.

Posted by Jose Maria Larocca on June 02, 2021

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  • The shipping industry must reach zero emissions by 2050, and to get there zero-emission ships must become the dominant and competitive choice by 2030.
  • A zero-emission fleet is only viable if zero-emission energy sources are competitive with traditional fuels, yet there is a competitiveness gap the market cannot solve by itself.
  • It is critical for shipping's long-term success the International Maritime Organization and member states show progress by adopting regulation allowing shipping to decarbonize in line with the Paris Agreement.

A conversation with a six-year-old will lay to rest any doubts you may have about the importance of tackling climate change. Environmental awareness is the hallmark of our time. While older generations ponder over the “whats” and “hows”, younger ones wonder why so much time goes on debating rather than doing.

The call for tackling climate change is gaining momentum among citizens, investors, companies and countries around the world. US Climate Envoy, John Kerry, recently announced that the US is joining international efforts to achieve zero emissions from international shipping by 2050. And the maritime industry wants to play its part. Since 2019, the Getting to Zero Coalition has been working on making zero-emission vessels commercially viable by 2030 from the perspective of technology, business models, growth opportunities and policy.

For world to decarbonize, shipping must decarbonize

Shipping connects the world by supplying essential goods that society needs to thrive. Whilst this is done with the lowest carbon footprint of any mode of transport per ton transported, shipping is still emitting significant amounts of greenhouse gases. With a sizeable carbon footprint that only shows signs of growing, and a decades-long investment horizon, shipping cannot afford to wait. For the world to decarbonize, shipping must decarbonize.

To stay in step with the needs of society – and thus stay relevant as an industry – now is the time to act. The shipping industry must reach zero emissions by 2050, and to get there zero-emission ships must become the dominant and competitive choice by 2030, when we need to reach 5% zero-emission energy sources in international shipping.

But herein lies a conundrum. A zero-emission fleet is only commercially viable if zero-emission energy sources are competitive with traditional fuels. However, fossil fuels remain readily available, reliable and cheap – and compatible with existing ships and engines – creating a competitiveness gap that the market cannot solve on its own.

New policies are needed, regulating and incentivising shipowners, operators and fuel providers in a direction that drives investments in new fuels and technology to enable a zero-emission fleet. And we need to move the needle now.

3 priorities for the IMO

In shipping, we are fortunate to have the International Maritime Organization (IMO) as the international body regulating our activities, ensuring a level playing field, and an efficient global maritime transport system. It is, however, critical for the reputation and long-term success of our industry that the IMO and its member states demonstrate progress by adopting regulation allowing shipping to decarbonize in line with the Paris Agreement and public expectations.

We are calling on the IMO and the member states to urgently address three priorities:

  1. The IMO must align international shipping with the Paris Agreement temperature goal by adopting a target of full decarbonization of international shipping by 2050, when the IMO’s Initial GHG Strategy is revised in 2021 and 2022. This would set a clear direction for the industry – a direction which has already been set for domestic emissions by many of the world’s nations including China, the EU, Japan, South Korea, the UK and the US.

  2. The IMO must make progress this year at MEPC 76 and 77 on meaningful measures bridging the competitiveness gap between carbon-based fuels and zero-carbon energy sources. This includes market-based measures setting an adequate price on GHG emissions based on a full life cycle analysis of energy sources. Progress this year is needed to instil confidence across the maritime value chain that such measures will enter into force in 2025 and make the transition to zero-emission shipping investable at scale.

    The required price on GHG emissions from international shipping needed to reach 5% zero-emission fuels by 2030 can be significantly reduced if the generated revenue from a market-based measure is used to support the deployment at scale of zero-emission vessels and fuels. This would also help de-risk first movers and make investments in zero-emission vessels and fuel production possible.

  3. The IMO must ensure a globally effective and equitable transition to zero-emission shipping. This could be achieved if part of the funds raised through a market-based measure was used to support climate vulnerable countries as well as to support the development and deployment of economically viable zero emission fuels and technologies in developing countries, particularly in Small Island Developing States and Least Developed Countries.


Recent reports from the World Bank show that meeting the future demand for zero-emission shipping fuels will create new growth and job opportunities all around the globe not least in developing countries and emerging economies. This demonstrates that the transition to zero-emission shipping can go hand in hand with sustainable economic growth.

Decarbonizing shipping is possible, but it will require urgent and sustained action by the private sector as well as by governments. Let us move forward together to make shipping a zero-emission industry, so we can be proud of the answer we give a six-year-old, when they ask: “What are you doing to address climate change?”

 

The signatories to this op-ed are all active in the Getting to Zero Coalition.

Henriette Hallberg Thygesen, Executive Vice President, CEO Fleet and Strategic Brands, A.P. Møller - Mærsk A/S
Christian Ingerslev, CEO, Maersk Tankers
Lasse Kristoffersen, Chief Executive Officer, Torvald Klaveness Group
Jose Maria Larocca, Executive Director Co-Head of Oil Trading, Trafigura
Fred Krupp, President, Environmental Defense Fund
Johannah Christensen, Managing Director, Global Maritime Forum
Christoph Wolff, Head of Shaping the Future of Mobility, World Economic Forum

First published by the World Economic Forum on May 27, 2021.

About the author

Jose Larocca

Jose Maria Larocca

Executive Director and Co-Head of Oil Trading Trafigura Group

Jose Maria Larocca was appointed to the Trafigura Management Board and Head of the Oil and Petroleum Products trading division in March 2007 and joined the board of Trafigura investment Puma Energy from October 2015 to October 2020. He was one of the company’s earliest employees, joining Trafigura in London in 1994 on the Oil Deals Desk before taking a series of commercial roles including as a trader of naphtha and gasoline.

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1 Comment

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  • Posted by Darren Shelton on June 03, 2021

    Well said and indeed industry collaboration around transparent data is the key to the informed decisions that must be made at the highest levels!

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