In recent years, disruption to Red Sea shipping routes and global sanctions have forced ships to take longer routes, increasing emissions in the first half of 2024 by six per cent compared to the previous year.Already responsible for around three per cent of global greenhouse gas emissions, projections indicate emissions could surge to 130 per cent of their 2008 levels by 2050.3 This has prompted the International Maritime Organization (IMO) to set ambitious targets to significantly reduce emissions by 2030 and even further in 2040, while ultimately aiming for net zero emissions by or around 2050.4

Addressing the rising emissions from shipping requires a multifaceted approach, combining regulatory measures, industry initiatives, and technological innovations particularly related to alternative fuels which present the most promising near-term opportunities for reducing fuel-related emissions.

Charting a sustainable course

Currently, over 95 per cent of ships run on fuel oil products like low sulphur fuel oil (LSFO), heavy fuel oil (HFO) and marine gasoil.6 With over half of the world’s ships at least 15 years old, there is a pressing need for renewal.2 The challenge for shipowners in this process is selecting the right fuel.

Comparing main alternative fuels

Liquefied Natural Gas (LNG) has emerged as an immediate, albeit transitional, solution due to its lower carbon intensity compared to heavy fuel oil – despite being a fossil fuel. The maritime industry is, however, gradually pivoting towards bio-LNG derived from waste biomass. Supply, however, is limited by feedstock constraints and competition from other sectors like aviation.

Methanol is gaining traction for its safety and low-emissions potential, with an increasing number of methanol dual-fuel ships coming into operation. The real promise lies in low-carbon methanol: blue methanol, biomethanol and e-methanol. While today’s low-carbon methanol production capacity is less than 1 per cent of global production, low-carbon supply is expected to increase to 11 million tons per year by 2030 (10 per cent of total methanol production today) according to BloombergNEF.8

Ammonia, while not yet used commercially in shipping, is garnering interest. Most ammonia is also grey, but low-carbon alternatives like blue ammonia and e-ammonia are emerging. Pilot projects are underway, with 27 ammonia-powered ships on order,9 but concerns remain around production scalability and safety given ammonia’s high toxicity (e.g., if a spill occurs).

All hands on deck

DNV estimates that deploying ships capable of using low-carbon fuels could cost $US8-28 billion annually between 2022-2050. An additional $US28-90 billion per year will be needed for the required fuel infrastructure, including clean energy production, fuel production (e.g., electrolysis plants), distribution and bunkering, all requiring significant collaboration between the maritime, energy and chemical sectors.10

These developments highlight a broader industry trend towards adopting a portfolio of alternative fuels, each presenting unique advantages and challenges. As the industry navigates the complexities of decarbonisation, the collaborative pursuit of regulatory clarity, cost-effective solutions, and sustainable infrastructure will be pivotal in steering maritime shipping towards a greener future.

Source: Macquarie Group