Who should pay for shipping's green transition?

Whether their cargo is wheat, iron ore, or containers full of Chinese-made consumer electronics, ships are by far the most energy-efficient means of getting goods from point A to point B.

Moving a tonne of cargo 100 km by modern freight train takes three or four times as much energy as moving it by container ship. Truck transport? Ten times as much. Air freight? Fifty times.

Moving cargo by ship is not only far less energy-intensive than any other freight transport mode; it's also cheaper. Environmentally and economically, the more cargo that's shifted onto ships, the better – though obviously big ships can only move between seaports, and can't travel across land. Germany has a well-developed network of canals and river-barge freight transport, but most countries don't, and even in Germany, other modes of transport, such as electric trains or Tesla's new electric trailer trucks, are also needed to move freight to final destinations inland.

Total emissions

The roughly 52,000 large merchant ships plying the seas today (a figure that doesn't include a large number of smaller vessels such as ferries) account for about 2.2 percent of global greenhouse gas (GHG) emissions, according to a study conducted in 2014 for the International Maritime Organisation (IMO). Total emissions are rising along with increases in the volume of global trade.

Ships generate a lot of unhealthy air pollution as well as carbon emissions. Nitrous oxides (NOx) and sulfur oxides (SOx) from ship smokestacks cause serious air quality damage in port cities, because ships burn heavy fuel oil, or "bunker fuel," to fuel their generators at anchor, and when coming or going.

Bunker fuel is dense, tarry, dirty fuel. Ships burn it because their big diesel engines can put up with low-quality fuel, and because it's cheap.

Since most ships have no filters or other pollution reduction equipment, "NOx from shipping is set to exceed NOx from all EU land-based sources in the coming decade," according to Transport & Environment (T&E), a prominent think-tank with offices in Brussels.

Negotiating cleaner shipping

That's why the IMO, an intergovernmental body with its headquarters in London, has hosted negotiations for the past several years aimed at achieving binding global emissions reductions agreements for the shipping sector.

The negotiations are hosted by the IMO's Marine Environment Protection Committee (MEPC). T&E's experts said IMO generally tries to achieve consensus on its policies, and with nearly every country in the world at the table, as well as legions of lobbyists from the shipping industry, progress on adopting new policies is slow.

In the short run, T&E said, reducing emissions will involve improving the energy efficiency of ships, for example by fitting them with more efficient propellers, applying low-friction paints to their hulls, or – especially – by reducing their speed: "The amount of fuel used by a ship is proportional to the third power of its speed," according to T&E clean fuels policy expert Faig Abbasov. "Slowing down even a little bit can lead to substantial fuel efficiency gains."

However, Abbasov admitted, slowing down also means taking more days to get from point A to B, and since shipping companies get paid to deliver cargo, that means reducing the amount of annual income a ship can generate for its owners.

Clean technology options for ships

In the short run, reducing NOx and SOx emissions will involve gradually switching to cleaner, but more expensive fuels such as low-sulfur diesel fuel. That's been agreed in IMO negotiations, and will take effect over the next few years. But while that will help improve air quality in port cities, it won't do anything to reduce greenhouse gas emissions from shipping.

"Nor would switching to turbine engines powered by natural gas, as some shipping industry lobbyists have proposed," Abbasov said. "Natural gas is still a fossil fuel." And since methane – the main component of natural gas – is a much worse greenhouse gas than carbon dioxide, and some leakage of gas from the fuel supply chain is inevitable, "gas turbine ship engines could well be worse in terms of climate impact" than existing fossil-fueled diesel engines, he added.

In the long run, reducing emissions (including carbon dioxide emissions) will mean bigger and more expensive changes in how ships are powered. Although it's years away from being agreed, IMO could eventually require ships to be powered by low-carbon, low-pollution fuel supplies such as synthetic, low-carbon methanol, ammonia, or hydrogen, according to Tristan Smith, a naval architect and professor at University College London (UCL) specialized in low-carbon shipping.

Smaller ships with short travel distances, such as local ferries, could be converted to battery-powered electric engines – using the same type of technology that Tesla Motors recently presented in a prototype battery-electric trailer truck. That would help local air quality in ports, and save a lot of fuel. But it's not a practical option for long-distance ocean-going ships, Smith told DW.

Is ammonia the fuel of the future for shipping?

Ammonia, by contrast, could be a solution for ocean-going ships. Its chemical formula is NH3. Given that nitrogen (N2) is the principal component of air, and hydrogen is found in abundance as part of every water molecule (H2O), NH3  can readily by synthesized in chemical factories by tearing apart N2 and H2O molecules and recombining the resultant free nitrogen and hydrogen atoms. If renewable or nuclear energy were used to power the synthesis process, the resultant ammonia would be a low-carbon fuel.

"Ammonia can be used directly as a fuel, burned in diesel engines, or it can be a way of storing hydrogen for use in fuel cells," T&E's Faig Abbasov told DW.

"In the latter case, ammonia must be cracked into H2 and nitrogen in on-board reformers, and H2 is then fed into fuel cells to generate electricity for propulsion. Ammonia can be produced from renewable electricity. The only catch is - ammonia is a poison." 

Another option, Tristan Smith said, would be hydrogen fuel cells: "There are impressive innovations in fuel cells of the scale relevant to shipping, coming from diverse sources – the data-centre industry, for example."

Refit or new-build?

Clean, low-carbon fuels could be implemented by refitting the existing fuel supply chain and shipping fleet to make use of the new fuels, or by requiring new ships to be designed for such fuels, or both.

But making the transition to clean fuels will require a whole new fuel supply chain as well as changes to ships' power trains, and will therefore cost a great deal of money. A big question is: Who should pay for the necessary investments?

In April 2017, a coalition of major shipping industry lobby groups (including WCS, the World Shipping Council, and two others) put forward a document at IMO MEPC negotiations, proposing that a global carbon fee could be applied to each tonne of fuel sold.

The proceeds would go into a new "International Maritime Research Board," which would have "a mandate to direct and fund research and development for new and improved marine propulsion systems, electric generation plants, fuels, and ship designs," the WCS document said.

R&D is good, but it isn't enough

About 300 million tonnes of heavy fuel oil are sold to power ships' big diesel engines each year, according to UCL's Tristan Smith. If the rate of the carbon fee on ship fuels proposed by the WCS were set at a rate of $10 per tonne, for example, then $3 billion per year would be made available for R&D and clean-shipping demonstration projects.

Such a levy could enable a leap forward in developing clean shipping technologies, and is worth supporting, Smith said. But in his view, a levy won't be enough, in and of itself, to generate a timely shift to low-carbon shipping: "Whilst there could be a role for some sort of carbon price or levy," it should be applied in tandem with IMO regulations that directly require the shipping sector to de-carbonize.

T&E's experts agree. The environmental think-tank has proposed an aggregate carbon dioxide emissions budget or cap for the sector as a whole, on a declining annual schedule over time. Within that cap, the sector could implement the most cost-effective technologies available to de-carbonize shipping.

Ultimately, though, it will be users that pay for the transition to clean shipping, one way or another, since ship-owners will have to pass through any increase in the costs of fuels or maritime power trains. That's as it should be, Smith said. But, he added, it's important to organize the transition in a way that presents a level playing field to industry participants, to avoid distorting shipping markets - and to achieve the transition as cost-effectively as possible. That will require a judicious combination of financial and regulatory instruments.

What specific combination of instruments should be adopted will be a matter of much contention. Experts expect it will take the IMO several years to get member governments to agree on a policy package.