The global move towards decarbonisation
In April 2018, the International Maritime Organization (IMO) adopted an ambitious greenhouse gas (GHG) reduction strategy, with a vision to decarbonise the shipping industry, including:
- A reduction in carbon intensity of at least 40 per cent by 2030 and 70 per cent by 2050
- A minimum 50 per cent reduction in total GHG emissions by 2050
- The implementation of a zero-emissions policy as soon as possible within this century
The global push that the maritime industry has been making towards alternative fuel sources is becoming increasingly evident. Navig8 and the participant companies in the ‘Castor Initiative’ have already invested heavily in new eco-friendly alternatives such as hydrogen cell technology and ammonia, while others such as Cargill, Louis Dreyfus and Mitsui OSK Lines have focused on revolutionising more traditional alternatives such as wind power.
Decarbonisation in Singapore and the IAP
The topic of sustainability, not surprisingly, has held centre stage at this year’s Singapore Maritime Week, which has focused on the issue of decarbonisation through a number of dedicated presentations and panel sessions.
As a leading international maritime hub, Singapore is well-placed to play a key role, not only in meeting, but in exceeding, the IMO’s 2030 and 2050 decarbonisation goals, through the development of new fuels, innovative solutions and efficiency measures.
Widely known for its proactive and innovative approach to developments in the maritime industry, the Singapore Maritime Foundation (SMF), with the support of the Maritime and Port Authority (MPA) of Singapore, formed the International Advisory Panel on Maritime Decarbonisation (IAP) in July 2020, in order to work together and produce recommendations aimed at accelerating the process of decarbonisation in the maritime sector. The IAP is made up of 30 selected industry leaders from both Singapore and overseas. The bodies represented on the panel include BW Group, Ocean Network Express, DNV, Sembcorp Marine, Maersk, MPA, SMF, the Singapore Shipping Association, the International Group, Cargill, Shell, Eastern Pacific, Wartsila, MISC and the International Chamber of Shipping.
The IAP is co-chaired by Mr Andreas Sohmen-Pao (chairman also of the SMF and BW Group) and Mr Wong Weng Sun (CEO of Sembcorp Marine). Both have been highly active and vocal proponents of decarbonisation and very much at the forefront of the maritime industry’s drive against climate change. They have long advocated the development of Singapore as a global hub for decarbonisation – very much in line with the government’s wider initiatives to reduce Singapore’s carbon footprint and promote sustainability in all areas of its economy. These are already well underway as evidenced by the government’s recently announced ‘Singapore Green Plan 2030’.
The BW Group (which owns and operates the world’s largest gas carrier fleet, and with Mr Sohmen-Pao at the helm) has itself over the last few years invested heavily in an array of decarbonisation initiatives, ranging from the LNG, LPG and biogas sectors, to new propulsion systems and technological developments in large-scale battery storage systems for ships, to other fast expanding projects in the solar and wind power sectors, including joint investment, together with the Swire Group, in wind turbine vessel player, Cadeler.
Other recent industry initiatives include Denmark’s newly established ShippingLab, which is a platform for testing and validating new alternative fuels, and BHP and Oldendorff’s first joint marine biofuel trial with an ocean-going vessel bunkered in Singapore, which was undertaken so as to better understand the behaviour, advantages and challenges of biofuels as potential low-carbon alternatives. Also significant are Shell’s recent decision to join a consortium of companies collectively trialling LNG-powered fuel cells, and the establishment by Ifchor/Clear Blue Markets of their own carbon trading desk earlier this year. CMA CGM also recently announced that, as part of its contribution, it will be investing in biomethane (from organic waste) production facilities.
As an interesting side development, the growing market demand from charterers for greener transport options has now led BW Dry (a BW Group company) and Weco Shipping to set up a new platform, known as the Copenhagen Commercial Platform, to assist charterers in identifying vessels, which have been vetted using efficiency and emissions metrics.
The IAP report: strategic pathways
To achieve its stated objectives, the IAP report, Decarbonisation Pathways for the Global Maritime Sector, identifies and comments on a number of collaborative initiatives with the aim of increasing momentum in the maritime sector’s decarbonisation efforts and ensuring sustained progress. These initiatives are detailed in the recommendations set out in the report.
The IAP’s recommendations are made against the backdrop of four strategic objectives:
- Harmonise standards
- Implement new solutions
- Finance projects
- Collaborate with partners
With these in mind, the IAP has identified nine recommended pathways towards decarbonisation.
We highlight below the key points of each pathway’s guidance and action plan:
Harmonise standards
1. Shape common metrics for carbon accounting
A mapping of GHG metrics currently in use will then help develop universal and consistent guidelines for measuring emissions. It is however essential that appropriate efforts are made to prevent the unintended consequence of reducing GHGs in one area, whilst increasing them in another. Singapore may consider establishing a registry to monitor its maritime-related emissions.
Lifecycle carbon analysis, which evaluates how much of the supply chain to include in carbon accounting, may help reduce emissions, though a gap still exists in its practical implementation.
Improving verified monitoring and timely reporting, with the assistance of IT platforms that measure the carbon impact of different operating or navigational parameters, will support ongoing efforts to standardise carbon footprint measurement. A decarbonisation centre that works with relevant international bodies could be established to help harmonise these various efforts.
2. Set standards for new technologies and solutions
Design thinking will be needed to ensure standards brought in across the maritime industry are implemented efficiently. One particularly promising area is Just-in-Time (JIT) arrivals, which promotes data sharing so that a vessel is able to maintain its optimal operating speed in order to arrive at port only when availability is ensured. BIMCO discussed and endorsed the adoption of JIT in a webinar presented as part of Singapore Maritime Week’s programme.
The harmonisation of data standards and set-up of a data platform will facilitate the interoperability of port community and onboard vessel system interoperability and the secure exchange of data.
Industry participants should come together to develop safety standards and regulatory frameworks for handling alternative fuels.
As an IMO member state, Singapore can promote and drive standards for new technology, and operational and technical solutions via a decarbonisation centre.
Implement new solutions
3. Pilot trials and deploy solutions
Small-scale pilot projects, such as regional GHG-free container services or feeder vessels, can test the feasibility of alternative fuels and operational improvements.
Consortiums undertaking different pilots around the supply and operation of alternative fuels are likely to underpin the commercial uptake of these alternatives. They should work alongside other industries as the aggregate fuel needs will help make a stronger case for the accelerated development of a particular fuel. A digital library collating the findings of these projects, such as within a decarbonisation centre, will avoid the duplication of efforts.
Pilot projects require funding support, which should be time-bound and strategically channelled.
The IAP recommends seed funding due to the current, very early stages of development of many of these alternative fuels.
4. Build flexible ship capabilities and relevant infrastructure
To avoid assets becoming stranded, it is important to support projects, which will facilitate a future transition to zero-carbon fuels, both in the near and long-term.
It is not in the IAP’s mandate to suggest which particular fuel is best. Instead, the IAP recommends that shipping companies provide a flexible fuelling infrastructure, which will allow the use of multiple fuels.
A central repository of information tracking the progress and readiness of these solutions would help the industry assess when certain technologies are ready for adoption.
Finance projects
5. Develop green financing mechanisms
Green financing schemes can support the construction of new vessels trialling new fuels and infrastructure. Mechanisms such as leasing schemes or financing vehicles could defray the upfront cost of new investment in decarbonisation.
A combination of both large and small scale incentives to reward investment in cleaner vessels would assist in closing the price gap between existing and new fuels and encourage early adopters who are trialling these new fuels.
Green finance is encouraged. Through this, capital providers can change their metrics for financing to factor the carbon footprint into the cost of capital. Moreover, increased disclosure of financial products or portfolios would prompt transparency and change in financing schemes.
6. Develop mechanisms that could support carbon pricing
A carbon levy, starting at a low level and growing over time, would increase the pressure on businesses to remain competitive and encourage fuel saving measures. As an intermediary, Singapore can play a key role in administering the levy, verifying payment and deploying the proceeds raised.
Offsetting emissions, or in-setting (where offsetting is linked to a company’s own strategy for decarbonisation), can be a complementary path to carbon reduction.
7. Act as custodian for and deploy research and development funds and grants
A global funding scheme that collects contributions in relation to an emissions metric, such as bunker consumption, could then be channelled back into the industry to reduce R&D costs. This could eventually become a virtuous cycle of investment back into the industry’s decarbonisation journey.
Collaborate with partners
8. Multiply local, regional and global collaboration across stakeholders
Having representatives from like-minded maritime jurisdictions work together is likely to accelerate progress. For example, a coalition of port authorities monitoring and, where appropriate, revising local bunkering standards, or the trialling of new fuels, would help lessen the fragmentation of standards and lower the risk of reduced competitiveness for first movers.
Communication and information flow can be strengthened between the different stakeholders in the port ecosystem by adopting common platforms and standards.
9. Set up a global decarbonisation centre
A Singapore-based global decarbonisation centre, drawing on expertise from different countries and sectors, could become a global hub in an international network of local institutions (one such example being the Copenhagen-based Maersk Mc-Kinney Moller Center for Zero Carbon Shipping).
This centre can coordinate, encourage and drive forward global decarbonisation initiatives, and act as a repository of knowledge gleaned from pilot trials and R&D projects under the other pathways.
IAP’s recommendations in practice
The IAP report also identifies a range of joint projects on which global stakeholders and the MPA can embark in order to advance the nine pathways. These include the establishment of a decarbonisation centre in Singapore, technological developments such as in JIT operations, and research into alternative fuels, most specifically ammonia.
Two of these suggested projects have already been launched, as was announced at the same media conference on 21 April:
- The MPA signed a Memorandum of Cooperation with BW Group, Sembcorp Marine, Eastern Pacific Shipping, Ocean Network Express, Foundation Det Norske Veritas and BHP in order to establish a fund totalling SGD$ 120 million for a maritime decarbonisation centre to be set up in Singapore, manifesting IAP’s ninth pathway.
- The MPA signed a Memorandum of Understanding with Temasek, to collaborate on the decarbonisation of port operations and the maritime supply chain generally, and the development and use of low-carbon and/or alternative marine energy sources.
Looking ahead
Decarbonisation will, without doubt, remain a considerable challenge for the shipping industry for years to come. However, Singapore is well-positioned and ready to face this challenge and turn it into an opportunity, given Singapore’s increasingly important role as a leading global hub port and international maritime, trading, and financial centre.
The IAP report concludes that “there is no silver bullet to decarbonisation; the way ahead needs to incorporate multiple pathways”. IAP’s recommendations outline how Singapore can not only contribute to the global effort to reduce maritime GHG emissions but also play a major role in steering the course ahead through a range of coordinated initiatives and collective efforts.
Client Alert 2021-111
