POLOKWANE – The maritime industry’s transition to a zero-emission future, crucial for meeting the Paris Agreement climate targets, is facing significant challenges due to the high cost of green fuels. This issue was highlighted in recent statements by First Movers Coalition members, Mitsui O.S.K. Lines and Maersk, who are signaling their readiness to procure alternative green fuels to drive economies of scale.
According to World Economic Forum, the current price of green fuels is approximately 3-4 times higher than that of traditional fossil fuels, posing a significant barrier to maritime decarbonization. Government action and policy measures are deemed essential in narrowing this price gap and enhancing the supply of green fuels.
The shipping industry, responsible for nearly 3% of global greenhouse gas emissions, moves over 11 billion tonnes of goods annually along deep-sea routes. Unlike many land-based industries, ships cannot directly use cheaper renewable energy due to the need for energy in a dense, easily manageable form.
The cost of fuel, which constitutes about 30-50% of a vessel’s operating costs, is a major concern, especially as 99% of shipping’s energy demand is currently met by Heavy Fuel Oil (HFO) and distillates. Despite various technologies being explored to reduce fuel consumption and improve energy efficiency, the high cost of transitioning to green fuels remains a challenge.
The industry has made progress in recent years, with over 180 ships capable of sailing on green fuels currently on order. The “Laura Maersk,” owned by Maersk, is an example, being the first container ship running on green methanol. Mitsui O.S.K. Lines is also working to decarbonize its diverse fleet, including container ships, bulkers, tankers, gas carriers, and roll-on-roll-off ships.
However, no single zero-emission fuel alternative yet meets the volume of bunker fuel used today. The maritime industry is exploring various zero-emission fuels like ammonia, methanol, hydrogen, and batteries to power zero-emission vessels. The substantial cost difference between green fuels and traditional bunker fuels remains a significant hurdle.
Recent data indicates that green fuels could be over three times more expensive than bunker fuel, potentially impacting freight rates significantly. For instance, shipping consultancy Drewry estimated that switching to green methanol could raise fuel costs by 350%, adding over $1,000 per 40-foot container shipped from Asia to Europe.
The challenge extends beyond the shipping industry, requiring collaboration across sectors and regulatory support. Methanol fuel technology, though more mature, still faces market limitations, and a global effort is needed to scale up the production of fossil-free fuels and incentivize the transition.
Regulators are called upon to introduce policies that support the scaling of green fuel production, ensure a level playing field, and foster a non-exclusive environment that backs initiatives like the First Movers Coalition while encouraging competition. Collaborative efforts and incentives are essential to level the financial playing field for the decarbonization of shipping, mitigating both the cost of the green transition and the future impact of natural disasters.