Try (Just a Little Bit Harder)

The international shipping industry’s push to significantly reduce its carbon footprint over the next three decades is raising an obvious question: Is there a zero- or low-carbon bunker fuel that meets all of the industry’s basic criteria — things like availability, safety, and relative economy, not to mention sufficient on-board energy to transport massive, city-block-sized vessels thousands of miles at a clip. There is no clear answer yet, but there is a lot of talk about ammonia, or more specifically ammonia produced in a way that either generates no carbon dioxide (CO2) or that captures and sequesters much of the CO2 that is generated during production. But several major challenges must be met before “green” and “blue” ammonia can lay claim to even a small slice of the bunkers market, as we discuss in today’s RBN blog.

International shipowners need to significantly reduce their carbon-dioxide emissions by 2030 and will come under pressure to achieve carbon neutrality by 2050. Given that the industry currently depends almost entirely on fossil fuels for ship propulsion — and that every zero- or near-zero-carbon alternative faces serious headwinds — it won’t be an easy or low-cost transition. One pathway would be expanding the use of LNG as a bunker fuel in the near term and then shifting to alternatives like bio-LNG and synthetic LNG as they become more commercially available and economic. Another would be to use “green” or “blue” hydrogen, ammonia, or methanol. But there are challenges to each, not the least of which are the small volumes of non-traditional fuels being produced — and their high cost — and the need for new infrastructure both to produce and distribute them, as we discuss in today’s RBN blog.

Leading international shipping associations and many of the large shipowners they represent are pressing the International Maritime Organization (IMO) to take a much more aggressive approach to decarbonizing their industry, and calling for a $100/metric ton fee on carbon dioxide emissions from ships to spur investment in no-carbon propulsion systems. In effect, shipowners—themselves under pressure from their large, ESG-minded customers, are telling the IMO that its goals of reducing global shipping’s carbon intensity by 40% by 2030 and total greenhouse gas emissions by 50% by 2050 are far too timid. They are insisting that the IMO set the industry on a course to quickly ramp down its carbon dioxide emissions in the 2020s and achieve net-zero CO2 emissions by mid-century. If the shipowners prevail, it could result in the phase-out of hydrocarbon-based bunker fuel in favor of low-carbon alternatives like ammonia, hydrogen, and electric batteries. In today’s RBN blog, we begin a review of the big changes ahead for global bunker fuel and what they mean for oil and gas producers and refiners.