Could synthetic fuels be the technology fix that shipping needs? While they do provide the possibility of reaching zero-emission targets, a few key factors – from cost concerns to the loss of energy compared with fossil fuels – are holding progress back. Even so, alternatives remain few and far between. As the world continues on its path to net-zero, shipping companies may have little choice but to use them.
Shipping's hard-to-abate sustainability dilemmas
Here’s the dilemma: shipping accounts for 90% of goods transported around the world, and it’s also the most energy-efficient mode of international freight transport. But it’s also a major source of global greenhouse gas emissions. Greener alternatives are often viewed as prohibitively expensive in a highly competitive market. And change is often desperately slow.
Today, international shipping accounts for 681 million tons of CO2 every year. While the sector is improving in terms of energy efficiency, emissions are likely to stay at about 600 megatons as seaborne trade is expected to grow by 15% by 2030. So, we’re going to look at the business case of synthetic shipping fuel as a technology fix to reduce carbon emissions. We’ll assess where we are right now and the pressures companies are under to meet net-zero targets. And we’ll examine which alternative fuels could be front-running technology as science improves and adapts.
It’s worth adding that we’re working with the consensus view of expected demand for shipping against the current policy backdrop.
Shipping is a ‘hard-to-abate’ sector. That's where it's prohibitively costly, or the technology's just not there yet to meaningfully reduce harmful emissions. For instance, the full electrification of maritime shipping is not a feasible strategy, given the technological limitations. So any transition pathways are gradual and long. And the international nature of maritime shipping doesn't help much. You can argue that any policy intervention should be globally aligned and implemented by the global authority, the International Maritime Organization (IMO).
Unfortunately, the IMO is not exactly a fast-moving beast. It's still targeting a 50% reduction in CO2 for shipping by 2050 from a 2008 base rather than from 1990, where the Paris Agreement looks at. That's far away from both the 2015 agreement and the net-zero target for the global economy.
On the other hand, it is encouraging to see some large container liners such as Maersk, MSC, and Hapag Lloyd are already committing themselves to net zero emissions by 2050.
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