By Eric Huang.    Photo：Glenn Langhorst 

In the past two years, major shipping lines have benefited from the panic consumption during the epidemic and the sky-high freight rates caused by the congestion of global ports, which have repeatedly presented brilliant financial reports to the world. As the global economy is affected by serious inflation in the post-epidemic era, demand has been greatly reduced, and the two-year-old One Piece has been put into the cold palace again. The entire shipping market not only returned to the situation before the epidemic in 2019, but even fell to the end of 2008 when the global economy in great recession. Even so, shipping lines with full cash in hand have been actively repeating shipbuilding orders in the past two years. MSC also placed additional orders for 12 16,000TEU LNG-powered container ships last month. Are these shipping lines ignoring the predicament of the global economic recession in the post-epidemic era? Or are the shipping lines too rich to splurge? There is only one answer - that is the era of green transition in shipping industry!

While ocean transport is one of the least emission-intensive modes of transporting goods compared to land or air transport, the ocean industry, which carries around 80% of world trade, is also one of the largest carbon emitters. The average annual greenhouse gas emissions are more than 1 billion tons, which is similar to the total carbon emissions of the whole Germany. If left uncontrolled, such emissions are expected to grow by 50-250% by 2050. So the International Maritime Organization (IMO), the United Nations agency responsible for shipping, has set itself a goal of reducing greenhouse gas emissions by at least 50 percent from 2008 levels by 2050. According to research by the University Maritime Advisory Service (UMAS) in partnership with the University College London (UCL) Energy Institute, the global shipping industry is expected to spend US$40 billion annually to produce zero-emission fuel vehicles and bunkering infrastructure by 2030 .

In order to achieve the emission reduction target set by IMO, major shipping lines dare not neglect to replace old and high-energy-consuming ships with new-type energy-saving and high-efficiency ships, and even invest a lot of money to sponsor the research and development of green energy. Some shipping lines, including Maersk, are betting on green methanol produced using renewable energy. Methanol is considered the best option in the near term, as existing ships can be retrofitted to operate on them. In contrast, ammonia must be stored under pressure or at extremely cold temperatures. The choice for the shipping lines however is " Do I build a cheaper asset now with the anticipation of retrofitting it in five years’ time to ammonia or do I build a more expensive asset now, with that premium at risk because I might be betting on the wrong fuel? No one knows what the regulations will be in 10 years’ time”

The shipping industry is a fragmented industry involving many stakeholders: from banks and financiers to bunker suppliers, shipbuilders, and insurance companies. Therefore, when it comes to green shipping, it cannot be achieved by a single individual or a few groups. To get a viable, investable green shipping project, you need a lot of things: a shipowner willing to pay a premium and finding an empathetic government and a suitable location to produce green ammonia, then financiers and Insurers are fully open to taking this risk. It seems like that sustainable shipping (green shipping) should be partly funded from public finances, as you can hardly expect private players to take all the risks. The European Union is currently leading the way in financing green shipping projects, while the governments of South Korea and Japan, the world's two largest shipbuilders, have also invested some money in research and development of ships that use zero-emission fuels. This shows that the goal of green shipping requires close cooperation between the government and shipping industry stakeholders.

Andrew Stephens, executive director of the Sustainable Shipping Initiative (SSI), launched by the European Union, said at Nordea Bank's Sustainable Finance and Shipping Forum that "Decarbonisation is where we are seeing a real dialogue between the public and private sectors, a place for action and collaboration. There is a desire for rapid decarbonization, and it will take a joint effort of stakeholders to solve the problem, which will not be solved by one group alone. Current discussions focus on alternative fuels and decarbonization technologies, which SSI is working on as a knowledge partner in the Fuels and Technology Workstream of the Zero Carbon Coalition.”

We look forward to all the stakeholders in the shipping industry who have benefited from the rise of One Piece in the past two years to have a deeper cooperation with the public sector, fully invest the development and promotion of new energy and accomplish the ultimate target in sustainable shipping (green shipping) at an early date! 

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