OpEd: Green Questions

Defining Efficiency in a New 'Green' World?

While the maritime industry continues to move toward a more sustainable future, there are still too many questions that remain unanswered.

By Robert Kunkel, President, Alternative Marine Technologies and First Harvest Navigation

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The level of confusion within the maritime industry regarding emissions, environmental compliance and climate change is reaching its peak. The confusion can be related to the timing of zero emission commitments, the lack of a standard fuel to reach those commitments, and more importantly, the fact that the tools we will require must also support the industry's economic bottom line. Achieving sustainability goes well beyond an environmentally progressive plan of attack. The means for reaching energy efficiency will be a topic of debate moving forward, and the cost will be insurmountable.

The term "green" in business historically referenced profitability and money. Shipping also follows the "show me the money" mantra when daily operational decisions are made and an efficient operation is defined. The current ESG investment path to support alternative fuels and alternative energy must also protect our businesses. And it has not.

The environmental goals can only be achieved if the results are deployable and profitable throughout all commercial markets. IMO may have a plan. But shipping does not have a solution to reach all of the proposed "zero emission" time lines. We would offer our apologies for raising the "money" discussion, and with that said, we support our statements by providing a quote from the U.S. envoy for the environment, John Kerry, as he spoke at Nor-Shipping in Norway in June of this year: "Climate crisis is the greatest economic opportunity the world has ever known."

Unfortunately, many of us in shipping do not agree with Kerry's statement. Climate change and the millions of lives it has the capability to destroy is hardly an "opportunity". An opportunity mindset is the problem the industry will have in meetings its goals.

In our opinion, the data to fuel the debate must be presented in more than several categories to develop a proper timeline and also take into account market responses. Start with the regulatory requirements, as IMO MEPC 80 will convene in July of this year. The IMO response to emissions has resulted in regulations with the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) being two that raised commercial issues ranging from charter party revisions to the reduction of ship speed. Shipping will be added to the EU's Emissions Trading System next year making those commercial inefficiencies all the more visible. These regulations are ushering in a fundamental shift in the way shipping does business, and as a result, parallel markets will develop accounting for those who comply and those who don't. And there will not be any economic winners here.

Shipowners tend to work their way around regulation as they determine how to remain profitable with compliance. It is not "either/or" as profit and sustainability can be met with the proper solution and an acceptable time period to reach it. The date of compliance becomes less important, as there are many waivers, grandfather clauses and loopholes that provide breathing room while the true science and technology makes its way through the hype. Compliance comes when a profitable solution is met and industry is cable of meeting the standard throughout all markets. MEPC 80 must be clear that efforts toward zero emissions are goal- or target-orientated, and not based upon regulatory compliance. Let's remember, we do not have a reporting system or technology in place to actually measure the emissions emulating from our stacks. As a result, we may not know the effect of our efforts for decades.

Take the IMO International Ship Management Code as a regulatory example. ISM was driven by safety issues to remove substandard shipping. The program uncovered shipowners who ignored safety, proper maintenance or regulatory compliance, and with that presented a risk to the industry as a whole. They were also perceived to be more profitable by ignoring those operational issues. The regulation dates were not the driving force. If they were, we would not be reading about a substandard "ghost fleet" delivering sanctioned Russian oil while class, insurance and flag states rush to identify the culprits, remove certificates and cancel insurance cover. Buoyant markets ignore risk as business rushes to profit. The rush to reduce emissions will be no different. Risk will be ignored in many cases.

Moving past the regulatory exposure, let's look at how the current solutions affect the many markets shipping supports. In the container markets the first quarter of 2023 identified the average sailing speed slowing to 13.8 knots, down 4% year-on-year. Most understand the speed reduction is a reaction to a poor commercial market and overcapacity. Others report the speed reduction has worked towards a 15% or more reduction in emissions and suggesting this speed could drop by an additional 10% before 2025. The reports work towards compliance with CII ratings and the 40% emission reduction by 2030. Question if any of these "reductions" take into account the additional tonnage and energy required for the companies to maintain delivery schedules as more ships enter the string. The argument reaches back to the analysis of "eco ships" in the tanker markets now decades ago. Reduce the amount of fuel used and emissions reduction will follow.

Transparent data, fleet optimization and operating efficiency will continue working hand in hand with fossil fuels to develop the correct solution and chip away at the 40% 2030 reduction goal. Look at the many reports of new construction deliveries reporting propulsion with ammonia, hydrogen and earlier liquefied natural gas (LNG). The engine designation is "DF" — dual fuel. Fossil fuels are involved simply because the supply infrastructure is not available for every market sector.

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Alternative fuels can only be discussed if they are economically produced and scalable. Current cost estimates to meet that "zero carbon" fuel of the future are reported above and beyond $1.5 trillion. That estimate is based upon scalable infrastructure development alone. It has not addressed ship design, emergency response, labor development and operational considerations. ABS recently announced new training programs for ammonia fuels that take into account emergency response for "ammonia plumes" in the machinery space. A welcome report and program that should alert ESG investment to the issues that lie ahead in ship design and operation with alternative fuels. Ammonia processing is also energy intensive and the process can release large amounts of methane and carbon dioxide into the atmosphere. Recent research has also identified the leakage of hydrogen being capable of global warming effects 12 times stronger the CO2. We had similar lessons learned with early projects involving LNG and lithium battery emergency response.

The argument that shipping must develop alternative fuels to achieve zero emissions and reach the 1.5-centigrade temperature threshold across the planet is being discussed through all transportation modes. The airline industry has also committed to reaching zero emissions by 2050; their strategy relies on the development of sustainable aviation fuels (SAFs) with a $2 trillion U.S. dollar estimate to reach a SAF solution. Listen carefully. There is a marked difference between the definition of "sustainable fuels" and "alternative fuels". Most, if not all, of the alternative fuels have lower energy density than fossil fuels. As a result, more fuel has to be carried, stored and processed to meet current operating parameters and distances. We have a long road to reach "sustainability", and as a result, we will see a stronger development of a "liquid" based biofuel with a petroleum base to reduce ship design cost, construction and bunkering infrastructure. Where the automobile industry led the way in electrification, the airline industry will lead with SAF.

As the world addresses extreme political division and current geopolitical events, climate change efforts come with questions about whether the solutions presented are politically motivated or economically viable. Some follow the science of climate change, while others still refute it and report it as misunderstood. Recent debates claim both parties are correct. The argument goes well beyond transportation needs and is strongly influenced by the future of alternative energy. We cannot solve mobility challenges without addressing how the two will work together and reach the 1.5-centigrade goal.


About the Author:

Robert Kunkel, president of Alternative Marine Technologies and First Harvest Navigation, served as the Federal Chairman of the Short Sea Shipping Cooperative Program under the DOT's MARAD from 2003 until 2008. He is a past VP of the Connecticut Maritime Association and a contributing writer for Marine News and MarineLink.com.

July 2023