Imagine going to a car dealership for a new vehicle that’s climate-friendly and being told that it isn’t clear what clean fuels will be available to fill it up, or how much those fuels will cost. You probably would walk away or opt for a car that runs on gasoline.
That’s the dilemma faced by the shipping industry as it looks to shift to cleaner vessels to meet emissions reduction goals.
The industry has agreed to boost the global fleet’s energy efficiency by at least 40% over the next decade and cut overall greenhouse-gas emissions from ship exhaust in half by 2050 compared with 2008 levels.
The difference with cars is that a cargo ship’s lifespan is around 25 years and it takes around two years to build a cargo vessel. If the owners want to meet the deadlines without crashing their operating budgets they will have to start buying zero-emission vessels within a few years, but there is no consensus yet on how green ships will be powered.
The focus on new fuel sources marks the biggest change in ship power since the sector switched from coal to the high-polluting heavy oil known as bunker more than 100 years ago.
The deadlines, set by the International Maritime Organization, the United Nations marine regulator in 2018, likely will become more stringent in 2023 when the body meets to review its strategy. Shipping services provider Clarkson Research Services Ltd. has estimated that it may cost the industry more than $3 trillion for ships to switch to new forms of power.
The choices by carriers will carry high stakes for shipping customers.
Shipping executives say they would seek to pass at least some of the costs of switching fuel sources along to cargo owners. That would drive up expenses in international supply chains for big retailers like Walmart Inc. and Amazon.com Inc., mining companies, and agricultural exporters moving raw materials in bulk.
Such companies also are looking to reduce the carbon footprint across their supply chains, so they may be able to incorporate some of the cutbacks in shipping pollution into assessments of their own operations.
If there is ample supply of new fuels, freight rates for transport on green ships may be similar to the price of shipping on vessels that run on traditional oil. But industry executives say they are bracing for higher costs.