Capt. Ram Iyer, Vice President, Seahorse Ship Agencies

Ships & Shipping - A changing scenario- towards a Green Future (a compilation)


Industrial revolution post world war has ushered in unabated avarice for increased energy sources and continue to pollute nature and environment due unabated GHG emission with scant regard for sustainability and nature..

The global waste crisis, and climate change are two of the greatest challenges of our time, and the world desperately needs revolutionary solutions that will help address both. EU is committed to be climate-neutral by 2050 under the Paris Agreement & accordingly has set the target to reduce greenhouse gas (GHG) emissions by at least 55% by 2030. India too has committed to be Net Zero by 2070.

The International Maritime Organization (IMO-UN Body that regulates safety and all allied matters of International shipping) has also set ambitious targets and aims to reduce GHG emissions by at least 50% by 2050 compared with their 2008 level and also phase out GHG emissions from international shipping entirely as soon as possible in this century.

Updated IMO 2023 regulation introduces mandatory reductions in carbon emissions for both new and existing ships, using energy efficiency indicators including CII /EEXI to determine these levels.

CII is calculated in terms of CO2 emissions generated per ton of cargo transported per Km. Starting in 2023, ships are to be graded indicating their CII (Carbon intensity indicator). Ship owner/operators need to collect data on fuel consumption and CO2 emissions and submit regular reports according to IMO guidelines and also take steps to improve energy efficiency and reduce carbon emissions with yearly tightening emission reduction targets. Meeting compliance with IMO CII reduction targets, ship owners may need to invest in alternatives, including more fuel-efficient engines, alternative fuels, improving hull design, optimised speed & route planning etc to minimise fuel consumption.

EEXI is a rating system that assesses the energy performance of existing ships based on energy consumption data and is a measure related to the technical design of a ship and based on the ship’s specifications, not its actual operating performance and wef 1 January 2023, it is mandatory for all ships to calculate their attained EEXI to measure their energy efficiency, compare it to the required value, improve the energy efficiency of ship if necessary, and submit the document for approval. If the vessel receives an EEXI rating below a certain threshold, vessel owner may be subject to IMO 2023 penalties and restrictions. To attain EXXI approval, owner may have to adopting newer technologies, modify engines or systems, such as engine or shaft power limitations etc to reduce CO2 emissions and /or opt for other energy-saving devices or clean technologies such as using batteries or zero-carbon fuels.

Updated IMO MARPOL 2023 regulation (International Convention for the Prevention of Pollution from Ships developed by the IMO with the goal of minimising pollution of the oceans and seas, including dumping, oil and air pollution) includes updates to SEEMP-Ship Energy Efficiency Management Plan. Shipowner must have an approved dynamic, documented plan which assists to calculate vessel’s current CII rating and articulate three-year target and details how vessel is going to achieve its CII targets by documenting prevailing fuel consumption data, track CII performance and the effectiveness of energy efficiency measures and evaluate plan.

Summing up the new IMO regulations 2023 provides a defined path ahead towards a more sustainable shipping industry

Shipping industry which transports about 90% of world trade & responsible for 2.5% of CO2 emissions lacks clarity on future clean fuels and regulatory system which is one of the prime reasons holding shipowners from replacing ageing vessels amid pressure to decarbonise faster (at the start of 2023, commercial ships were on average 22.2 years old) and remains almost entirely dependent on fossil fuels. Shipping groups investing in decarbonisation, are divided on the best solutions, betting on a range of fuels including methanol and ammonia and other modes to propel ships, despite concerns over whether alternative fuels will be affordable or available at scale. Low-carbon fuels such as green methanol or ammonia cost up to four times as much as fossil fuels.

Whilst Shipping companies are commissioning methanol-powered vessels to cut down on greenhouse gas emissions and one expects the number of such ships will rise to over 200 by 2028, a notable increase from the current count of 30 this year, industry remains sceptical of timelines for the production of renewable methanol to catch up with the demand, and for the associated costs to decrease. Challenges persist in ensuring an adequate fuel supply, and eliminating emissions remains a formidable task.

The real cost challenge remains on the fuel supply side and the need to rapidly build production globally and at scale and ensure associated infrastructure for availability of same for shipping Industry. Additionally, we note that the challenge is, that there are many different options and no consensus on which sustainable fuels will be commercially available. This creates business risks regarding fuel availability, increased CAPEX/OPEX, vessel design, storage and handling, including complexities in managing cryogenic requirements.

Whilst to comply with IMO provisions & timelines hydrogen and hydrogen-derived synthetic fuels (such as Ammonia or Methanol) could be considered amongst the most scalable long-term solutions as marine bunker fuels, challenge is on commercial & reliable availability of such sustainable fuels.

These uncertainties regarding fuel availability, increased CAPEX / OPEX, vessel design, its structure, storage and handling, including complexities in managing cryogenic requirements and toxicity create business risks. Then we also have the timing issue as to when should one make the investment & go for sustainable fuel? ..We only have a limited amount of shipyard capacity in the world, so it would not be possible / feasible to upgrade all commercial vessels at the same time.

Readiness and availability of zero carbon/ carbon neutral fuels remains lower than the transition fuels, which could offer GHG emission reduction in the short term while building capacity and infrastructure for long term requirement for zero carbon/ carbon neutral fuels. Thus, summarising one is looking at a dynamic & challenging scenario all around with a myriad of changing regulations and associated costs & surcharges, whilst Ships, shipping & logistics continues in its mandated endeavours on going Green.

Along with all above, one cannot but highlight the need for the original 3 mantras .. (3 Rs.. Reduce, Reuse & Recycle) and overemphasise Circular economy for a sustainable future. Circular economy is all about taking care of the world’s resources. Circular bio flows from field to fork, turning food residues and waste into renewable and sustainable products, sustainable transportation- turning trash into treasure, efforts to create a greener future, and of course, sustainable bubbles.

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