Shipping steers to a zero-carbon future

As the shipping industry begins a multi-decade journey to reduce greenhouse gas emissions, a combination of digitalisation, business incentives and collaboration is needed to identify the right future fuels and meet ambitious decarbonisation goals

Last year marked a pivotal moment for the shipping industry when the International Maritime Organization (IMO) established a target to reduce the sector’s greenhouse gas emissions by at least 50 per cent by 2050. The result has been greater attention from maritime stakeholders about what this transition involves and a growing number who are demanding shipowner action on decarbonisation.

Supporting shipping to address this change is a key focus for Lloyd’s Register and this requires strong partnerships.

“Climate change is among the greatest challenges for the safety of our world. All participants in the maritime value chain must collaborate to accelerate the transition to no or low-carbon operating models as society will continue to seek more sustainable transportation,” says Nick Brown, marine and offshore director at Lloyd’s Register.

Leading the decarbonisation movement for the classification society is Katharine Palmer, global head of sustainability for Lloyd’s Register’s marine and offshore business. Together with colleagues and experts at the UK’s University Maritime Advisory Services, she collaborated on a series of studies, with the latest on low-carbon transition pathways, which assess ways shipping can address the challenges of energy development, vessel design and operational implications relating to the IMO’s ambition.

However, despite the regulatory landscape achieving a heightened awareness around carbon emissions, for many a gap remains in understanding how sustainability equals success and what this means for business. Acceptance that sustainability can have a positive business impact beyond compliance is yet to be widely embedded across the sector.

“Several sustainability challenges are being addressed through compliance, but to really move ahead with this, shipping needs to truly understand the sustainability benefits and impacts so they can turn them into something successful,” says Ms Palmer.

If the 2050 goal is to be met, the decade between 2020 and 2030 will be the most significant as maritime stakeholders begin to respond to consumer pressure. With uncertainty still lingering around which fuel and technology will be the best route forward, the 2020s will require full-scale pilots and prototypes as well as new policies, standards and rules. It’s crucial that zero-emission vessels enter the fleet before this decade has ended.

Batteries in short-sea markets, or if used as hybrids, and on-shore power supply will play an important role in reducing the dependency on fossil fuels. Easy-to-store zero or low-carbon fuels, such as sustainable biofuel and methanol, may also be an attractive solution as existing infrastructure and machinery can be used to ease the transition in the short term.

Once the most appropriate solutions have been identified, the 2030s will be about scaling them up. The evolution of shipping’s fuel mix is closely linked to that of the wider energy system, so a clear signal needs to be given to the potential fuel producers.

“We expect a consolidation of what the dominant technologies for use on board will be, and the interactions between end-fuel price, machinery costs and revenue loss will be better understood,” says Ms Palmer. “We will start to see ships being designed to store less energy on board and changes to their operating profile to bunker more frequently.

“Although the likelihood of any pathway is difficult to assess, we may experience more than one switch. For example, a growing share of biofuels in the 2020s and ongoing efforts to develop fuels produced from renewable electricity could result in a major shift to electro-fuels in the 2040s and 2050s. By 2050, and beyond consolidation of the market, we expect to see an end-fuel mix dominated by one family of fuels.”

Though fuels derived from renewable electricity, such as hydrogen and ammonia, have zero emissions across their whole life cycle, they are currently produced from natural gas which means there are still upstream production emissions. While the IMO’s ambitions currently focus on operational emissions, Lloyd’s Register’s own discussions with shipowners indicate they don’t just want to shift the problem upstream. Scalability and cost continue to hold back the transition to zero-carbon alternatives and this needs policy interventions and a fundamental change to the incentives scheme for shipping.

There needs to be a clear direction on which way the fuel transition is going to go so the industry can begin developing the correct supply infrastructure

Digitalisation will play a key role in getting through these challenges. Embracing new technology and digital applications to change the way businesses in the maritime industry operate is inextricably connected to resolving complex sustainability challenges, though not everybody in maritime sees this.

Technologies that allow data to be managed more effectively allows shipowners to measure efficiency and fuel consumption and emissions accurately, which ultimately enables them to make more informed decisions in creating the right decarbonisation strategy.

“It also underpins improved transparency and disclosure in the supply chain,” says Ms Palmer. “Digitalisation enables owners to get data in real time, be more predictive and understand operations to improve efficiencies. However, it will be the desire for change among other stakeholders, including customers and banks, that will influence shipowners the most.

“When technology, commercial and policy perspectives overlap, it creates the right conditions to enable the change. We need technology readiness as well as the safety case. We also need the commercial environment to reward lower emissions and the policy to drive the incentives that enable the transition.”

Lloyd’s Register anticipates more countries will develop and implement national action plans to address greenhouse gas emissions, with more ports introducing zero-emission incentives to ships operating in their waters. These efforts may be stepped up in 2030 resulting in new incentives and funding to create conditions that support the transition.

Given the current economic viability of zero-emission vessels compared with those using fossil fuels, the market alone will not drive the transition and the industry may need policy interventions and a fundamental change to the incentives scheme for shipping.

Meanwhile, bankers are aligning businesses activities with international climate goals, which involves assessing the climate risk exposure to their portfolios and setting targets to meet decarbonisation goals. This has been seen recently with the introduction of the Poseidon Principles, a global framework for responsible ship finance.

Most importantly, however, there needs to be a clear direction on which way the fuel transition is going to go so the industry can begin developing the correct supply infrastructure. Shipping has a lot of choice and requires a strong understanding about all the fuels that could potentially answer the industry’s decarbonisation challenge.

“This will need to be supported by investment in those fuels to ensure sufficient quantities and the required location,” Ms Palmer concludes. “The move away from fossil-based fuels will require a completely new infrastructure. This investment will then increase production.”

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