Decarbonizing the supply chain in the coming years will take a collective effort from stakeholders and the robust availability of green fuel to make that happen, panelists said at a Feb. 28 session on “The Route to Carbon-Neutral Shipping and a Multi-Fuel Future.”
The panel, which took place during the TPM23 and TPMTech Conference by S&P Global Market Intelligence in Long Beach, Calif., brought together four experts to discuss the industry’s role and challenges in trying to decarbonize operations.
Panelists included Julia Bedanova, chief operating officer of Million Dollar Baby, a Los Angeles-based baby and children’s furniture company; Paolo Montrone, senior vice president and head of global trades at Kuehne + Nagel; Ocean Network Express (ONE) CEO Jeremy Nixon, and Katarin van Orshaegen, commercial lead and spokesperson for GoodShipping, an organization that helps to decarbonize the global shipping industry.
The need to reduce the industry’s carbon footprint has come to the fore as the International Maritime Organization recently set out aggressive goals to lower greenhouse gas emissions from vessels, including efforts to eliminate at least 50% of 2008-level GHG emissions by 2050 and lower CO2 emissions by 2030.
Shipping carriers burn about 55 billion tons of fuel annually and about 165 million tons of carbon dioxide, said Nixon, who also serves as co-chair for the World Shipping Council.
“In the last year we’ve really had a very good understanding and cooperation across all the container shipping carriers to really move forward very strongly to try to decarbonize this industry,” Nixon said.
A Multi-Fuel Future
A multi-fuel future will be a key part of the success, panelists said. While there are some green-fuel options on the market, including ethanol, ammonia and renewable synthetic LNG, widely available options have been hard to come by.
“Many of us, including my company, we’ve signed up to net zero by 2050 and that’s an easy thing to say,” Nixon said. “But actually, you know, we’ve got to start investing in assets right now that can actually use those green fuels.”
Container shipping carriers, including ONE, have ordered about 65 to 70 new dual-fuel engine ships in the last nine months, which will start using cleaner fuel alternatives such as ammonia and methanol.
“But to do that, we need a lot of green hydrogen,” Nixon said, adding, for example that there is a shortage of methanol.
“And you could see that Maersk is taking a very leading edge on methanol, which I congratulate them on, and they are looking to invest actually in the fuel types themselves,” Nixon said. “But even with their very strong efforts over the last year, they can’t procure enough methanol at the moment, so they are building some other initiatives. And I’m aware other carriers are doing that and we’re doing that as well.”
Some carriers are looking at collaborating with energy producers and Good Shipping in the next two to five years, Nixon said. Some are involved in pilot programs. For example, there’s a movement to use residual oils coming out of the catering industry and blending them for fuel use.
“So we’re not chopping down rainforests. We’re trying to use these oils which normally would just be destroyed and try to use that,” Nixon said.
The cost of moving containers on green fuel also remains a challenge. According to Nixon, the average cost of carbon fuel today is about $1,000 per FEU, compared to potentially $2,000 to $3,000 to move the same 40-foot container.
“We as an industry, we as individual carriers, will pioneer new green solutions. but at the end of the day, if our competitors are running on $1,000 on a 40 foot, we’re running on $2,000 to $3,000 tons per week, we can’t survive,” Nixon said. “So we need a leveling up.”
Regulators need to step in and set a carbon price, he said, be very specific about what fuels can be used and move to those new fuel types.
“We look to the IMO to bring in market-based measures where we will have a common carbon price which is transparent and we can provide predictability and insight … on what our future costs would be,” Nixon said.
Consumers and brands are becoming more aware about the sustainability of their purchases. Bedanova, of Million Dollar Baby, cited a study last year stating that about 82% of all shippers would be willing to pay a premium for a reduction in carbon, an 11% increase from the previous year.
Bedanova said she started having a conversation with one of her supply chain partners about making operations more sustainable and the partner offered carbon offsets as part of every single shipment she does with them without cost.
“And to me, that made me that much more of a loyal customer,” she said. “I’m a big promoter for them. I’m telling all of my friends about them. I think it’s the shippers and the brands that need to come to the table and say, ‘This is needed and we want this and we’re willing to pay a premium’.”
Previously, there wasn’t much data transparency about CO2 emissions, but in the last five years, there’s been “a quantum leap forward in the industry,” said Montrone of Kuehne + Nagel.
Embracing biofuel is probably one of the key solutions that is ready and adaptable to the supply chain, Montrone said.
He added that carbon taxes are coming in Europe and that the U.S. would not be too far behind.
“There will be a cost not to be green,” he said.
“When you look at your freight bill in the future, you can’t ignore the fact that there is a possibility the regulation may bring in a carbon tax and therefore you are going to see higher costs in the supply chain,” he said.
Van Orshaegen said Good Shipping is a decarbonization service that works with cargo owners on carbon measurements and scope of reduction, whether businesses want to be 100% carbon neutral right away or if they want to start with 10% and build up.
Meanwhile, carriers need to look at their individual data to understand how to lower their carbon footprint in the next four or five years, even if the green fuels don’t become available, Nixon said.
Carriers can examine the way they move cargo and how they forecast it, he said. Do they need to do so much air freight? Could they be more predictable in the way they move sea freight? Could they do more direct movements inland? Can they move more by rail?
While there has been a lot of progress, the industry needs to push on, especially when it comes to making green fuel more available, Nixon said.
“We need government regulation, frankly, also pushing energy companies to invest more in green technology (and) green fuels going forward and not be too reliant on their own oil and gas production side … it needs the whole industry.”
KAREN ROBES MEEKS, a Southern California native, is an award-winning journalist with more than 20 years’ writing experience. Her articles have appeared in the Los Angeles Times, San Francisco Chronicle, Orange County Register and Long Beach Press-Telegram, where she worked as a reporter for nearly 14 years. Her work has been recognized by the California News Publishers Association, the Associated Press News Executives Council and the Los Angeles Press Club. Karen can be reached at firstname.lastname@example.org.