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SETTING THE COURSE TO

LOW CARBON SHIPPING

ZERO CARBON OUTLOOK

ABOUT THE NET ZERO NAVIGATOR

FEATURED ON THE COVER AND THROUGHOUT THE PUBLICATION

The vessel is a conceptual design of a liquid hydrogen carrier, approximately 80,000 cubic meters (m3) in capacity.

Hydrogen is billed as one of the potential future fuels for eliminating greenhouse gas (GHG) emissions from

shipping because it either burns without emitting anything other than water vapor, or can be used in hydrogen fuel

cells to generate electricity directly.

The Net Zero Navigator was heavily inspired by the National Aeronautics and Space Administration (NASA) and

space-age technologies involving hydrogen. Its large spherical hydrogen storage tanks were developed by NASA,

along with its hydrogen fuel cells and batteries, which were used for power generation on the space shuttle.

This vessel requires special spherical tanks because hydrogen gas is notoriously dicult to store safely at signiﬁcant

quantities. The typical solution is to store the hydrogen in a liquid form at -253° C. These temperatures are achieved

with a complicated refrigeration system and highly sophisticated insulation, which is why the design features such

prominent metal sheathing.

ACKNOWLEDGMENTS

This publication was prepared by a group of contributors including: Georgios Plevrakis, Panos Koutsourakis, Stergios

Stamopoulos, Jatin Sarvaiya, Ilias Soultanias, Shankar Vaidhyanathan, Nathan Seward, Tao Shen, Anna Zhu, Revekka

Koliniati, Andreas Kalamidas, Daniel Barcarolo, Ioannis Dimakopoulos, Ai-Nian Zhang, Hamid Daiyan, Aditya

Bose, Sarah Bell, Lindsay Bass, Shannon Crisafulli, and Jesse Lashbrook, in collaboration with Maritime Strategies

International and Herbert Engineering.

TABLE OF CONTENTS

WHILE ABS USES REASONABLE EFFORTS TO ACCURATELY DESCRIBE AND UPDATE THE INFORMATION IN THIS PUBLICATION, ABS MAKES NO WARRANTIES OR

REPRESENTATIONS AS TO ITS ACCURACY, CURRENCY OR COMPLETENESS. ABS ASSUMES NO LIABILITY OR RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS IN

THE CONTENT OF THIS PUBLICATION. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EVERYTHING IN THIS PUBLICATION IS PROVIDED WITHOUT WARRANTY OF

ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,

OR NON-INFRINGEMENT. IN NO EVENT WILL ABS BE LIABLE FOR ANY DAMAGES WHATSOEVER, INCLUDING SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL

DAMAGES OR DAMAGES FOR LOSS OF PROFITS, REVENUE, OR USE, WHETHER BROUGHT IN CONTRACT OR TORT, ARISING OUT OF OR CONNECTED WITH THIS

PUBLICATION OR THE USE OR RELIANCE UPON ANY OF THE CONTENT OR ANY INFORMATION CONTAINED HEREIN.

INTRODUCTION .........................................................1

CURRENT MARKET OUTLOOK ............................................ 3

2.1 CURRENT STATE OF THE MARKET ...................................................3

2.2 ZERO-CARBON FUTURE OF THE GLOBAL SHIPPING INDUSTRY .........................13

2.3 ADDRESSING FUTURE CLIMATE RISKS ..............................................15

OVERVIEW OF TWO EMERGING VALUE CHAINS: HYDROGEN AND CARBON .....18

3.1 EXPLORING THE HYDROGEN VALUE CHAIN AND HYDROGEN-BASED FUELS .............19

3.2 NET-ZERO APPROACH FOR HYDROGEN IN SHIPPING ................................ 28

3.3 ROLE OF CARBON CAPTURE AND STORAGE ........................................ 34

3.4 ROLE OF DROP-IN TRANSITION FUELS ............................................ 43

3.5 THE ROLE OF ENERGY STORAGE ................................................. 47

CARBON MARKETS AND PRICING MECHANISMS ........................... 55

4.1 GLOBAL CARBON PRICING ....................................................... 55

4.2 TAXING CARBON AND SUBSIDIZING ALTERNATIVE ENERGY SOLUTIONS ............... 56

4.3 ANATOMY OF EMISSIONS TRADING SYSTEMS ....................................... 59

4.4 PROMOTING COOPERATION AND BREAKING IMPASSE ............................... 65

4.5 DECARBONIZING THE MARINE AND OFFSHORE INDUSTRIES THROUGH

CARBON PRICING ............................................................... 66

4.6 THE ROLE OF CARBON OFFSETS IN ACHIEVING NET-ZERO EMISSIONS ..................71

SCALING ALTERNATIVE ENERGIES AND DRIVING MOMENTUM ............... 76

5.1 ALTERNATIVE ENERGIES: SCALING UP THE VALUE CHAIN ............................ 76

5.2 NEW BUNKERING INFRASTRUCTURE TO SUPPORT THE MOMENTUM ................... 77

5.3 THE ROLE OF SUSTAINABLE FINANCE INSTRUMENTS ................................ 80

5.4 VALUE-CHAIN ENABLERS ........................................................ 84

5.5 UPDATE OF FUTURE FUEL MIX ....................................................103

5.6 GREEN CORRIDORS .............................................................112

CONCLUSIONS ........................................................115

REFERENCES ........................................................... 117

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SETTINGTHECOURSETOLOWCARBONSHIPPINGZEROCARBONOUTLOOKABOUTTHENETZERONAVIGATORFEATUREDONTHECOVERANDTHROUGHOUTTHEPUBLICATIONThevesselisaconceptualdesignofaliquidhydrogencarrier,approximately80,000cubicmeters(m3)incapacity.Hydrogenisbilledasoneofthepotentialfuturefuelsforeliminatinggreenhousegas(GHG)emissionsfromshippingbecauseiteitherburnswithoutemittinganythingotherthanwatervapor,orcanbeusedinhydrogenfuelcellstogenerateelectricitydirectly.TheNetZeroNavigatorwasheavilyinspiredbytheNationalAeronauticsandSpaceAdministration(NASA)andspace-agetechnologiesinvolvinghydrogen.ItslargesphericalhydrogenstoragetanksweredevelopedbyNASA,alongwithitshydrogenfuelcellsandbatteries,whichwereusedforpowergenerationonthespaceshuttle.Thisvesselrequiresspecialsphericaltanksbecausehydrogengasisnotoriouslydifficulttostoresafelyatsignificantquantities.Thetypicalsolutionistostorethehydrogeninaliquidformat-253°C.Thesetemperaturesareachievedwithacomplicatedrefrigerationsystemandhighlysophisticatedinsulation,whichiswhythedesignfeaturessuchprominentmetalsheathing.ACKNOWLEDGMENTSThispublicationwaspreparedbyagroupofcontributorsincluding:GeorgiosPlevrakis,PanosKoutsourakis,StergiosStamopoulos,JatinSarvaiya,IliasSoultanias,ShankarVaidhyanathan,NathanSeward,TaoShen,AnnaZhu,RevekkaKoliniati,AndreasKalamidas,DanielBarcarolo,IoannisDimakopoulos,Ai-NianZhang,HamidDaiyan,AdityaBose,SarahBell,LindsayBass,ShannonCrisafulli,andJesseLashbrook,incollaborationwithMaritimeStrategiesInternationalandHerbertEngineering.TABLEOFCONTENTSWHILEABSUSESREASONABLEEFFORTSTOACCURATELYDESCRIBEANDUPDATETHEINFORMATIONINTHISPUBLICATION,ABSMAKESNOWARRANTIESORREPRESENTATIONSASTOITSACCURACY,CURRENCYORCOMPLETENESS.ABSASSUMESNOLIABILITYORRESPONSIBILITYFORANYERRORSOROMISSIONSINTHECONTENTOFTHISPUBLICATION.TOTHEEXTENTPERMITTEDBYAPPLICABLELAW,EVERYTHINGINTHISPUBLICATIONISPROVIDEDWITHOUTWARRANTYOFANYKIND,EITHEREXPRESSORIMPLIED,INCLUDING,BUTNOTLIMITEDTO,THEIMPLIEDWARRANTIESOFMERCHANTABILITY,FITNESSFORAPARTICULARPURPOSE,ORNON-INFRINGEMENT.INNOEVENTWILLABSBELIABLEFORANYDAMAGESWHATSOEVER,INCLUDINGSPECIAL,INDIRECT,CONSEQUENTIALORINCIDENTALDAMAGESORDAMAGESFORLOSSOFPROFITS,REVENUE,ORUSE,WHETHERBROUGHTINCONTRACTORTORT,ARISINGOUTOFORCONNECTEDWITHTHISPUBLICATIONORTHEUSEORRELIANCEUPONANYOFTHECONTENTORANYINFORMATIONCONTAINEDHEREIN.INTRODUCTION.........................................................1CURRENTMARKETOUTLOOK.............................................32.1CURRENTSTATEOFTHEMARKET...................................................32.2ZERO-CARBONFUTUREOFTHEGLOBALSHIPPINGINDUSTRY.........................132.3ADDRESSINGFUTURECLIMATERISKS..............................................15OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBON.....183.1EXPLORINGTHEHYDROGENVALUECHAINANDHYDROGEN-BASEDFUELS.............193.2NET-ZEROAPPROACHFORHYDROGENINSHIPPING.................................283.3ROLEOFCARBONCAPTUREANDSTORAGE.........................................343.4ROLEOFDROP-INTRANSITIONFUELS.............................................433.5THEROLEOFENERGYSTORAGE..................................................47CARBONMARKETSANDPRICINGMECHANISMS............................554.1GLOBALCARBONPRICING........................................................554.2TAXINGCARBONANDSUBSIDIZINGALTERNATIVEENERGYSOLUTIONS................564.3ANATOMYOFEMISSIONSTRADINGSYSTEMS........................................594.4PROMOTINGCOOPERATIONANDBREAKINGIMPASSE................................654.5DECARBONIZINGTHEMARINEANDOFFSHOREINDUSTRIESTHROUGHCARBONPRICING................................................................664.6THEROLEOFCARBONOFFSETSINACHIEVINGNET-ZEROEMISSIONS..................71SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUM................765.1ALTERNATIVEENERGIES:SCALINGUPTHEVALUECHAIN.............................765.2NEWBUNKERINGINFRASTRUCTURETOSUPPORTTHEMOMENTUM....................775.3THEROLEOFSUSTAINABLEFINANCEINSTRUMENTS.................................805.4VALUE-CHAINENABLERS.........................................................845.5UPDATEOFFUTUREFUELMIX....................................................1035.6GREENCORRIDORS..............................................................112CONCLUSIONS........................................................115REFERENCES............................................................1171INTRODUCTIONTheurgencyoffindingsolutionstotheclimatechangeproblemisgrowingasatoppriorityforbothdomesticandinternationalpolicymakers.Aroundaquarteroftheworld'sgreenhousegas(GHG)emissionsarelinkedtointernationaltrade,accordingtothemostrecentestimates[1].Asthelifebloodofglobaltrade,theshippingsectorfacessignificantchallengesindecarbonizingduetoitsdiversity,whichrangesfromferriestomassivetankers,aswellasthefactthatcleanfuelssuchasgreenhydrogen,ammoniaandmethanolarenotyetavailableatscale.Policymakersareconsideringwaystoencouragetheshippingindustrytouselow-carbonmodesoftransportation.AspecificreferencetoshippingwasnotincludedintheParisAgreement,andsomeobserversbelievethisomissioncanbeexplainedbythefactthatcountriesarecooperatingwiththeInternationalMaritimeOrganization(IMO),whichisaspecializedagencyoftheUnitedNations(U.N.),toreducetheemissionsassociatedwithinternationalshipping.Individualcountriesmayincludetargetsforshippingintheirnationalmitigationplans,andtheymaybeabletoactmorepromptlythantheIMO.Forexample,inanewclimateplan,theEuropeanUnion(EU)proposesthatthescopeofitsEmissionsTradingSystem(ETS)beexpandedtoincludecarbondioxide(CO2)emissionsfromships,whichwouldbethefirsttimethishasbeendone.Inasimilarvein,JapanhasinformedtheIMOthatitwouldsupportacarbontaxthatwouldraisemorethan$50billion(B)peryear[2],markingasignificantstepforwardbytheworld'ssecond-largestshipownernationinaddressingemissionsfrommaritimetransport.Theinclusionofthisprovisionwouldimposeapriceonemissionsfromshipping.Asweevaluatewhatimpactallthismayhaveonourindustry,itishelpfultoconsiderhowwearrivedatthispoint.Overrecentyears,ABS,beingclosetothedevelopments,hasreportedonthechallengesthatlieahead,asGHGreductiontargetsaresetandpathwaysareconsideredtomeetthesetargets.Inthatcontext,wehaveexploredtheboundariesofexistingtechnologiesanddiscussedemergingfuturesolutionsidentifyingthebarriersorobstaclesthatneedtobeovercomeinorderforthemtopresentasafe,practicalandfeasiblesolution.Asweshiftedfrom2021into2022,weacknowledgethatoverthelastfouryearsourindustryhasachievedahighermaturitylevelwithregardstotheknowledgeandawarenessofthedecarbonizationchallenge.Westartedwithattemptingtodefinetheriddleofdecarbonizationasweunraveledthetechnicalandoperationalchallengesthatwereassumedwiththeintroductionofthe2030and2050carbonintensityreductiontargets.Regulationsthataremeanttodrivethetransitiontowardsthosetargetshavestartedtakingshapeandform.Thatallowedustobenchmarkvesselsandfleetsinamoreprecisemannerandtoexplore,withhigherfidelity,technologicalimprovementoptionsandfuelpathwaysthatcanpotentiallyleadtocarbonneutrality.Thishigherfidelityallowedustoidentifypolicyandregulatorygapsthathavetobeimplementedbeyondthemaritimeindustryinordertosupportshippingonitsjourneytolowercarbonintensity.Wewerethenabletounderstandthattheenergytransitionrequiresarobustvaluechainandwestartedinvestigatinghowenergycarriersorfuelsshouldbeproducedandmoreimportantlywhatmethodsweshouldputinplaceinordertoaddresscarbonneutralitybyimplementingalife-cycleapproach.PAGE1SETTINGTHECOURSETOLOWCARBONSHIPPINGABSAteverystepoftheway,throughcollaborativeresearchandjointeffortsweareexploringtheboundariesofwhatiscurrentlyfeasibleandhighlightingareaswheremoreemphasisshouldbegiveninordertohavesafeandsustainablesolutionsforourdecarbonizationtargets.Weexaminednewenergyefficiencytechnologies(EETs),advancingdigitalizationinordertoincreaseoperationalefficiencyandultimatelytheimplementationofnewfuelsandenergycarriers.Andthroughtheprismoftradechangesduetoclimatechangesandtheeffectonglobalroutesandassociatedemissions,weattemptedtolookaheadintothelong-termandestimatetheenergymixofthefuturebasedoncertainscenarios.Lookingaheadthrough2022andbeyonditisclear,shippingwilllikelyrequirevaluechainadaptationsandpoliciesinsupportofitsdecarbonizationjourney,asweidentifiedinthepreviouseditions.Inordertoachievenet-zeroemissionsacrossthevaluechainby2050,theenergysystemwillneedtobetransformedusingawiderangeoftechnologies.Energyefficiency,behavioralchange,electrification,renewables,hydrogenandhydrogen-basedfuels,andcarboncapture,utilizationandstorage(CCUS)arethekeypillarsofdecarbonizingtheglobalmaritimeenergysystem.Hydrogenisaversatileenergycarrier,thefundamentalbuildingblockthatisusedtoproduceotherenergycarriersandsupportsthetransition.Azero-carbonorcarbon-neutralvaluechainwillrequirehydrogenpositiveenergytokenstobeproducedutilizingrenewableenergysourcesornuclearenergy.Thevaluechainwillalsorequirestorageofthehydrogenenergy,transportationandpossibleconversionintootherformsandfinallydistributionandenergyconversionthroughconsumption.Althoughhydrogencanbeproducedfromalmostanyenergysource,themajorityofhydrogenusedtodayinoilrefiningandchemicalproductioncomesfromfossilfuels,withsignificantCO2emissions.Tohelpaddressthis,anessentialcomponentofglobaleffortstoachievenetzerowillbeCCUS.Sinceawiderangeoftechnologieswilllikelytransformthewayweproduceandconsumeenergy,CCUSwillneedtoplayasignificantrolealongsideelectrification,hydrogenandsustainablebioenergy.Inordertoachievenet-zerogoals,CCUSreducesemissionsinkeysectorsandremovesCO2tobalanceemissionsthatcannotbeavoided.Hydrogenfosterscross-valuechaincollaborationbybringingdifferentstakeholderstogetherwhichwillalsohelpthemaritimesectorachievenet-zerogoals.Theassociatedregulatorypathwayswillevolvealongsideasitinfluencesshipdesign,technologyandoperations.Inrecognitionofthisgoal,ABSisexploringthetwoenergytransitionvaluechainsinthisfourthintheseriesofSettingtheCoursetoLowCarbonShippingpublications.ThispublicationexamineshowthemaritimesectorwillbeimpactedbasedonthelatesttrendsanddevelopmentsoutoftheIMO,technologyreadinessoflowcarbonandalternativefuelsandthehydrogenandcarbonvaluechainaccelerators.Italsoexaminesthepossiblecapacitydemandandrelatedemissionsoutputtrendsonaglobalbasistoenvisiontheenvironmentsinwhichtargetsmaybeachievedthroughtheprismofthosevaluechains.Furthermore,weexaminehowshippingbecomesasignificantvaluechainenablerasitsupportsthetransportationofenergyandexplorestechnologiesthatleveragethesenewenergysources.WeonceagainattempttoexploretheboundariesofapplicabilitybylookingintoconceptualdesignsofliquefiedhydrogenandliquefiedCO2carriesandhowthatcouldsupportthevaluechains.Wealsoevaluatethechallengesandconsiderationsofcapturingcarbononboard.Examiningthetechnicalaspectsthatwerereferencedaboveformsthefoundationsofadecarbonizationstrategy.Inthisdocument,weareoverlayinganextradimensionwhichincludestheviewofthevaluechains.Asweexaminecarboneconomicsandhowthepriceofcarbonpresentsanextravariableinthedecarbonizationnarrative.Thispublicationisofferedsolelytohelpindustrystakeholdersmakeinformeddecisionsandtoassistincomprehendingthecomplexityofthetask-at-handandmovingforwardeffectivelyastheyevaluatetheiroptionsforatransitiontolow-carbonoperationsandsubsequentlyazero-carbonfutureforshipping.ABSZEROCARBONOUTLOOKPAGE2INTRODUCTION2CURRENTMARKETOUTLOOK2.1CURRENTSTATEOFTHEMARKETTheshippingindustryiscurrentlyinanongoingtransitiontowardsdecarbonization.Manymarketactorsareaccentuatingtheirfocusonmodernandgreenershipdesigns,operations,alternativefuels,energyefficiencyandcarboncapturetechnologies.Greenfinancing,environmental,socialandgovernance(ESG)reportingandEuropeanUnion(EU)taxonomyarejustafewexamplesofmechanismsthatwerepreviouslydownplayedbytheindustryandhavenowbecomeincreasinglywidespread.Furthermore,thereisanincreaseddemandforgreenorcarbon-neutralfreight,withmanycompaniescallingforfullneutralityby2040.Asaresult,shipownersareengagingmoreactivelywithpartnersintheircommercialeco-system(shipyards,designers,originalequipmentmanufacturers,etc.)toensurethatvesselsincorporatedesignelementsthatfacilitatetheconversionfromfossil-basedtozero-carbonmarinefuels.Forinstance,thefirstammonia-fuelreadyvesselintheworld,theABS-classedsuezmaxtankerKritiFuture,iscurrentlyconventionallyfueled.ComplyingwiththeABSAmmoniaReadyLevel1requirementsindicatesthatthevesselisdesignedtobeconvertedtoammoniafuelinthefuture[3].Primarilydrivenbyglobaldecarbonizationgoalsandrequirements,acceleratedtechnologicalchangewillbecrucialforenablingthelow-carbonenergytransition,andalternativefuelsarenowviewedasacriticalareaoflong-termtechnologicaldevelopmentinmaritimetransportation.Althoughanumberofdeterminantsinfluencetheintentiontoaccept,diffuseandusealternativefuelsandenergiesformarinepropulsion,anintersectionofenergysecurityandenergytransitionexists,andthiswillworkasacatalysttodrivetherequiredtransition.FEBRUARY14,2022MARCH7,2022$/Ton$/TonHFO380LSMGOVLSFOLNGHFO380LSMGOVLSFOLNGSingapore5648247291,283Singapore6211,0349212,002Rotterdam5168176811,402Rotterdam6411,1268613,235Fujairah5268717351,212Fujairah6341,1319711,919Houston554915716480Houston6711,101858544Table1:Theriseinbunker-fuelcostsatthebeginningoftheUkrainecrisis(Source:AffinityBunkerFuelPrices).Ontheregulatoryfront,theInternationalMaritimeOrganization’s(IMO’s)EnergyEfficiencyExistingShipIndex(EEXI)andCarbonIntensityIndicator(CII)willcomeintoforceinJanuary2023.WithregardstoEEXIthismeansthatshipswillhavetocomplywithrequirementsontheirAnnual,IntermediateorRenewalSurvey(whichevercomesfirst)onthatyear.Attheclosureof2021,theIMObegandiscussionstoreviseits2018initialgreenhousegas(GHG)strategyfor2050asaresponsetothecallsfromsomememberStatesandassociationsforaligningwithnet-zerogoalsandtheParisAgreement.Currently,therearecallsfornet-zeroemissionsfromshippingby2050andincreasedpressureforanaccelerationonthemarket-basedmeasures(MBMs)includingalife-cycleapproachformaritimefuels.With2021UnitedNations(U.N.)ClimateChangeConferenceoftheParties(COP26)puttingemphasisontheGHGemissionsfromshipping,onecouldexpectanIMOdrivetowardsmoreambitiousgoals;otherregionalregulationsareabouttobeginputtingapriceonthecarbonemitted(theEU’sEmissionsTradingSystem[ETS])andtheupstreamemissionsfromthefuelsusedbyshipping(FuelEUMaritime).Intheshortterm,thenextsignificantregulatoryimpactonshippingcanbeexpectedfromIMO’sEEXIrequirements.TheexpectationisthatvirtuallyallshipswillbecomecompliantwithEEXIbyrelyingmostlyonimplementingmeasuressuchaslimitstoengineandshaftpower.However,thepresentexpectationisthatthepowerlimitationsfromEEXIwillnotaffectaveragesailingspeeds,thissuggeststhatEEXIalonewillnotdrivevesselstolowersailingspeeds.Consequently,onecouldexpectthatthecurrentlevelsofcarbondioxide(CO2)emissionsfromshipsshouldnotbediminishedsolelybyEEXI.However,withpowerlimitationsinplace,vesselswillhavelessflexibilitytoreachthedemandofhigherspeedsbeingdrivenbyincreasesinfreightrates,whichhasbeenoneoftheinfluencingfactorsduringtheCOVID-19pandemic.PAGE3SETTINGTHECOURSETOLOWCARBONSHIPPINGABSFrom2023,themarketwillfaceanewdynamicthatcombinesthosepowerlimitationswiththeaddedoperationalimpactoftheCII.WhilethefullextentoftheEEXI’simpactremainstobeseen,itislikelytobeovershadowedbytheentryintoforceoftheCII.Nevertheless,ownershavetheEEXIandtheCIIclearlyintheirsightsandthisisdrivingcurrentdemandforretrofitsthatcanimproveavessel’shydrodynamicefficiency,operatingprofileandoptionsforusingalternativefuels,etc.ThecontinuouspressureforenergyefficiencyandoperationalimprovementtoalignwithCIIandthedecarbonizationtrajectoryofIMO’sGHGstrategywillleadownerstoadoptmoreambitioustechnologiesinthelongterm.Intheshortterm,thefocusremainsontheadoptionofmoreconventionalenergyefficiencytechnologies(EETs)likelowfrictionhullcoatings,preandpostswirldevices,wakeequalizingductsandhigherefficiencypropellers,whicharebeingscheduledduringupcomingdockingopportunities.Thestrictermid-termrequirementsaround2026willeventuallyleadownerstoconsidermoreaggressivetechnologiesthatcoulddeliverhigherpowersavingsinthenextdockingcycles,likeairhulllubrication,wind-assistedpropulsionandwasteheatrecoverysystems.ThebelowgraphsprovideanoverviewofthecurrentlevelofadoptionofEETs.Figure1:Numberofenergy-savingdevicesthatcanfittoaship.StayingonthetopicofEETs,manywindpropulsionprojectsareunderway,andtothisdateatotalof18vesselsareknowntobefittedwithatypeofwindpropulsionsystem.Thevesselsfittedwithwindpropulsioninstallationscanbecategorizedintwoways:•Wind-assistedvessels:Inthesecases,thewindisconsideredasbeinganassistancetothemainpowergeneration.Typically,thepowerdeliveredbythesesystemsvariesfromfivepercentto20percentofthetotalpowerneedsofthevessel.Thesecasesaremostlyretrofitcaseswheresailsarefittedondeckwithoutothermajormodificationstotherestofthehull.•Wind-propelledvessels:Inthesecases,thewinddeliversamoresubstantialportionofthetotalpower,typicallyrangingfrom15percentto40percentandtohighervalues.Inthesecases,thehullandothersystems(rudder,controlsystems,engine,etc.)areeitherretrofittedordesignedtoaccountforthepresenceofthewind.Thelevelofpowercontributiondeliveredbythewinddependsonmanydesignfactors,suchasthetypeoftechnology,sizeandtypeofthevesselandthewindsailssystem,etc.However,onceavesselisfittedwithsuchatechnology,theextentofthefuelsavingsthatonecanexpectwouldbedictatedbythewindconditionsitencountersandbyvesselspeeditself.Therefore,harvestingthewindviaaweather-routingorothertypeoftechnologybecomesanimportantfactortomaximizethesavingsdeliveredbysuchasystem.Windpropulsionmaybeakeyenablerforthequickerdevelopmentofalternativefuelsinshippingaswell.Duringtheuptakeofalternativefuels,thesefuelsareexpectedtohavehigherpricesandloweravailabilitythanthetraditionalandconventionalfuels.Aswindpropulsionwouldallowapowersavingvaryingfromfivepercentto30percentorhigher,awideradoptionofwindpropulsionwouldnotonlyallowforareductionofemissions(asthefuelconsumptionislower)butintrinsicallyallowforpotentiallyalowerdemandforalternativefuels.Therefore,windpropulsioncanbeseenasanenablerofalternativefuelsuptakeinthemaritimeindustry.05101520024681012ExistingFleetOrderbook9%91%18%82%1xESD2xESD3xESD4xESD5xESDNone1xESD2xESD3xESD4xESD5xESDNone7%13%5%2%1%1%•91%oftheexistingﬂeethasnoenergy-savingdevices•18%oftheorderbookiscontractedwithatleastoneenergysavingdevice...from15%inFebruary2022Datasource:ABS,IHSMarkit,ClarksonsApril2022ABSZEROCARBONOUTLOOKPAGE4CURRENTMARKETOUTLOOKIntheMarineEnvironmentalProtectionCommittee(MEPC)77,windpropulsionreceivedaregulatorypushfromtheIMOwheretheMEPC1.Circ.896wasapprovedbytheplenary.Thiswasanupdatedofapreviouscircular(MEPC1.Circ.815),andthemajorchangeswere:•Abetterdefinitiononhowtheforcematrixcanbecalculated:usageofwindtunneltests,computationalfluiddynamics(CFD),andothermeanstoderivetheforcesandmethodologybywhichthewindprofileistakenintoaccount,etc.•Theeffectivepowercalculationhaschangedtoaccountonlyforthe50percenthigherwindforcesdeliveredbythesystem.Insuchaway,thefinaleffectivepowerthatgoesintotheEnergyEfficiencyDesignIndex(EEDI)andEEXIcalculationishigherthaninthepreviousversion.TheIMO’sintentionwithsuchanamendmentistofurtherincentivizetheuptakeofwindpropulsion.InadditiontoEEXI,windpropulsionplaysakeyroleintheCIIcompliance.ThecalculationmethodologyfortheEEXIreliesonawindprobabilitymatrixwhichwasderivedfromfixedworldshippingroutesandisbasedonadesignpoint.ComparedtotheEEXI,thereductionintheCIIratingforvesselsfittedwithwindpropulsioncouldbehigherastheywouldbenefitfromtheactualoperationofvessels.Therefore,wheninvestinginwindpropulsion,itisimportanttoconsiderbothEEXIandCII.InadditiontoIMOregulations,regulationsaretakingshaperegionallysuchastheFitfor55packageofwhichtheFuelEUforMaritimeispart.Forthismechanism,inthecurrentformofthedrafttext,aprogressiverewardfactorisincludedthatwouldallowshipownerstoreducethefinalachievedGHGintensityofthefuelmixusedbythevessel(GHGIntensityIndex)byagivenpercentagedependingonthelevelofpowerdeliveredbythewind.However,thereareproposalsonthetableseekingtoincludetheactualpowerdeliveredbythewindasanadditionalenergysource,similartoenergyconsumptionfromshorepower.Inthisway,suchenergyfromwindwouldbeseenasacarbon-neutralsourceofenergy,hencefurtherloweringtheGHGIntensityIndex.Inconclusion,windpropulsionisatechnologythatisincreasinglyplayingalargerroleinmaritimedecarbonizationandhasthepotentialtosupportthetransitionoftheindustryfromconventionaltocarbon-freefuels.TheIMOhasprovidedtheindustrywithenoughinformationtogaugethepotentialimpactoftheCIIuntil2026.ThislevelofvisibilityallowedarecentABSstudytoestimatethat,iftradingremainedat2019levels,afairlyhighpercentageofthecurrentfleetwouldneedtoundergoeitherdesignand/oroperationalchangestoimprovetheircarbonintensityandreachcompliance.Theselevelsareshowninthefiguretotherightwhereitispossibletoobservethatupfrom43percentto71percent,dependingontheshiptype,wouldfallundercategoriesDorEoftheCIImechanismby2026.Toavoidsuchratings,thesevesselswouldneedtoundergoimprovementstoimprovetheircarbonintensity.Asaconsequence,theCIImechanismisalreadycreatinganincreasedawarenessforbothenergyandoperationalexcellency,whereownersareevaluatingretrofits,improvedmaintenance,operationalchanges,etc.Theratesofcarbonreductionrequiredbeyond2026havenotbeenset;theywilldependonfinalizationoftheIMO’sambitionlevelsandtheeffectivenessoftheEEXIandCIIregulationsintheinterim.However,itcanbeexpectedthattherewillbeincreasedpressurefrommemberStatesandtheindustryforhigherreductionrates.Figure2:EstimatedpercentageofvesselsthatwillfallincategoriesDandEby2026basedonEUMRVdatafor2019fromABS,IHSMarkitandClarkson.Ro/rocargoships,ro/rovehiclecarriersandro/paxaregroupedtogether.59%Sample3,347VesselsBulkCarriersContainershipsTankersGasCarriersLNGCarriersPassengerCruiseShipsRo/roVessels76%Sample1,804Vessels53%Sample1,526Vessels56%Sample328Vessels43%Sample343Vessels61%Sample179Vessels56%Sample964VesselsPAGE5SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKOntheonehand,pressureformorecarbon-reducingambitioniscomingfrominternationalbodies(suchasthoseinvolvedinCOP26discussions);ontheotherhand,itiscomingfromtheprospectofstricterregionalregulation,forexample,attheEUlevel.TheEUmemberStatesareimplementingtheFitFor55package,theumbrellaregulationthatincludestheFuelEU,theEU’sETSextensiontothemaritimetransportsector,anupdateEnergyTaxationDirectiveandinitiativesonthedeploymentofAlternativeFuelsInfrastructure.TheexpansionoftheEUETStothemaritimetransportsectorwillbringthecap-and-tradeapproachtoanindustrylevel.Foreachindividualvessel,theimplementationwillbemorelikecarbontaxationwithapaymentobligationforeachtonofcarbonemissionsfromthevessel.Inthisinstance,thetank-to-wakeemissionsandthefuelconsumptionasreportedwithintheEUmonitoring,reportingandverification(MRV)frameworkareonlyconsidered.TheFuelEUMaritimemechanismexpandscarbon-outputcalculationsbeyondpresenttank-to-wakeestimatestoincludewell-to-tankemissionswhichbetterreflectenergylifecycles.Theinitiativeaimstoincentivizetheuseoflow-carbonfuels,aswellastheshorepowerconnectionofspecificvesseltypes(containershipsandpassengervessels)andtherebyescalatethetransitiontocarbon-neutralshipping.TheFuelEUMaritimeinitiativemakesuseofthelife-cycleapproachonawell-to-wakebasistoderivethecarbonfootprintoffuelsincludingCO2,nitrousoxide(N2O),methaneslipandthecarbondioxideequivalent(CO2eq)emissionsfromelectricityusedduringportstays.OtherEuropeaninitiativestargetthefacilitationofthisstrategyformaritimetransportationthroughshoreinfrastructureandtheinternalmarketintheglobalecosystem.TheamendmentstotheEnergyTaxationDirectivewillintroduceabunkerlevyonheavypollutantfuelstohelpincentivizethedevelopmentoflow-carbonfuels.DevelopmentofproductionanddistributioncapacityforthesefuelsisthefocusoftheframeworkofcommonmeasuresforEUports,wherebythecommissionwillfundandfacilitatethedevelopmentoftherenewableandlow-carbonfuelandenergysourcesvaluechainfromproductionandstoragetodistributionandbunkering.TheIMOhasstarted(theMEPC77andtheIntersessionalWorkingGrouponReductionofGHGEmissionsfromShips[ISWG-GHG]9)workingtowardsdevelopingalife-cyclestandardforshipping.ISWG-GHG11sawmemberStatessubmittheirviewsontheelementsthatwouldneedtobeincluded.AwideracceptancebetweenmembersStatesontheneedofsuchguidelineswasobservedandacorrespondencegrouptodeveloptheseguidelineswilllikelybeinitiatedbyMEPC78andexpectedtobereportingbackduringMEPC79.Broadly,industryfeedbackappearstosupportanewregulationtosupportcountingshipping’semissionsonawell-to-wakebasiswith,forthesakeofhomogeneousenforcementandfairness,anyregulationonthatlevelapplicabletoallinternationalshipping.Astheregulatorsrampupdiscussionstoincreasethescopeofregulations,theindustryisshowingstrongsignsofitscommitmenttoagreenerfutureforshipping.Therehasbeenanincreasednumberofordersforliquefiednaturalgas(LNG)fueledvessels,acontractfortheworld’sfirstmethanol-poweredcontainerships,newpartnershipstoacceleratetechnologydevelopment,ashiftinbusinessmodelsandnewregulationstoacceleratetheenergytransition.OneexampleofnewpartnershipsistheMærskMc-KinneyMøllerCenterforZeroCarbonShippingbasedinCopenhagen,whereacross-disciplinaryteamiscollaboratingtohighlightdecarbonizationpathways,acceleratethedevelopmentoflowercarbonfuelsandpowertechnologiesandsupporttheestablishmentoftheregulatory,financial,andcommercialsupportthatwillenablethetransitiontowardsgreenshipping.Theinitiative’sfoundingpartnersareABS,A.P.Møller-Mærsk,Cargill,MANEnergySolutions,MitsubishiHeavyIndustries,NYKLineandSiemensEnergy,acoalitionthatiseffectivelyshowinghowcooperationisthekeytoazero-carbonfuture.Whilesomeoftheindustry’sleadinglightsareannouncingambitiousdecarbonizationtargetsandstrategies,globaleffortstocleanupshipping’scommercialecosystemcouldbenefitfromtheincreasedcoordinationamongthevariouspartiesinvolved:shipowners,technologyproviders,charterers,fuelproducers,regulatorsandsoon.ABSZEROCARBONOUTLOOKPAGE6CURRENTMARKETOUTLOOKTHEGLOBALORDERBOOKThe2021orderbookillustratesthestrongpresenceofthedominantsectorsoftheshippingindustry:containerships,tankersandbulkcarriers.Inthecontainershipmarket,thereissustaineddemandacrossthespectrumofcontainercapacity:feedervessels,intermediate,neo-panamaxandultra-largecontainerships(offeringcapacitiesabove10,000twenty-footequivalentunit[TEU]).Inthebulksector,thereisnotabledemandforthehandymaxsector,whilechemicaltankershavethehighestpercentageofdemandinthetankersector.Demandremainedsteadyforliquefiedpetroleumgas(LPG)andLNGcarriers(105and77orders,respectively)in2022.Inadevelopmentillustrativeofshipping’sgreenimpetus,therewasincreaseddemandforlow-orzero-carbontechnology,with19vesselseitherfittedorwithplanstofitwind-assistedpropulsiontechnology.Figure3:2021Orderbookdistributionbyshiptypeandcategory.LNG-FUELEDFLEETGROWTHGenerallyregardedasthecleanestofthefossilfuels,LNGgeneratesapproximately20percentlessCO2thanfueloilandabout45percentlessthancoal.Itisconsideredbymanyatransitionfuel,formingabridgebetweenfossilfuelsandgreenenergyasindicatedbyasurveyperformedwithshipownerswhichisreflectedinthefigureabove.Intoday’sincreasinglyESG-influencedmaritimeindustry,thefocusisgrowingonfindingwaysthatthetank-to-wakeportionofusingLNGasfuelcanbeoffset.GeneralCargo137Tankers296Handymax33%Containerships502Feeder39%ULCS24%3-5KIntermediate15%6-8KIntermediate10%Neo-Panamax12%LPGCarriers105LNGCarriers77LNG-Large87%LPG-Large50%BulkCarriers358Aframax15%PostPanamax14%VLBC/VLOC14%Kamsarmax14%Handysize9%Capesize8%Panamax5%SR14%VLCC10%Suezmax5%LPG-Small30%LPG-Mid18%Passenger35Ro/pax34HandyChemical32%SmallChemical22%©IHSMarkitPAGE7SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKHencetheemergenceandpromotionofagreenLNGproduct.AnenvironmentallyfriendlierversionofLNG(fromawell-to-tankperspective)isgeneratedusingbiogasasthefeedstockandrenewableenergytopowerliquefactionfacilitiesorbyusingcarbon-capturetechnologies.Figure4:Surveyresultsforalternativefuelsourcesconsiderationsforthefuture[5].©TheSustainabilityImperative,WatsonFarley&Williams2021ChangeinrankLNG/LPG/CNGWithinthenexttenyearsWithinthenextﬁveyearsLNG/LPG/CNGBiofuelsBiofuelsHydrogen–asafuelElectricity–batterypacks&storageCleanammoniaElectricity–shoresidepowerElectricity–batterypacks&storageHydrogen–asafuelElectricity–shoresidepowerSolarandwindSolarandwindCleanammoniaHydrogen–fuelcellsNoalternativefuelsourcesAlcohols(e.g.methanol)Hydrogen–fuelcellsNoalternativefuelsourcesAlcohols(e.g.methanol)60%59%31%47%27%35%24%31%21%30%21%28%23%20%12%18%17%10%6%8%1122334455667788991010ABSZEROCARBONOUTLOOKPAGE8CURRENTMARKETOUTLOOKLastyear(2021),theglobalLNG-fueledshipfleetexpandedrapidly,with240ordersrecorded.TheriseofLNG-fueledcontainer,tankerandcruiseshipstranslatesintoariseintheLNGbunkershipfleet.Therearenowabout694LNG-poweredshipsinoperationandunderconstruction,andthereareabout213morethatareconsideredLNG-ready.InJanuary2021,thefirstship-to-shiprefuelingwascarriedout;abunkervesselloadedapproximately6,000cubicmeters(m3)ofgasintoanewlybuiltLNG-poweredcontainership.Figure5:ABSinterpretationoftheLNGorderbooktrendbasedonvariousreports(includingShellLNGOutlook2022andInternationalGasUnionWorldLNGReport2021).Anothergas-relateddevelopmenttookplaceinNovemberatCOP26,whentheUnitedStates(U.S.),theEUand100signatorycountriesintotal,announcedtheirGlobalMethanePledgetocuttheemissionsfrommethaneby30percentby2030,comparedwith2020levels[6].Thejointinitiativeaimstoreducemethanefugitiveemissions(eitherleakagesorslip)thatcontributetothegreenhouseeffectacrossallsectorsthatproduce,transportorconsumemethane,suchupstreamproduction,farming,powergenerationandinefficientenergytransport.AreportreleasedlastyearbytheIntergovernmentalPanelonClimateChange(IPCC)highlightedtheneedtoregulatemethaneslip;since2011,therelatedatmosphericconcentrationsofmethaneemissionshavebeengraduallyincreasing,reachinganannualvalueofabout1,866partsperbillion.Thereportalsoidentifiedthattheglobalwarmingpotential(GWP)ofunburnedmethaneover100yearsisabout30timeshigherthanCO2;over20years,thisratiocanexpandto85times.Duringthepastcoupleofyears,theindustryhasseenanincreaseintheadoptionoflow-pressure,LNG-burning,Otto-cycleengines,whichduetotheiroperatingprinciplehaveahigherrateofmethaneslipthanhigh-pressureDiesel-cycleenginesthatarelesspronetomethaneslip.Withmoreregulationsexpectedtomeasureandreducemethaneslip,thispurchasingtrendisexpectedtoreverse.Methaneslipissignificantlyincreasedwhenusinglow-pressuretwo-strokeandfour-strokeenginescomparedtohigh-pressuretwo-strokemodels.201020112013201520172019202120232025201220142016201820202022202416543927382398401420454482511541593635669727727754793847NumberinOperationNumberonOrderbookPAGE9SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKAfter-treatmentsolutionssuchascatalysts,exhaustgasrecirculation(EGR)andplasma-reductionunitsareexpectedtoplayasignificantroleinanenvironmentwheremethaneslipismoreregulatedandlow-pressuretwo-andfour-strokeenginesaretargeted.Butmostofthesetechnologiesarestillbeingdeveloped,sothereislimiteddataontheirabilitytoreduceemissions,additionalpowerrequirementsandthecostsassociatedwithpurchasingandoperatingthem.TheeffectivenessofcatalystsissubjecttospecificexhaustgastemperaturesandthesulfurcontentintheLNG,pilotfuelandlubricationoil.Thelocationofthecatalyst(upstreamordownstreamoftheturbocharger)significantlyaffectsthecapitalexpenditures(capex)andoperationalexpense(opex)oftheinstallation.Currently,catalystsandplasma-reductionunitsarethetechnologiesbeingexaminedfortheirabilitytoreducemethaneslipfromthefour-strokeengines.Fortwo-strokes,combustion-relatedadjustments(tohigh-pressureinjection)andplasma-reductiontechnologiesareseenasthemainsolutionsformethaneslip.METHANOL-FUELEDSHIPSTheapplicationofmethanolasamarinefuelisonlybeginning;itwasapprovedforinclusionintheIMO’sInterimGuidelinesforLowFlash-PointFuelsinNovember2020.Itsonboardusesareversatile;itcanbeusedasfuelforinternal-combustionenginesorasafuelsourceforfuelcells.Thekeybenefitsofmethanolarethatitdoesnotcontainsulfur(soitsuseinenginescancomplywithIMOrequirementsforemission-controlareas[ECA])andbecauseitcanbestoredasaliquidinambientairconditionsthecostsfortanksandfuel-gassupplysystemsaregreatlyreduced.Italsodoesnotproduceparticulatematteruponcombustion.Dual-fuelenginesthatusemethanolandincludeawater-injectionunit,whichmixeswaterwithmethanolattherequiredlevels,canreducenitrogenoxides(NOx)emissionsandassurecompliancewithTierIIIlevels.Asamarinefuel,methanolhasthepotentialtohaveaverypositiveimpactontheIMO’sstrategicshort-termregulations,EEXIandCII,becauseitproduceslessCO2thanotherfossilfuelspertonoffuelalthoughthisisinmostcasescompensatedduetoahigherconsumptionasmethanolhasamuchlowercalorificvalue.Forexample,methanol’sCarbonFactor(Cf)(1.375)isthelowestamongmarinegasoil(MGO):3.206,heavyfueloil(HFO):3.114,andLNG:2.750.Itisawidelyshippedcommodityandhasbeenusedinthechemicalindustryformanydecades.Thesupplychainsforitsdistributionalreadyexistandarewell-positionedtooffermethanolasamarinefuelatmanyports.Therearecurrentlyaboutadozenvesselsengagedindeep-seatradingusingmethanol-fueledengines.Inearly2021,theDanishshipownerMærskmatchedthatwithanorderof12methanol-poweredcontainershipstorunongreenmethanol.Methanolasamarinefuelcanbeconsideredrenewableornon-renewable,dependingonthefeedstockusedtoproduceit.Brownorgraymethanolhasrelativelyhighcarbonintensity,asitismainlyproducedfromcoalornaturalgaswithouttheuseofcarboncapturetechnology.Bluemethanolisproducedfromnaturalgasusingcarboncapturetechnology,orwastestreamsandby-productsfrommanufacturingprocesses.Greenmethanolisproducedfromrenewableenergysourcessuchaswindandsolarpower,orfrombiomassandbiodegradablepartsofwasteproduction.ABSZEROCARBONOUTLOOKPAGE10CURRENTMARKETOUTLOOKFigure6:Methanolasafueldemandandproductioncapacity.Figure7:Methanoldemandbyfinaluseandtype.Forshipping,themaingreencandidatestodayarebiomethanolderivedfrombiomassfeedstocksande-methanolderivedfromrenewableelectricityandcapturedCO2;thesebothhavestrongpotentialtoproduceneutralwell-to-wakeemissions.Anoverviewofbiomethanolande-methanolprojectsasof2021isshowninthefollowingfigure.200,000180,000160,000140,000120,000100,00080,00060,00040,00020,0000-000-MetricTonsTotalProductionCapacityTotalDemand201620172018201920202021MethanolMarketServicesAsiaMethanolMarketServicesAsia202120202019201820172016120,000-000-Metrictons100,00080,00060,00040,00020,0000MethylaminesMethanethiol(MethylMercaptan)DimethylTerephthalate(DMT)MethylMethacrylateMethyltert-ButylEther(MTBE)AceticAcidFormaldehydeMethylChloride(Chloromethane)GasolineBlendingandCombustionBiodieselDMEFuelcellsMethanol-to-OleﬁnsOthersPAGE11SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKFigure8:Overviewofbiomethanolande-methanolprojectsworldwidein2021[10].Fromapricepointofview,e-methanolandbiomethanolarenotexpectedtobeasattractiveasotheralternativefuelsforyearstocome.Thisismainlyduetothelackoflarge-scaleproductioncapacityfortherenewableversionsofmethanol.However,oncedemandincreasesanditssupplychainsmature,thepriceisexpectedtodrop,perhapsasearlyas2030.Figure9:Projectedfuelprices,includingthepotentialeffectofcarbonpricing[11].Bio-oilsGlobalizedest.FuelProductionCostsGlobalizedest.FuelPrices~22~5Biomethanol~22030$/GJEectofCarbonPricingat$230/tCO2eq2050~24Biomethane~3~1~1~1~22~23LSFO~11~20~11~20LNG~8~16~9~16~22~16e-Ammonia~32~17e-Methanol~44~23e-Methane~45~26BlueAmmonia~4~3~24~21MærskMc-KinneyMøllerCenterforZeroCarbonShippingBiomethanolE-methanolMethanolInstituteABSZEROCARBONOUTLOOKPAGE12CURRENTMARKETOUTLOOKDEMANDFORBIOFUELSThemaritimeindustryisincreasinglyconsideringbiofuelsasoneofthemainoptionsathandtoreducetheshipping’scarbonfootprint.Thereisgrowingshipowneractivityinallsectorswithregardtothetestingofbiofuelsinconventionalengines,blendscontainingbiofuelswithsharesofsevenpercentto100percentorotherwisecalledB7toB100.Operatorshavebecomemorefocusedonthesustainabilityofbiofuelsandaskquestionsaboutthelife-cycleconsequencesoftheirproduction.Currently,thereisalimitationtothequantityofbiofuelsthatcanbeusedwithouthavingadirectimpactonfeedstocksustainability,foodcropsandthenaturalecosystem.Themainlong-termanswerisexpectedtobebiomethanolduetoitscompatibilitywithcurrenthandling,storageandbunkeringpractices.However,biomethanealsoisexpectedtoplayakeyroleinthefutureduetotheever-increasingsizeofLNG-poweredvessels.2.2ZERO-CARBONFUTUREOFTHEGLOBALSHIPPINGINDUSTRYCARBONEMISSIONSFROMINTERNATIONALSHIPPINGShippingiswidelyknownasoneofthemostefficienttransportationoptionsintermsofemissionspertontransportedperkilometer.However,demandformaritimetransportationhasrapidlyincreasedoverthedecades,resultinginaproportionateriseincarbondioxideCO2emissionsfromtheshippingsector.Internationalshippingaccountedforapproximatelytwopercentofglobalenergy-relatedCO2emissionsin2020[1],orabout765millionmetrictonsofcarbondioxide(MtCO2)intotheatmosphere.Thiswasroughly1.2percentlessthanthepreviousyearwhenemissionsreachedarecordhighof774MtCO2.Annualinternationalshippingemissionshavemorethandoubledsince1990[2].ThehistoricalCO2emissionsfrominternationalshippingworldwidefrom1990to2018areshowninthefigurebelow.Figure10:Internationalshippingemissionsandtrademetrics,indexedin2008,fortheperiod1990-2018,accordingtothevoyage-basedallocationofinternationalemissions.19902005COeemissions(t)199520152010200014012010080602020UNCTADSeabornetrade(tnm)UNCTADSeabornetrade(t)EEOI(gCO/tnm)AER(gCO/dwtnm)2008EEOIIMO2IMO3IMO4©IMOPAGE13SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKDespitetheglobalchallengesfacedbytheshippingsectorduetotheCOVIDpandemic,theCO2emissionsfrominternationalshippingremainedfairlyhigh.Shipping-relatedGHGemissionsroseby4.9percentin2021,reachingatotalthatwashigherthan2020or2019.AccordingtoSimpsonSpenceYoung’sannualindustryreport,thekeydriverforthe2021increasewastherecoveringworldeconomy,duringwhichdemandfordurablegoodsremainedfirm,whiledemandforservicesincreased[79].However,forecastsmadeatthebeginningofthepandemic—thatprojectedemissionstofallin2020and2021—provedwishfulthinking.Anyprojectionsofemissionsfromshippingarehighlydependentonmultipleparameters,includingfleetgrowthanddemand,improvementofvesselefficienciesanddeploymentofnewtechnologies.TheIMOexpectsemissionsfromshippingin2050torangefrom1,200MtCO2/yearinitslow-emissionscenarioto1,700MtCO2/yearinitshigh-emissionscenario[3].NETZEROFORSHIPPINGShippingisbeingchallengedalongwithalltheotherindustriestoreduceemissionstomeetdecarbonizationtargetsinthedecadestocome.TheIMO’sinitialGHGstrategywasadoptedinApril2018.Itincludedalistofshort-,mid-andlong-termmeasurestomeettheIMO’sambitiontoreduceCO2emissionspertransport(asanaverageacrossinternationalshipping)byatleast40percentby2030,andtopursuea70percentreductionincarbonintensitywhilepursuing50percentreductionsinabsoluteglobalGHGemissionsby2050,comparedto2008.SomecountriesandseveralshippingcompaniesbelievethenewtechnicalandoperationalmeasuresestablishedbytheIMOarenotambitiousenoughtocurbGHGemissionsfrominternationalshippinginthelongterm.Figure11:Revisionof2050Targets.REVISIONOF2050TARGETSMEPC77/7/3(Kiribati,MarshallIslandsandSolomanIslands)•TargetZeroGHGemissionsin2050•DraftResolutiononZeroEmissionShippingby2050•Noconsensusforzeroemissionsin2050-Identiﬁedneedtodeﬁneintermediatetargets:2030and2040•Noconsensusforthedraftresolution•CommitteeagreedwithneedtoreviewandupdateinitialIMOGHGstrategy•Targets,impactassessment,fuelavailability,etc.•InvitedsubmissionofpaperstoMEPC78,ﬁnalization/adoptionoftherevisedstrategyatMEPC80(Spring2023)ABSZEROCARBONOUTLOOKPAGE14CURRENTMARKETOUTLOOKTheshort-termmeasuresseektoimprovetheaverageannualefficiencyoftheglobalfleet(throughapplicationoftheCII)byalmosttwopercentbetween2020and2026.Thiswasonlyslightlybetterthanthe1.6percentimprovementachievedbetween2000and2017.AsweestablishedafterthepublicationofoursecondSettingtheCoursetoLowCarbonShippingpublicationin2020,inorderforshippingtoachieveits2050goals,governmentpoliciesandincentiveswillbeacriticalelementtohelpmeetdecarbonizationobjectives.Shipping’sroleinglobalemissionsoutput,anditspotentialtocontributetomitigationefforts,gainedgreaterattentionatCOP26inScotlandlastyearwhentheconferencerefocusedonthewidermaritimesupplychain’simportantroleinmeetingthegoalsoftheParisAgreement.LedbyDenmark,14nationsissuedthe“DeclarationonZeroEmissionShippingby2050.”WiththesignaturesofmajorshippingnationsincludingtheU.S.,UnitedKingdom(U.K.),Germany,FranceandNorway,aswellaskeyplayersintheindustrysuchasPanama,thedeclarationcalledforimmediatereductionstoallowshippingtoreachzeroemissionsby2050[4].However,zeroemissionsdoesnotequatetonocarbonemissionsintheliteralsense;ifittakesprecedentindeclarationsfromothertransportsectors,thegoalismorelikelytobenet-zeroemissions,agoalthatisoftensupportedbycreatingoffsetssuchascarbonsinks(e.g.,trees),orthroughcarboncapture.AlternativefuelswillplayadominantroleinthedecarbonizationofthemarineandoffshoresectorsandareexpectedtoyieldthemostbenefitsforreducingGHGemissions.However,withthecurrentregulatoryframeworkfocusedontank-to-wakeemissionsratherthanthosegeneratedduringthefulllifecycleofthefuel(well-to-wake),shiftingmeasurementcriteriatothelatterisseenasessentialforachievingnet-zeroemissionsforshipping.Figure12:COP26developments.2.3ADDRESSINGFUTURECLIMATERISKSTHECONSEQUENCESOFCLIMATEINACTIONClimatechangeisbecomingmorerapidandwidespread,withirreversibleconsequences.Environmentalchangesandcataclysmicfeedbackloopsarepredictedtopushecosystemsbeyondtippingpoints,accordingtotheoverwhelmingweightofscientificevidence.Atthatpoint,alleffortstowarddecarbonizationwouldberenderedineffective[14].Themostrecentnationallydeterminedcontributions(NDCs)todecarbonizationpresentedatCOP26stillfallshortoftheParisClimateAgreement’s1.5°Ctarget[14].Oncurrentcourse,theworldisexpectedtowarmby2.4°C,withonlythemostoptimisticscenarioslimitingitto1.8°C(asshowninthefollowingfigure).FirstMoversCoalition•PrecededbyCargoOwnersforZeroEmissionVessels(coZEV)priortoCOP26•25foundingcompaniesthathavemadecommitmentstospurcommercialadoptionofemergingtechnologies•Memberscommittedtousingzero-emissionfuelsinnewandretroﬁttedvesselsby2030•Targetof>5%deep-seashippingusingzero-emissionfuelsby2030•10%ofcargovolumetransportedonzero-emissionfuelsby2030,100%by2040ClydebankDeclaration•22signatoriestothedeclarationatCOP26•Facilitatestheestablishmentofpartnershipsalongthevaluechain(ports,vesseloperators,etc.)toacceleratedecarbonizationthrough“GreenShippingCorridors”•Lookstoestablishsixgreencorridorsby2025,withmoreaddedby2030•Shipsusingthesecorridorswoulduselow-to-zeroemissionfuelsMethanePledge•Morethan100signatoriestothepledge•30%reductionofmethaneemissionsby2030from2020level•Callsformethaneemissionreduction,notmethane(LNG)reduction•U.S.andEUfocusingonmitigationtechnologiesandcarbonaccountingmethodologiesPAGE15SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOKFigure13:Globaltemperaturescenariosby2100[14].Withoutstrongeraction,theglobalcapacityformitigationandadaptationwillworsen.Theworldwillbearsignificantcostsifwecollectivelyfailtoreachnet-zeroemissionsby2050.Lossesofbetweenfourpercentand18percentofglobalgrossdomesticproduct(GDP)[15]areexpectedwithdifferentimpactsindifferentregionsifnoactionistakentoaddressclimatechange[16].Thetransitiontonet-zeroemissions,inwhichGHGreleasedintotheatmospherearebalancedbytheirremoval,couldbeastransformativeforeconomiesandsocietiesaspastindustrialrevolutions.AsclimatechangeworsensandsomeeconomiesrecoverfasterthanothersfromCOVID-19,disconnectsbetweengovernments,businessesandhouseholdsintermsofpolicycommitments,financialincentives,regulationsandimmediateneedsmayamplifythetransition'sdisruptivepotentialwithincountries.Asustainedlackofcoordinationamongcountrieswouldalmostcertainlyhaveprofoundgeopoliticalimplications,withrisingtensionsbetweenstrongdecarbonizationadvocatesandthosewhoopposequickstrongactionbyemployingtacticssuchasstallingclimateactionorgreenwashing—thepracticeofconvincingpeoplethatacompanyorauthorityismoreenvironmentallyfriendlythanitactuallyis.+4°C+3.6°C+2.7°C+2.0°C+3°C+2°C+1.5°C+0°CWearehere1.2°Cwarmingin20211.5°CParisAgreementGoalPre-industrialAverageCurrentPolicesActionbasedoncurrentpolicies+3.0°C+2.4°C+1.9°C2030TargetsOnlyFullimplementationof2030NDCtargets+2.6°C+2.1°C+1.7°CLong-termPledgesand2030TargetsFullimplementationofsubmittedandbindinglong-termtargetsand2030NDCtargets+2.4°C+1.8°C+1.5°COptimisticScenarioBest-casescenario;assumesfullimplementationofallannouncedtargetsincludingnet-zerotargetsLTSsandNDCs©IPCCABSZEROCARBONOUTLOOKPAGE16CURRENTMARKETOUTLOOKRecentresearch[17]showsthattheglobalshippingandtheportindustryisatriskofbillionsininfrastructuredamageandtradeinterruptionasaresultofclimatechangeimpacts.Globaltemperatureincreasesareexpectedtocauseorexacerbateanumberofclimate-relatedhazards,someofwhichcanposesignificantphysicalriskstotheshippingandportindustries.Notably,thesehazardsinclude:sealevelrise,severetropicalstorms,inlandflooding,droughtandextremeheatevents.By2100,theshippingindustrycouldbeforcedtopayanadditional$25billion(B)inadditionalannualcostsduetotheeffectsofclimatechangeifemissionsaren'treduced.Climatechangeislikelytocauseglobalsealevelstoriseandincreasetheintensityoftropicalcyclonesthroughincreasedwindspeeds,waveheights,andrainfallintensity.TheEnvironmentalDefenseFund(EDF)report[17]includesestimatedcostsfortwoselectedyears—2050and2100—byassumingaworst-caseclimatechangescenarioRepresentativeConcentrationPathway(RCP8.5).Atthecurrentrateofstormdamagetoportsaroundtheworld,theannualglobalaverageisestimatedatabout$3B.Additionalannualdamagesandportdisruptioncostsareexpectedtoreachupto$25.3Bby2100,accordingtoprojectionsintheEDFreport(seeTable2).Additionally,thereportestimatesthecostsofadaptingportstoavoidthedamagesanddisruptionsdescribedpreviously,focusingonportelevationasanadaptationstrategy.TheanalysisestimatesthecostofelevatingallcurrentportareasgloballybythesametotalamountusingthesamecombinationofsealevelriseandstormsurgeheightassumptionsastheRCP8.5scenarios.Anestimated$205Binglobalinvestmentisneededtosafeguardallportsfromtheexpectedriseinsealevelandstormsurgein2100(seeTable3).Onanannualizedbasisthesecostsrangefrom$4Bto$6.8Bperyear.Thesamestudy[17]alsoinformsthatundertheRCP8.5scenario,annualeconomiclossestoports,shippersandcarriersduetostorm-relateddisruptionsmaybe$0.8Bto$1.6Bhigherby2050thantheywouldbewithoutclimatechange.By2100,theseadditionallossesareprojectedtobe$1.9Bto$3.7Bperyear.A$0.3Bto$1.1BannualincreaseintheeconomiccostsofshippingdelaysispredictedunderRCP8.5by2050.Theseaddedannualcostsmayreach$1.1Bto$3.9Bby2100.Thus,by2100,climatechangeattheRCP8.5levelisprojectedtoincreasetotalannualcostsassociatedwithstorm-relatedportdisruptionsby$3.1Bto$7.6B(seeTable4).20502100IncreasedAnnualStormDamagetoPorts1.8–7.14.5–17.7IncreasedAnnualPortDisruptionCosts1.1–2.73.1–7.6TOTAL2.9–9.87.6–25.3Table2:Projectedcostsofsealevelriseandstrongerstormsforportsandshippinginfutureyears(billion$/year).20502100InvestmentCost(billion$in2021)121–176151–205AnnualizedCost(billion$/year2021-2100)4.0–5.85.0–6.8Table3:Portadaptationcostsagainstprojectedsealevelriseandlargerstormsurgeforselectedfutureyears[17].20502100Sealevelrise(m)0.270.84Increasedstormsurgeheight(m)0.380.76Increasedpeakwindspeed(m/s)3.06.0Ports,shippersandcarriers(billion$)0.8–1.61.9–3.7Consumersofshippingservices(billion$)0.3–1.11.1–3.9TOTAL(BILLION$)1.1–2.73.1–7.6Table4:Estimatedincreaseintheannualcostsofportdisruptionsduetosealevelriseandstrongerstorms(billion$/year).PAGE17SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCURRENTMARKETOUTLOOK3OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONLimitinggreenhousegas(GHG)emissionsisconsiderablychallengingforoursociety.Thetask,aswearegoingtoseeinthelatterpartsofthispublication,includesscalingupofrenewables,electrifyingthetransportationsystemsanddealingwiththeeconomicfalloutthatthefossilhydrocarbonindustrymayface,accountingforapproximatelysevenpercentoftheworldeconomy[76].Theenergytransitionthatneedstooccuraswestrivetoreachthedecarbonizationtargetswillbebasedontwovaluechains,thehydrogenandthecarbonvaluechains.Thehydrogenvaluechainincludesalltheenergyconversionelements.Hydrogenshouldnotbeseenjustasamoleculeoftheperiodictableoronlyasasinglemarinefuel.Itisamediumwhichcouldbeconvertedintodifferentformsasanenergycarrier.Renewableenergyviaelectrolysiscanbeconvertedintohydrogen,anenergycarrierwhichcouldbestoredandtransportedbysea.Itcanalsoserveasamediumwhichcanbethebuildingblockforgreenande-fuels,minimizingtheuseoffossilfuels.Figure14:Thehydrogenvaluechain.Shiftingandabsorbingcapturedcarbonthroughcarbonsinksorsequestrationinsoilandoceanwillbeinstrumentalinachievingthenet-zerogoal.Incontrastwiththehydrogenvaluechain,whichisanenergyconversionsystem,thecarbonvaluechain(alternatively,thesystemofcarboncaptureusageandsequestration)isanabatementmechanism.Thissystemcreatesaseparatevaluechainthatintersectswiththehydrogenvaluechaintoproducebluecodedfuelsasrenewableenergyscalesuptomeetthefuturedemand.Currently,thecarbonchainisanichesector.However,theneedforscalingupmaytransformcarbonintoapreciouscommodity.Inbothvaluechains,themaritimeandoffshoresectorsaretheconnectinglinksviathetransportationofthevaluechain’stokens.Inessence,themarineandoffshoresectorsarebecomingfundamentalenablersoftheenergytransitionandactingasindispensablelinksforthetwovaluechains.Toachievethenet-zerotarget,moreinnovationwillberequired.Amongothers,hydrogenisaidinginclosingthegapinindustriessuchasheavy-dutytransportation,steelmanufacturing,fertilizerandmethanolproductionthatwouldbedifficulttoeliminateotherwise.Itwillrequiremanyplayers’involvementintheformofconsortiaandorganizationsteaminguptomeettheneedsalongthevaluechain;developmentofnewfacilitiesorupgradingandretrofittingtheexistinginfrastructurewillbecrucialtoaddresstheemergingtransitionandphysicalrisksalongtheway.FeedstocksFuelProductionFuelsTransportationGreenElectricityNaturalGasSteamMethaneReformingCarbonStorageHCarbonCaptureSynthesisHaber-BoschProcessLiquefactione-HydrogenBlueHydrogene-AmmoniaBlueAmmoniae-MethanolBlueMethanole-MethaneSynthesisandLiquefactionElectrolysisofWaterABSZEROCARBONOUTLOOKPAGE18EnergyproducersEnergyandfeedstockdemand(end-consumers)FossilcarbonEnergyﬂowsFlowofcarbonGeothermalSolar&windHydroNuclearTidalAtmosphericCOSigniﬁcantabatementopportunitiesprimarilyviasolarandwindpowerPowersuppliesDirectelectriﬁcationordirectuseofelectricityIndirectelectriﬁcationordirectuseofelectricityTransmission/distributiongridenhancementEnd-usetransformationse.g.electrictugboats,fuelcells,vehicles,etc.HydrogenstorageandtransportinfrastructureBuildings,transport,industry,manufacturing,chemicals,etc.Utilizationoffossilinfrastructure(e.g.naturalgasgrid)andcombustiontechnologiesCanbeutilizedviabiomassordirectaircapture(DAC)FossilCCUDoubleutilizationoffossilCOcanhalveemissions(incompatiblewithclimateneutrality)FossilCOCarbonCaptureandUsage(CCU)AtmosphericCOCombustiontechnologiesLong-termenergystorageCarbonCaptureandCycling(CCC)CanbeclimateneutralDirectuseHydrogene-methanee-liquidsHGreenviaelectrolysise-FuelsSynthesizedfromelectricity-basedH(orHOviaco-electrolysisFigure15:Hydrogenandcarbonvaluechain(adaptedfrom[18],ABSWhitepaperHydrogenasMarineFuelandABSWhitepaperCarbonCapture,UtilizationandStorage).3.1EXPLORINGTHEHYDROGENVALUECHAINANDHYDROGEN-BASEDFUELSHydrogen,whichhastraditionallybeenusedaschemicalfeedstockinseveralindustries,isnowbeginningtoseewideruseasanalternativefuel.Itiswellsuitedtoproduceelectro-fuels(e-fuels).AcompleteoverviewonhydrogencanbefoundinrecentABSpublications,including:HydrogenasMarineFuelSustainabilityWhitepaper—June2021andthenewlyreleasedpublication,OffshoreHydrogenProductionofGreenHydrogen—February2022.Furthermore,theroleofhydrogenasamarinefuelisexpectedtohaveasignificanteffectontheemergingenergytransition.Developmentsrelatedtohydrogen'stransportation,production,safety,standardsandregulationaregoingtobeinthespotlightfortheyearstocome.PAGE19SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONHYDROGENPRODUCTIONOVERVIEWHydrogenisproducedthroughchemicalreactionsthatseparateitfromwaterorhydrocarbons.Inindustry,itisoftenreferredtobydifferentcolorstoindicateitsorigins.Themorecommonsourcesare:•Brownhydrogen,producedviacoalgasificationorcoalcarbonization.•Grayhydrogen,producedfromreactiontothereformationofsteamusingnaturalgas.•Bluehydrogen,producedinthesamemannerasgrayhydrogenbuttheemissionsarecaptured,resultinginanet-zerocarbonfootprintfromthereformationprocess.•Greenhydrogen,producedfromrenewableenergysourcespoweringthewater-electrolysisprocesswithnocarbonemissions.•Pinkhydrogenisgeneratedthroughelectrolysispoweredbynuclearenergy.Figure16:Differentmethodsofhydrogenproduction.In2019,globalconsumptionofhydrogenfuelreachedabout75millionmetrictons(Mt)accordingtoInternationalEnergyAgency(IEA).Ofthatvolume,only1.5Mtwasgreenhydrogen.AmarketanalysisperformedinApril2021bytheEnergyTransitionsCommission(ETC),aglobalindustrycoalitioncommittedtoachievingnetzeroby2050,indicatedthatthedemandforhydrogenwasexpectedtoincreaseannuallybyseventoninepercent.Thiswouldleadtoanestimateddemandbetween500and800Mtofhydrogenbytheyear2050andfulfill15to20percentoftheglobalenergydemand.Toreachaproductionlevelof500Mtby2050,therewouldneedtobe3,000to6,000gigawatts(GW)ofnewlyinstalledrenewableenergysourcesdevotedexclusivelytohydrogenproduction.SMRwithCarbonCaptureSteamMethaneReformation(SMR)RenewableEnergyWaterElectrolysisGREENH2GasStorage/PipelineBLUEH2GasStorage/PipelineGRAYH2GasiﬁcationCoalBROWNH2WaterElectrolysisNuclearEnergyPINKH2ABSZEROCARBONOUTLOOKPAGE20OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure17:Lowvs.highdemandhydrogenforecasts.Focusinginparticularonthemaritimetransportsector,theprojectionforhydrogendemandcombinedwiththeproductioncapacityoftheprojectsinthepipelineandforecastbasedonthat,itseemsthatmorecapacitywillberequiredtocoverthehydrogenneedsofthesectorinthelongterm.HYDROGENPRODUCTION(GREEN/PINK)—ELECTROLYZERSHydrogenthatisproducedthroughtheuseofrenewableelectricityorelectricitythatisgeneratedbynuclearpowerplantsreliesheavilyonelectrolysis.Electrolyticsystemshavebeenwidelyusedfordecadesintheindustryparticularlyinprocessessuchelectrowinningandelectrorefining.Attheheartofthesystem,wefindtheelectrolyzingunitwhichcanusearangeoftechnologiestoproduceelectrolyticwork.Currentlytherearethreecommercially-viabledesignsofelectrolyzersbeingconsideredforuseinhydrogenproduction:protonexchangemembrane(alsoknownaspolymerelectrolytemembrane,orPEM)electrolyzers;alkalineelectrolyzers(AEC);andsolidoxideelectrolyzers(SOEC).AlthoughPEMelectrolysisisamaturetechnologyandhasashortresponsetimeforelectricalloadchange,itisexpectedtoremainrelativelyexpensivebecauseofexcessiveuseofrareorcostlymetals(Ir,Pt,Ti).SOEC,thoughmuchlessmaturethanAEChassignificantpotential.ItisanticipatedtoreachthesamecostasAEC,whileitwilllikelymaintainanefficiencyadvantage.Figure18.Commonelectrolyzerdesigns.(left:PEMelectrolyzer,center:alkalineelectrolyzer,right:solidoxideelectrolyzer).900800700600500400300HydrogenDemand(Millionmetrictons)10020002020203020402050IEABrown/GrayIEABlueIEAGreenETCBrown/GrayETCBlueETCGreen©IEA,ETCAnodeCathodeAnodeCathodeAnodeCathodee-e-H+H+HHOHOHOHOPEMAlkalineElectrolyteSolidOxideElectrolyteHOHOOOOHHOOOOHHHe-e-OHHHOHOHHe-HOOOOOOe-PAGE21SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONEachelectrolyzerdesignhasitsownuniquebenefitsanddrawbacks.Theselectionofanyparticulardesignwillinfluencethedesignofthecompletefacilityandviceversa.Theyeachrequiredifferentpre-processingtechniquesforthesuppliedwater,havedifferentoperatingconditions,andhavedifferentmaintenancerequirements.Inordertounderstandwhereeachelectrolyzercouldbeoptimal,thecompletehydrogenproductionfacilitymustbeexamined.NAMEALKALINEELECTROLYZERPEMELECTROLYZERSOLIDOXIDEELECTROLYZERElectrolyteAqueousAlkalineSolution(KOHorNaOH)SolidPolymerSolidOxide,Yttria-stabilizedZirconiumOxideCurrentDensity(A/m2)2,000–4,00010,000–20,0003,500–5,500WorkingPressure(bar)≤30≤50--OperatingTemperature(°C)60–950–80500–850HydrogenPurity(%)≥99.8≥99.99≥99.99ExportComponent(s)O2+lye,H2+lyeO2+DeionizedWater,H2+TraceDeionizedWaterO2+DeionizedWater,H2+TraceDeionizedWaterInputComponent(s)DeionizedWaterandAlkaliMaterialDeionizedWaterDeionizedWater(Steam)RelativeVolumeLargeSmallSmallRelativeManufacturingCostLowMediumHighElectrolyzerLifetime10years3–4years5–10yearsTable5:Comparisonofcommonelectrolyzerdesigns.Asthebuildingblockofotherenergycarriers,hydrogenwilladdasignificantcostelementtotheoverallcostsrelatedtothefinalenergycarriersandultimatelytotheeconomicsofthetotalenergyconversionofthevaluechain.Consideringthattheproductionofhydrogenwillheavilydependontheelectrolysisprocess,itscostswillalsobeaffectedsimilarly.Therefore,itisinterestingtolookathowelectrolysistechnologiescandefinethefinalcostoffuelsproduced.Forthepurposesofthispublicationwelookintoprotonexchangemembrane(alsoknownaspolymerelectrolytemembrane,orPEM)electrolyzers,alkalineelectrolyzers(AEC),andsolidoxideelectrolyzers(SOEC).ThegraphsbelowshowthecostofH2productionrelatedtothelevelizedcostofelectricity(LCOE)andthespecificelectrolysistechnology.ABSZEROCARBONOUTLOOKPAGE22OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONSource(MarE-fuel:Energyefficienciesinsynthesizinggreenfuelsandtheirexpectedcost–DTU)WeobservethatduetotheincreasedefficiencyofSOEC,thecostofthefinalproductisexpectedtobelowerthanAECacrossawiderangeofelectricityprices.Ifweaccountforinstallationcosts(capitalexpenditure[capex]incurred),AECperformsbetterin2020butasthetechnologybenefitsfromscaleeffectsandinstallationcostdrops,theexpectationisthatin2050,SOECwillprovideamorecost-effectivesolution.Thecostoftransitioningtonetzeroisoneofthebiggestchallengesforshippingcompanies.Astechnologycontinuestoevolveandeconomiesofscaleareachieved,thecostofthealternativefuelswillcontinuedecreasing.However,accordingtoarecentstudy,thepriceofalternativefuelswillremainmoreexpensivethanconventionalmarinefuelsin2050[24].Figure22:Blendedfuelpriceswithelectro-fuelsproducedoffgrid.(Franz,Shapito-BengtsenandCampion)GLOBALGREENANDBLUEHYDROGENPROJECTSGreenhydrogenwouldprovideacleanersourceofhydrogenfeedstockandfuelformanyindustries,butrealizingthisprospectwillrequiresignificantadditionalinvestmentandinfrastructure.Projectstoproducegreenhydrogenareontheriseandthistrendisexpectedtocontinuefortheyearstocome,astheproductionofgrayhydrogenhasalreadystartedtodecline.Blendedfuelprice(€2019/GJ)2020203020402050LowSulphurFuelOil/HeavyFuelOil20452035202560.0050.0040.0030.0020.0010.000.00MarineDieselOilMarineGasolineOilLiqueﬁedNaturalGasLiqueﬁedPetroleumGasMethanol(gray)Methanol(e-bio)Methanol(CCU)Methanol(DAC)Ammonia(gray)Ammonia(blue)Ammonia(green)ReﬁnedpyrolysisoilLiquiﬁedbiogasTechnicalUniversityofDenmarkFigure19:CostofproducedH2vs.expenseforelectrictywhentreatingthisastheonlycost.Figure20:Costofgreenhydrogenvs.COEwithmostlikelycapexassumptionsforyear2020.Figure21:Costofgreenhydrogenvs.COEwithmostlikelycapexassumptionsforyear2050.3,5003,0002,5002,0001,5001,0005000102030405060AECSOECSOECWFSLCOE(€/MWh)CostofHrelatedtoelectricty(€/t)5,0004,0003,0002,0001,0001020304050605,0004,0003,0002,0001,0000102030405060LCOE(€/MWh)LCOE(€/MWh)CostofgreenHby2020(€/t)CostofgreenHby2050(€/t)PAGE23SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure23:Overviewofoperational,under-constructionandpendingFIDblueandgreenhydrogenprojectsworldwide.Figure24:Overviewofoperational,under-constructionandpendingFIDblueandgreenhydrogenprojectsinEurope.TypeBlueGreen©IEATypeBlueGreen©IEAABSZEROCARBONOUTLOOKPAGE24OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONHYDROGENHUBSCriticaltothescalingupofthehydrogenvaluechainisthedevelopmentofregionalhydrogenhubstofacilitategrowth.Theseareregionsinwhichacleanenergysourcecanbelocallyscaledandrefined.Hydrogenisaperfectcandidatefordevelopinghubs,consideringthevastarrayofsynthesizinghydrogentobeusedasafuel.Investmentshavebeenmadebydevelopedgovernmentstoestablishthesehubs,whichiscriticaltotheoverallsuccessoftheglobalinitiative.TheUnitedStates(U.S.)governmentrecentlyapprovedupto$8billion(B)foruptofourhydrogenhubs.Theapprovalwillmostcertainlybecontingentupongeographiccompetitiveadvantages.Forexample,theGulfCoastispotentiallyaprimelocationtohaveahydrogenhubdevelopedduetoitscommerciallocation.Likewise,theGreatPlainshaveidealgeologyforcarboncaptureandhaveanabundanceofrenewableenergyintheformofsolarandwind.Infact,fourstates(Colorado,NewMexico,UtahandWyoming)havecometogethertodevelophydrogenhubandcompeteforthefederalfunding.Competitiveadvantagesaside,scalingupofrenewableswillbenecessaryforgreenhydrogentobeamajorityofthehydrogenmixin2050.Understandingtherequiredenergyinputs,andwaterinputs,cannotbeunderestimated.Therefore,selectionofthelocationofhydrogenhubswillbeadeterminingfactorinitssuccess.Asthepicturebecomescleareronthenecessitiesofarobusthydrogeneconomy,itseemsmoredifficulttoachieve.Thesuccessisnotonlyafunctionoftheinvestment,butalsothelocation,renewablescapacity,wateravailability,storagecapacity,commercialviabilityofhydrogenintheregionandtransportationinfrastructure.Itwillbeinevitablethatthehubsbeingestablishedwillnotthriveinallthesetopics,butvaluablelessonswillbelearnedwithineachhubthatwillprepareusforlong-termsuccessandimplementation.HYDROGENASAMARINEFUELMostofthecurrentpilotanddemonstrationprojectsarefocusedonshort-seashippingandinlandshipping,whilenewdesignsaremostlyforsmallervessels.Thisisduetohydrogen’slowenergydensityandthedirecteffectthatthishasonaship'scargopayload.Withthecurrenttechnologies,thedesignofhydrogen-fueledshipsrequiresexhaustiveoptimizationofspeed,range,operationalprofileandbunkeringfrequency.Anoverviewofthekeycharacteristicsofhydrogenasamarinefuelfollows:EnergyConverters•Fuelcelltechnologydemonstrated,butnotyetcommerciallyavailable(PEM,solidoxidefuelcell[SOFC])•Batteriesareacomplementarytechnologyforfuelcellstoshavepeakloadsandsupplypoweratlowloads•Internalcombustion(IC)enginesarebeingdemonstratedordeveloped,butarelimitedtosmallershort-seashipping•ICenginedevelopmentprimarilyfocusedonammonia•H2canbeblendedwithothercompatiblefuelssuchasmethane,orcombustedwithfueloilTypeBlueGreenFigure25:Overviewofoperational,under-constructionandpendingFIDblueandgreenhydrogenprojectsinNorthAmerica.©IEAPAGE25SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONHydrogenStorageandFuelGasSupplySystem(FGSS)•Cylindricalorsphericalfullyrefrigeratedtankwithdoublewallandvacuuminsulation•StorageConditions:Highpressuresbetween350and700bar,cryogenicenvironmentsbelow-252.9°Coracombinationofhighpressureandlowtemperaturemayberequiredtoreachhigherhydrogendensities•Currentprototypesizeis1,250cubicmeters(m3)withlargercapacitydesignsunderdevelopment•Theboil-offrate(BOR)isonetofivepercentperdayforstandardland-basedliquidhydrogenstoragetanks•Tankcostiscurrentlythemainbottlenecktoviabilityasboil-offgas(BOG)managementtechnology/improvedinsulationareneededPotentialNeedforAftertreatmentTechnology•Commerciallyavailablenitrogenoxides(NOx)reductionsystemmightberequired(exhaustgasrecirculation[EGR],selectivecatalyticreduction[SCR]orwaterinjection)tomeetTierIIIEnergyDensityandVolumeConsiderations•Majorconcernsoverspace•Requires4.5/8(liquid/compressedgas)timesthevolumecomparedtomarinegasoil(MGO)andoverthreetimescomparedtoammoniaforthesameenergycontent•DoublestructurevacuuminsulationrequiresadditionalspaceSafetyandEnvironmentalConcerns•Flammableproperties,wideflammabilityrange(increasedwhenmixedwithpureoxygen),andhydrogenisasmallmoleculethatisdifficulttocontain•Leaksinopenorcontainedspacescanbeaseriousfirehazardduetoquickformationofflammablegasmixture(lowactivationandignitionenergy)•Floworagitationofhydrogengasorliquidcancreateelectrostaticchargesresultinginsparksandignition•Flamesareinvisibleandburnextremelyquickly(deflagrationordetonation);detonationscanresultinextremepressureincreases•Whilenon-toxic,athighconcentrationsitcanactasanasphyxiant•Dissipatesquickly—sodoesnotposedirectthreattotheenvironmentRegulations•Noprescriptiverules,onlyMaritimeSafetyCommittee(MSC)interimrecommendationsandreferencetotheInternationalCodeoftheConstructionandEquipmentofShipsCarryingLiquefiedGasesinBulk(IGCCode)•RequirestheInternationalCodeofSafetyforShipUsingGasesorOtherLow-flashpointFuels(IGFCode)alternativedesign•Currentregulationsandguidancemainlyassociatedwithfuel-celltechnology•IMOCCC7/3/9AmendmentstotheIGFCodeandDevelopmentofGuidelinesforLow-FlashpointFuels(abouthydrogenfuel).FuelCells:•Annex1ofIMOCCC7/15DraftMaritimeSafetyCommittee(MSC)CircularInterimGuidelinesfortheSafetyofShipsUsingFuelCellPowerInstallations•ABSGuideforFuelCellPowerSystemsforMarineandOffshoreApplicationsCarriageofHydrogeninBulk(LiquefiedHydrogen):•IMOMSC420(97)InterimRecommendationsforCarriageofLiquefiedHydrogeninBulk•ClassNKGuidelinesforLiquefiedHydrogenCarriers(2017)ABSZEROCARBONOUTLOOKPAGE26OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONOtherHydrogenStandards(notlimitedtothefollowing):•IEC60079—StandardforExplosiveAtmospheres•IEC61892—StandardforMobileandFixedOffshoreUnits(Part7ElectricalInstallations—HazardousAreas)•ISO11114—GasCylindersStandard•ANSI/AIAAG-095A—GuidetoSafetyofHydrogenandHydrogenSystems•ASMEB31-12—HydrogenPipingandPipelines•NFPA55—CompressedGases&CryogenicFluidsCode•NFPA2—HydrogenTechnologyCodeHydrogenPriceEstimatedProductionCosts—2025•E-hydrogen:approximately$50/gigajoule(GJ)•BlueHydrogen:approximately$30/GJ•Source:Techno-EconomicModel(NavigaTE)MærskMc-KinneyMøllerCenterforZeroCarbonShippingBunkeringprices:ABSOffshoreProductionWhitepaper—February2022•ThepriceofgreenhydrogeninApril2021rangedbetween$3and$6.55perkilogram(kg)•Blueorbrown/grayprocesses,costbetween$1.30and$2.90perkgand$0.70and$2.20perkg,respectivelyBy2030,greenhydrogenisexpectedtodropinpricetoaround$2perkginmostregionswithlowsof$1perkginfavorableregions.FuelCellElectricProjectOne:•ZeroEmissionIndustries,formerlyGoldenGateZeroEmissionMarine,hydrogenfuelcellcatamaranferry•PEMfuelcellswith242kgcompressedhydrogen•100kilowatt-hours(kWh)ofbatteriesProjectTwo:•FutureProofShipping(FPS)—EuropeaninnovationprojectFlagships•RetrofitProject:theinternalcombustionenginewillberemoved,andPEMfuelcells,hydrogenstorage,batterypacksandanelectricdrivetrainwillbeinstalled•Totalamountofpower:approximately1,200kwto200twenty-footequivalentunit(TEU)capacityDual-fuelEngineConcept•BeHydroenginesandCMB.TECH'sHydrovilleferry•Dual-fuelhydrogen-dieselengineswithpoweroutputfrom1,000to2,670kWIntegrated-electricEnginewithFuelCell•Ulstein'sSX190zero-emissionoffshoresupplyvessel•Twomegawatts(MW)ofPEMfuelcellsanddieselenginesABSSUPPORTThroughtheparticipationinjointindustryprojects(JIPs)andwithclosecollaborationwithindustrypartners,ABSislookingtoacceleratetheadoptionofSOFCtechnologyforpowerproductiononmarinevessels.ThemainbenefitofSOFCsisthat,throughtheelectrochemicalconversionoffuelintoelectricity,propulsionpowercanbegeneratedwiththesameorhigherefficiencylevelsthaninternal-combustionengines.ABSisalsojoiningforceswiththeMærskMc-KinneyMøllerCenter’sFuelCellWorkingGrouptoprovideregulatoryandtechnicalsupport.Theworkinggroup’sscopeistoinvestigatethecurrentandfuturestatusoffuel-celltechnologyandsuggestaclearpathwayforitsadoption.PAGE27SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBON3.2NET-ZEROAPPROACHFORHYDROGENINSHIPPINGGreenershippingwillbeacriticalpiecetohelpmitigateclimaterisksandprotecttheenvironment.Whilemanybelievethatanet-zeroshippingstrategywillbechallengingtoachieve,therearepathwaysthatcouldleadtothatgoal.Theproblemsassociatedwithanet-zerofleetarecomplex,andamoreexpansivecollaborationacrosssectorsisrequired.Variousexternalfactorssuchasdiverseemissionlevels,economicimpacts,publicperceptionandpoliticswillinfluencetheoutcome.Improvingtheenergyandoperationalefficiencyofvesselsalonewillnotresultinnet-zeroemissionsinthefuture,sousingnet-zerofuelswillbeessential.Thenet-zeroapproachmayallowtheindustrytousefossil-basedresourcestoproducefuelssuchashydrogenandammonia,providedtheemissionsarecapturedandstored[71].Thiswillbecriticaltoproducingmarinebunkerfuelsatvolumebecauseensuringaccesstogreenenergyistheindustry'sgreatestchallenge.Net-zeroemissionscanbeachievedwhentheamountofGHGsreleasedintotheatmosphereequalstheamountabsorbedbysinks.Net-zeroquantificationisnoteasyandrequiresalife-cycleapproachfromwell-to-waketoensurethatalltheemissionsareconsidered.Anall-inclusiveapproach(well-to-wake)tomeasurementisneededtoensurethatallemissionsareconsidered.Numerousscenarios[125]havebeenmodeledandstudiedtodescribethepathtowardsaclimate-neutralworldandeachofthesescenarioshaveafewcriticalpathsincommonwhichincludesthefollowing:1.Largescaledeploymentofnet-zerocarbonfuels[125]a.Synthetichydrogen-basedfuelswhichincludesgreenhydrogen(hydrolysisofwaterusingrenewableelectricity),greenammonia(Haber-BoschProcessusinggreenhydrogen),greenmethanol(hydrogenationofcarbondioxide(CO2)usinggreenhydrogen)b.Biofuels(biomethanol,bio-oils,biomethane)c.DecarbonizedfossilfuelsusingCCUS(bluehydrogen,ammonia,methanol)2.Seculardeploymentacrosssectors(industry,transportandbuiltenvironments)andparticularlytheshippingindustryisexpectedtoplayaleadingroleindeployinglowcarbonfuels.3.Globaltradeflowsofzero-carbonfuelsTHENET-ZEROEMISSIONSBY2050SCENARIO(NZE)[125][126]TheIEA2050NZEforecaststhattheglobaluseofhydrogenwillexpandto200Mtin2030andabove500Mtin2050andthelow-carbonproportionofthehydrogenwillrisefrom10percentto70percentin2030.Theinterestingassumptionisthatitisexpectedthataroundhalfofthehydrogenproducedwillbegreenhydrogenandtherestbluehydrogenwiththeratiosvaryingregionallybasedontheavailabilityofelectrolyzersandrenewableenergycapacityinthecaseofgreenhydrogen.Inthecaseofbluehydrogen,deploymentwillbeheavilydependentonavailabilityoffeedstock(economicallyviablenaturalgas)andrapidgrowthinCCUStechnologyandthecarbonvaluechain.AccordingtoIEANZE,in2030,about100Mtofhydrogenwillbeproducedusingelectricityandmorethan300Mtby2050.In2050,itisforecastedthatshippingwillconsumeapproximately17percentofthehydrogenfuel,basedonwhichwecanestimatethattheshippingdemandwillgoupto60Mtby2050.Theglobalelectrolyzerscapacityisforecastedtoreach850GWby2030and3,600GWby2050whichtranslatestoanelectricitydemandof3,850terawatt-hour(TWh)and14,500TWh.Applyingaonepercentfactorforshippingusage,theelectricitydemandisestimatedtobe650TWhand2,465TWhrespectivelyin2030and2050.ABSZEROCARBONOUTLOOKPAGE28OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONSHELLSKY1.5SCENARIO[125]Inthisscenario,shipping’sshareofglobalhydrogenisassumedtobeonepercenttofourpercentofannualconsumptionin2100,ifweassumedamid-rangeoftwopercentofglobaldemandby2050.TakingtheIEAforecastof500Mtin2050andapplyingatwopercentdeploymentassumptionforshipping,itisestimatedthat10Mtofhydrogenwillbeusedinshipping.TheproportionofgreenhydrogenaccordingtoIEAisexpectedtobehalfofthetotalhydrogenproducedandconsequentlyelectricitydemandwillbeproportional.Thisscenarioalsoassumesthathydrogenasafuelrampsupinthe2050sandreachesahighpointin2090andstaysconsistentuntil2100.Overall,thismodeldoesnotconsiderhydrogenasanimportantpartofthemixtilllaterinthecenturybutitistheonlymodelthattakesintoconsiderationtheimpactofglobaldisruptionslikethepandemicandassumesa“healthfirst”attitudeinresponse.BP'S2020ENERGYOUTLOOK[125]TheBPNetZeroin2050definesthreedifferentscenarios:1.Rapid:Globaltemperatureislimitedtobelow2°Cby2100byreducingGHGemissionsfromenergyuseby70percentby20502.Netzero:AdditionalmeasuresovertheRapidScenarioleadingtoa95percentreductionemissionby20503.Business-as-usual(BAU):Assumingnochangeinfuelmixoverthemediumtolong-termMarineshippinghadonlyaminorincreaseinenergydemandparticularlyinthebusiness-as-usualscenarioandnotesthatshippingasanindustryhasmanyoptionscomparedtoaviationtodiversifyitsfuelmixwhichincludeshydrogen,ammonia,liquefiednaturalgas(LNG)andbiofuels.Shippingenergydemandisexpectedtostayconstantwithgradualdecarbonizationofthefuelmix.Thehydrogendemandintherapidscenarioisestimatedtobetwoexajoules(EJ)and,inthenet-zeroscenario,aboutfourEJ.OneEJistheequivalentofsevenmilliontonsor78billioncubicmeters(m3)ofgaseoushydrogen,990billionBritishthermalunits(BTUs),278TWhofelectricity,170millionbarrelsofoilor290billioncubicfeetofnaturalgas[130].BLOOMBERGNEWENERGYOUTLOOK2021[125]TheBloombergNewEnergyOutlook,publishedin2021,describesthreelong-termscenariosby2050:1.Green:greenhydrogendominantscenariowith85percentoftheglobalenergymixbeingrenewable2.Gray:fossilfuels(52percent)arestillthedominantenergysourcebutwithCCUSplayingamajorrolealongwithrenewables(42percent)3.Red:nuclearenergyusingsmallmodularreactorsaretheprimaryenergysource(66percent)Inthegreenandredscenarios,itisestimatedthatbiofuelsandammonia(basedonzero-carbonhydrogeni.e.,greenhydrogen)willberesponsibleforbetween18percentand35percentreductioninemissions.TheBloombergscenariosareelectricityheavyandestimatesbetween62,200TWhand121,500TWhforthegrayandgreenscenariosrespectively.Thegreenscenarioassumesthatnearlyhalfoftheelectricityproducedisusedforgreenhydrogenwhichindicatesthattherenewableelectricityrequirementwillbe59,300TWh.Theshippingcontributiontotheusagewhilegrowingconsistently,isnotamajorconsumerleadingtoapproximately10to15Mtofconsumptionby2050whichrepresentsaboutonepercentofthetotalhydrogenconsumed.IRENASHIPPINGSCENARIO[125][127][128]AccordingtotheInternationalRenewableEnergyAgency(IRENA),greenhydrogen-basedfuelsareexpectedtoplayamajorroleinthedecarbonizationoftheshippingsectortomeetthegoaloflimitingtemperatureincreasestobelow1.5°Cby2050.Itisestimatedthattherequirementofgreenhydrogenwillbe46Mtor1,800to3,800TWhintermsofelectricityofwhich74percentwillbeusedforammoniaproduction,16percentformethanolandtheremaining10percentasliquidfuelhydrogen.Toputthisinperspective,theglobalcapacitytoproducerenewableelectricityisprojectedtoreach8,300TWhin2021[126].Oneofthestumblingblockstodeploymentofgreenhydrogenatscaleisthechallengeofincreasingrenewablepowercapacity.Renewableenergysourcesaregeographicallyandtemporallydependentandforittobecostcompetitive,itisimperativetodevoteefforttodevelopleast-costrenewablepowerplantstoallowforproductionofpowerfuels.PAGE29SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONABSFUTUREFUELMIXSCENARIOInthefuelmixscenariosmodeledbyABS,themeta-analysisconductedtakesintoconsiderationthecurrentfuelmixandnewprojectannouncementswhicharethenforecastedintothefuture.Thisisconsideredamorerobustmethodologysince,theforecastinganalysishingesonrealprojectsandnotprojectionsbasedonothereconomicvariablessuchastradeandgrossdomesticproduct(GDP)growththataresubjecttoahighlevelofuncertaintywhenapplieddowntoasector-levelanalysis.Thebasescenarioassumesthattotalenergyconsumedbytheshippingindustrywillrisefrom185milliontonnes(MnT)heavyfueloil(HFO)equivalentto237MnTin2050.Whileoil-basedfuelsstilldominatethefuelmixasof2025withnearly80percentoffuelbeingoil-based,itisexpectedtorapidlydecelerateandreachabout25percentofthefuelmixby2050.Ammoniaandhydrogenontheotherhandisexpectedtorapidlytakeofffrombeingnegligiblein2025tonearly40percentofthefuelmixby2050.Basedonourestimates,theincreaseinhydrogen/ammoniainthefuelmixisfromzeroMntHFOequivalenttoa93.7MntHFOequivalentsin2050.Thisincreasecanbedescribedasexponential,anditiscontingentuponthematurityofthehydrogenvaluechainwhichincludesdevelopmentofrenewableenergycapacityforgreenhydrogenandCCUSdeploymentatscaleforbluehydrogen.Detailsoftheassumptionsandresultsofthefuelmixscenarioisexplainedintheupdateoffuturefuelmixsection.SUMMARYAmmoniaandhydrogenwillbeamajorpartoftherapiddecarbonizationoftheshippingindustryinanynet-zeroscenarioby2050.Electricityproduction,electrolyzerstechnologicalmaturity,manufacturingcapacityanddeploymentofCCUSatscaleareonthecriticalpathforthelong-termsuccessofthesefuels.Whileallprojectionsseemtoindicatehydrogenandconsequentlyammoniabeingamajorcomponentofthefuelmix,therearestillmanyuncertaintiesbeforethesefuelscantrulytakeoff.Intheshort-termbiofuelswillplayakeyroleinreductionofCO2fromshipping,overthemediumandlongterm,greenhydrogen-basedfuelswhichincludesammonia,methanolwillstartgainingprecedence.Renewableammoniaisexpectedtobethebackboneofshippingdecarbonizationandcouldrepresentupwardsof40percentofthefuelmixin2050[127].LOWCARBONFUELPRODUCTIONPATHWAYSItiscommonunderstandingnowthatcarboncaptureisvitalpartofthetransitiontonetzero.Itprovidessolutionsforcurrentenergyassets,aswellapathwayforrapidlyscalinguplow-emissionhydrogenproduction.However,thecapacityofinfrastructuremaystillprovetobealimitingfactorusedforcarboncapture,utilizationandstorage(CCUS)inthemid-andlong-term[21].Hydrogen,capturedcarbonandbiomassarethemostpromisingelementsformakingsustainablefuels.Theyarethekeyingredientsforcreatingasetofzero-carbonfuels.Thefollowingfiguresshowtheimportanceofscalinguptheproductionofrenewableenergy,aswellasusingfossilfuel-basedhydrogenwithcarboncaptureasatransitionoption.ABSZEROCARBONOUTLOOKPAGE30OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure26:Mainzero-carbonbunkerfueloptionsforshipping[21].Alternativefuelssuchasgreenammoniaandgreenhydrogenhaveimmensepotentialtolowerthecarbonfootprintofshipping.However,oneofthechallengesoftheseprospectivealternativefuels,istheirlowerenergycontentcomparedtoconventionalfueloilssuchasHFO.Hydrogenhasthehighestenergycontentpermassofallchemicalfuelsat120.2megajoulesperkilogram(MJ/kg).Intermsofmassenergy,itexceedsMGOby2.8times,andalcoholsbyfivetosixtimes.Therefore,hydrogenfuelcanincreasetheeffectiveefficiencyofanengineandhelptoreducespecificfuelconsumption.However,duetoitslowervolumetricenergydensity,liquidhydrogenmayrequirefourtimesmorestoragespacethanMGOorabouttwotimesmorespacethanLNGtoproducetheequivalentamountofenergy.Whencomparingtheenergyandrequiredvolumesoffuels,itisalsoimportanttoconsidertheenergyefficienciesoftheconsumer,ortheelectricalenergylossesinfuelcells.Trueforallmarinefuels,additionalvolumesoffuelmayberequiredtoaccountforthepowerlostfromthetanktotheoutputshaft.Asmoreexperienceisgainedfrompilotprojects,themarineindustryisexpectedtoadopthydrogenasanenvironmentally-friendlyfuelofchoice.Unlikefossil-basedpetroleummarinefuels,whichareexportedfromresource-richcountries,hydrogencanbeproducedinanycountrytosecureanenergy-independentecosystem.Forthisreason,nationalgovernmentsaredevelopingagendastoincludeitintheirenergyplans;thismayinturnhelptoquickenthepaceofglobalproduction,includingtheamountavailableformarinefuel.EnergySourceBiomassProductionPathwayBiofuelSynthesisZero-CarbonBunkerFuelsBIOFUELSHYDROGENANDAMMONIASYNTHETICCARBON-BASEDFUELSLiqueﬁedBiomethaneBioethanolBiomethanolHydrogenationforAlcoholSynthesisGreenGreenHydrogenBlueHydrogenGreenAmmoniaGreenLiqueﬁedSyntheticMethaneGreenSyntheticMethanolBlueSyntheticMethanolBlueAmmoniaNon-BiogenicRenewableElectricityCarbonCaptureandStorageDirectAirCaptureSteamMethaneReformingElectrolysisofwaterHaber-BoschProcessNaturalGasBlueHydrogenCO2CO2PAGE31SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONAmmoniaiscarbon-freeanditssynthesisfromrenewablepowersourcesisacarbon-freeprocess.Likehydrogen,itcanbeproducedfromfossilfuelsusinggreenmethodssuchascarboncaptureandcombinedrenewableenergy,bothofwhichmayinfluenceitscostcompetitiveness.Currently,ammoniaisproducedinlargescalefromthehydrocarbonfuelsthatareusedtoproducehydrogenbyreformingmethanewithsteam.Thenitrogenforproductionisextractedfromtheairafterliquefaction.Renewableenergysourcescanbeusedtoproducehydrogenfromtheelectrolysisofwaterandlatersynthesizedtoammonia.Inthiscase,ammoniahaszero-carbonintensityduringproductionoruse.Ifenoughcanbeproducedusingcarbon-neutraltechnology,ammoniahasasignificantpotentialtohelpmeetInternationalMaritimeOrganization’s(IMO’s)GHG-reductiontargetsfor2050.Ammoniahasahighervolumetricenergydensitythanliquefiedhydrogen,closertothatofmethanol,whichreducestheneedforlargertanks.Thesizeofammoniastoragetankswillbesignificantlysmallerthanofthoseusedforliquidhydrogenforthesameenergyrequirement,evenmoresoconsideringthevolumeofinsulationrequired.ThefuelcharacteristicsofammoniaenabletheuseofTypeCorprismatictanksandtheyrequiresignificantlylessenergyforre-liquefactionthanhydrogenorLNG.Figure27:Hydrogenandammoniaproductionanduse[22].Carbon-neutralfuelssuchasbiofuelsalsohaveagreatpotentialtosupportthetransitiontoalternativefuels.Drop-infuelssuchasbiodieselscanbeusedinincreasinglyhigherpercentageblendstolowertheemissionsfrommarinevesselswithlittlechangetotheircurrentoperations.However,someofthecurrentchallengeswithusingdrop-infuelsistheirlimitedavailabilityandthehighcostofproduction.Withsupportingregulation,biodieselscanbeabeneficialcontributortoloweringGHGemissionsinshort-seashippingorbetweenports,whererefuelingmaybemorereadilyavailable.Theuseofbiofuelsisexpectedtogrowduetoitspotentialsimilaritiestomarinepetroleum,andtheeaseofdistribution,storageandbunkering.NaturalgasPetroleumCoalRenewableenergyCHCH3HtolueneMCHReforming/gasificationGasificationDehydrogenationDirectuseasafuelCarbondioxidecaptureandstorageProductionbyelectricityandheatFuelcellvehiclePowergenerationFuelCellNHdirectcombustiongasturbineFuelcellNHfurnaceHHHLiquidhydrogenLH(-253°C)Organichydrides(methylcyclohexane)(H6wt%)AmmoniaNHLiquid:-33°Cor8.5Bar(H18wt%)HydrogenproductionTransport(Energycarriers)UtilizationABSZEROCARBONOUTLOOKPAGE32OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure28:Generalproductionlifecycleofbiofuels[23].Usingrenewableenergytoproduceelectro-fuelsfromhydrogencouldreducetheenergyrequiredfortheirproductionandreducetheirlife-cyclecarbonfootprint.Thistechniquecanbeappliedtoanyofthethreefuelpathwaysusedtoproducee-LNG,e-methanolore-diesel.Electro-fuelshavethepotentialtooffercarbon-neutralpropulsionandprovidecarbon-reductionsolutionsinthemedium-tolong-term.Inadditiontofossilandbiomasssources,electro-fuelscanbeproducedbycarbon-dioxiderecovery(CDR),atechniquethatconvertsCO2tosyngas,whichinturncanbeusedtoproducebio-LNGorbiomethanol.CDRhasthepotentialtoremoveCO2fromtheatmosphereanduseittoproduceelectro-fuels,minimizingtheenergyusedforfuelproductionandenhancingtheirpotentialtoreduceglobalwarmingMethanol’sadvantage,overgasfuelsthatrequirecryogenicconditionsandmaterials,isitsliquidstateinambientconditionsanditsabilitytoefficientlyrepurposeexistinginfrastructureandvessels,withretrofits.Itissignificantlyeasierandmoreeconomicaltostoreonboard.Retrofittingavessel’stanksfromconventionalfueloil,ballastorsloptoholdliquidmethanolfueliseasierthaninstallingcryogenictanks.Oneofthechallengesofusingmethanolasanalternativefuelisitslowerenergycontentthanconventionalfueloils.However,asmethanolisaliquidatambienttemperatureandpressure,fueltankscanbeconvertedwithminorretrofittingtoholdthelargervolumesrequiredtoproduceanequivalentamountofenergy.Further,methanol’suseasamarinefuelonlymayrequiretheexistingtrade,storageandproductionactivitiestobescaledup.Bunkeringfacilitiesandfuel-supplysystemsneedtobedevelopedandexpanded,andpresentresearchisexploringwaystorapidlyincreasetheinfrastructureanddeveloponboardapplicationsandinstallations.Thereisawiderangeoffuelswithdifferentlevelsoftechnologyreadinessthatwillprovideamoreflexibleandsustainableenergysystem.Thecompatibilityofe-methanolandammoniawithpresentpropulsionandpower-generationsystemsmakesthemattractivealternativestootherzero-emissionfuels.Internationalshippingisresponsibleforalargepartoftheglobalshippingemissions,andlargeandverylargeshipsareresponsibleforabout85percentofthenetGHGemissionsassociatedwithinternationalshipping[25].Thisfigureshowsitiscrucialtoimplementmeasuresonaninternationalscale.Whilethereisnocurrentglobalgoalforshippingtobecomenetzero,somecountriesandregionshavebeensettingtargetstoachievenet-zeroGHGemissions.BiomassPrimaryProductBiomassResiduesBiofuelMarineDistillateorResidualFuelOilMarineBiofuelBlendsStorageandBlendingBiomassProductionBiofuelUseBiofuelProductionBiomassSeparationPAGE33SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONAneffectivelydesignedinternationalcarbon-pricingmechanismisconsideredaspartofanumberofproposedmarket-basedmeasures(MBMs)whichhavebeensuggestedtohelpdrivetowardsnet-zero.Toreachanet-zerotargetby2050,theaveragecarbonpriceisforecastat$360/tCO2[26].However,itisassumedthatthecarbonpricecanbeloweredbyuptohalfprovidedtherevenueisusedtosupportthedecarbonizationofshipping[26].Thepossibilityofapplyingthesetaxeshasbeendebatedatlength,makingitclearthataglobalallianceandthepoliticalwillberequiredtomakealternativecleanfuelscostcompetitive.Inaddition,theinitiativetoimplementcarbonpricingisexpectedtogeneraterevenuethatcanbeusedforfinancingbothresearchanddevelopmentactivitiesandinfrastructureneeds.Theideaofcarbonpricinghasbeengainingtractioninrecentyears,withmanycountriesalreadyusingthisstrategytoreduceclimatechangeanditsnegativeimpactsasshowninthefigureabove.Theconceptofcap-and-tradecarbonpricingisexplainedindetailinthefollowingsections.3.3ROLEOFCARBONCAPTUREANDSTORAGEInApril2018,theinitialIMOstrategyonthereductionofGHGemissionsfromshipswaspublishedwiththefollowinggoals:reducingCO2emissionspertransportwork(carbonintensity)byatleast40percentby2030andreducingthetotalGHGemissionsbyatleast50percentby2050[84].DuringtheMarineEnvironmentalProtectionCommittee(MEPC)Session77,heldfromNovember22to26,2021,aproposalwasreceivedtoexpandtheIMO’sclimate-relatedambitionstoreachzeroGHGemissionsby2050,insteadofreducingGHGemissionsby50percent.AlthoughtheCommitteedidnotsupportthedraftresolution,theyagreedthattherewasaneedtoreviewandupdatetheIMO’sinitialGHGstrategy,includingtargetupdates,impactassessmentsandthefutureavailabilityoffuels.IthasbecomeclearthattheIMO’scarbonemissionsreductiontargetswillgetprogressivelytougherandthereforeshipoperatorsandorganizationsintheindustry’svaluechainsarelookingatalloptionsavailabletoexpeditetheirtransitiontowardsalow-carbonenvironmentwhileconcurrentlyservingtheever-growingglobaldemandfortradetransport.Oneareaearmarkedforprogressiscarboncaptureandstorage(CCS).AccordingtotheIntergovernmentalPanelonClimateChange(IPCC)andtheIEA,theannualglobalcapacityforcarboncapturewillneedtoincreasemultifoldfrom50millionmetrictonsofcarbondioxide(MtCO2)in2020to800MtCO2peryearby2030andmorethan5,000MtCO2by2050[4].Thisrepresentsa16-foldincreaseby2030anda100-foldincreaseby2050incarboncapturecapacity.FueltransformationshouldbethefastestadopterofCCUS,becauseindustrialheatisdifficulttoelectrify;andlow-carbonfuelsarethepathofleastresistance.Kearnsetal.hasestimatedthattotalglobalstoragecapacityisbetween8,000gigatons(Gt)and55,000Gtandeventhelowestestimatefarexceedsthe220GtofCO2thatisexpectedtobestoredovertheperiod2020to2070accordingtotheIEA’sSustainableDevelopmentScenario.About75percentoftheestimatedstorageisonshoreindeepsalineformationsanddepletedoilandgasfieldsbutthereissignificantoffshorecapacity(about25percent).Thefollowingfiguressummarizetheestimatedstoragecapacity.Applyingthesameoffshorestoragecapacityfactortotheannualglobalcapacityofcarboncapturerequired,wecancalculatethattheonshoreCCUSmarketwillneedtoincreaseto200MtCO2by2030and1,250MtCO2by2050.BulkCarrier23%ChemicalTanker7%Containership27%GeneralCargo5%LiquiﬁedGasTanker8%OilTanker15%Others15%Figure29:Voyagebasedallocationofenergyconsumptionforinternationalshipping[25].©IMOABSZEROCARBONOUTLOOKPAGE34OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure30:IEAestimateforonshorevs.offshoreCCUSmarketinMtofCO2(2030and2050).Figure31:KearnsetAl.estimationofglobalonshoreandoffshorestoragecapacity.EstimateTotalStorageCapacity(Gt)OnshoreCapacity(Gt)OffshoreCapacity(Gt)IEASustainableDevelopmentScenarioEstimateforCCUS(Gt)OnshoreCapacityRequired(IEASustainableDevelopmentScenarioGoal)(Gt)OffshoreCapacityRequired(IEASustainableDevelopmentScenarioGoal)(Gt)IEAExpectedSizeoftheCO2CommodityMarketby2030(Gt)Low8,0006,0002,000220167531–7High55,00042,00013,000Table6:SummaryofDataonStorageCapacity,OnshoreandOffshoreCapacity.Source:Kearnset.Al,2017.600OnshoreCCUS(Mt)3,7504,0003,5003,0002,5002,0001,5001,0005000200OshoreCCUS(Mt)1,25020302050©IEA©KearnsetAl.TotalStorageCapacity(Gt)OnshoreCapacity(Gt)OshoreCapacity(Gt)60,00050,00040,00030,00020,00010,0000PAGE35SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFromashippingindustryperspective,thetransportofCO2byshipshasauniquebusinesscase,particularlyfordislocatedemittersoverlongdistancesandforsmallerquantities.Althoughpipelinesareamaturetechnology,theyrequireacontinuousflowofcompressedgasandtheirusercostsarehighlydependentondistance.ThefigurebelowisaschematicoftheCO2shippingchainfromthesourcetostorage.ItillustratestheprocessofCO2beingcapturedfromapowerplant,liquifiedandstored.ItisthenloadedontoaCO2carrieranddeliveredtothefinalportofdestinationandconnectedtotheendpointtransmissionline.Figure32:Carbondioxideshippingchain.TheCCUSvaluechainisextensiveandhasimplicationswellbeyondtheshippingindustrywhichwillplayaveryimportantroleoftransportingtheCO2fromthepointofcapturetothepointofstorage(offshoregeologicalstorageorenhancedoilrecovery[EOR])orthepointofutilization—biologicalutilization:greenhouseandalgaegrowth,mineralization(constructionmaterial);chemicalutilization:bakingsoda,bioethanol,carbonfers,ethanol,fertilizers.Theschematicbelowprovidesahigh-levelsummaryofthecarbonvaluechainfromcapturetotransporttostorageandutilization.Figure33:Carboncapturevaluechain.Currently,liquifiedCO2shippingismostlyusedinthefoodandbeverageindustryforcapacitiesvaryingbetween800m3and1,000m3,butisunderstoodthatforCCUSapplications,thecapacitiesneedtobemuchlarger.ThecurrentmarketforCO2utilizationisestimatedtobe230MtCO2peryearandisinstrumentalintheproductionprocessforfertilizers,oilandgasandthefoodandbeverageindustries.ItisestimatedthattheCO2commoditymarketcouldincreaseuptoonetosevenGtCO2peryearby2030asnewroutestocarbonutilizationareunlockedsuchasusageinfuels,chemicalsandbuildingmaterials.TheutilizationvaluechainisverycomplexandmaynotdevelopasfastasrequiredtohelpwithreducingGHGemissions,requiringthedisposalofCO2tobeinjectedintogeologicalformations[95].COCarrierPipeline[Storagesite]StorageTanksCargoHandlingSystemStorageTanks[PowerPlant]LiquefactionSystemCaptureSystem[IntermediateTerminal]PumpingSystemCAPTURECapturingCO2fromfossil-orbiomass-fueledpowerstations,industrialfacilitiesordirectlyfromtheair.STORAGEPermanentlystoringCO2inundergroundgeologicalformations,onshoreoroshore.TRANSPORTMovingcompressedCO2bypipelineorshipfromthepointofcapturetothepointofuseorstorage.USEUsingcapturedCO2asaninputorfeedstocktocreateproductsorservices.ABSZEROCARBONOUTLOOKPAGE36OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONThetransportationofCO2forgeologicsequestrationwillinvolvethedevelopmentofinfrastructureforbothpipelinesandshippingandinmanycasesprojecteconomicsmaydictateagainsteachofthesesolutions.Forexample,iftheamountofCO2requiredtobestoredissmallorthereisinconsistentflow,thenpipelinesmaynotbethemostappropriateoption.Numerousstudieshaveshownthatshipmentiseconomicallyadvantageousoverpipelinesfordistancesgreaterthan700kilometer(km)andquantitiesgreaterthansixMtCO2peryear.AsofApril2022,therearefourliquidcarbondioxide(LCO2)carriersinoperation(mostlyinserviceforthefoodandbeverageindustry)andthreeotherscurrentlyonorder(seetablebelow)byvariousoperators,includingthenorthernlightsprojectspecificallytoservicetheburgeoningneedfortransportingliquidCO2foroffshoresequestration.Withcarboncapturebeingamajorpartofthedecarbonizationjourneyoftheeconomyworldwide,thedemandforLCO2carriers,fortransportationtothestoragesite,isexpectedtoincrease.NAMETYPEOWNERGROUPOWNERLCO2CAPACITY(m3)N/BDalianShipbuildingCO2CarrierNorthernLightsNorthernLights7,500N/BDalianShipbuildingCO2CarrierNorthernLightsNorthernLights7,500N/BMHIShimonosekiCO2CarrierSanyuKisenSanyuKisen1,450Table7:LCO2carriersorderedforCCUSserviceasofApril2022.ThenorthernlightprojectsinvolveddevelopinginfrastructuretotransportCO2fromcapturesitesbyshiptoaterminalinwesternNorwayforintermediatestoragebeforebeingtransportedbypipelineforpermanentstorageinareservoir2,600m(meters)undertheseabed.ThisprojectisonecomponentoftheNorwegiangovernment'sCCUSproject“Longship”andisexpectedtohaveacapacityof1.5MtCO2peryearaspartofphaseone.OncetheCO2iscaptured,itisexpectedtobetransportedbynewlydesignedships,injectedandpermanentlystored2,600mbelowtheseabedoftheNorthSea.Theplanistoexpandcapacitybyanadditional3.5Mtbasedonthemarketdemand.TherearenumerousotherprojectsinthepipelinesuchastheAcornCO2SAPLINGprojectintheUnitedKingdom(U.K.).Additionally,offshorestoragecapacityhasbeenidentifiedoffthecoastofJapanandisconsideredafitcaseforsource-sinkmatchingduetothepresenceofconcentratedCO2emittersnearthecoastline.Accordingtoa2018studybytheEuropeanZeroEmissionTechnologyandInnovationPlatform(ETIPZEP),itisestimatedthat600vesselswillberequiredforCO2transportduetotheburgeoningCCUSapplicationforsupportingtheCCUSsectorinEurope.Although,thestudywasEuropeanUnion(EU)specific,theCO2vesselswillsupportthedevelopmentofthecarbonvaluechainallovertheworld.AsofApril2022,therehavebeenthreevesselsorderedforoffshoresequestrationpurposesandifthemarketfollowstheIEAestimationofneedinga16-foldincreaseinCCUScapacityby2030anda100-foldincreaseby2050,wecanestimatethatthenumberofvesselsrequiredwillbe48in2030and300by2050.Therangevariesbetween50to600vessels,between2030to2050,thespecificnumberisnotasimportantastheoveralltrendupwards.Theshipscurrentlyonorderareexpectedtobelaunchedby2023and2024andareexpectedtosatisfyfuturedemandwhichisamajorassumption,sincethisisasingulardatapointwhichcouldbeanunderestimationoffutureneed.Ifadditionalshipsareordered,whichislikely,consideringtheexpectedgrowthofthismarket,thesizeoftheLCO2marketcouldgrowtotwotothreetimesthecurrentestimate.Inresponsetothegrowingdemand,HyundaiHeavyIndustry(HHI)andKoreaShipbuilding&OffshoreEngineeringCo,Ltd(KSOE)havedevelopedadesignforanew40,000m3LCO2carrierdesign.ABSandDaewooShipbuilding&MarineEngineeringCo.,Ltd(DSME)aredevelopingdesignsfora70,000m3verylargeLCO2carrierandhaverecentlyobtaineddesignapproval.Thevesselmeasures853ftinlengthandwithabeamofapproximately145ft,makingitthelargestLCO2carrierthathasbeencertifiedbyaclassificationsociety.PAGE37SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONAsthesizeofthevesselsgetlarger,thenumberofvesselsmayreduce,butthetotalcapacityrequiredwillfollowthemarkettrend,leadingtoagreaterneedforLCO2carriers.ThereareseveralassumptionsandvariablesinestimatingthesizeofthemarketsuchasCCUSmarketsize,projectsannouncedandthesuccessofthoseprojects,economicclimateanddisruptionssuchasCOVIDanditisstilluncertainhowbigthemarketwilleventuallybe,butasandwhennewprojectsareannouncedandsource-to-sinkmatchingisdone,itisapparentthatanewvesselwillberequiredtosatisfythedemandforoffshorestorage.Inaddition,theCO2utilizationmarketisnascentandthereislargevariabilityintheexpectedgrowthofthemarket,pullinginadditionaldemandandleadingtofurthergrowthinthesizeoftheLCO2vesselmarket.Figure34:LCO2CarrierEstimates(2022–2050).a.Thenumberofvesselsorderedforcarbonstorageapplication(NorthernLights(2)andSanyuKisen)b.Representsa16-foldincreasetomeettheIEAestimatedtotalCCUSrequirementof800milliontonnesperannum(mtpa)from50mtpain2020c.Representsa100-foldincreasetomeettheIEAestimatedtotalCCUSrequirementof5,000mtpafrom50mtpain2020d.Representsafour-foldincreasetoindicativeoftheoffshoreproportionofthetotalCCUSmarketwhichisassumedtobeindicativeoftheneedforLCO2carrierby2030(200MtCO2outof800MtCO2)e.Representsa25-foldincreasetoindicativeoftheoffshoreproportionofthetotalCCUSmarketwhichisassumedtobeindicativeoftheneedforLCO2carrierby2050(1,250MtCO2outof5,000MtCO2)f.EUZeroEmissionTechnologyandInnovationPlatformStudyEstimate,2018Also,itispossiblethattheoffshoresequestrationmarketmaytakeoffquickerthantheonshoremarketduetopermittingcomplexitiesnearpopulationcentersandtheneedforpipelinestotransporttheCO2.Althoughonshorestoragecapacityisextensive,itmaynotconvertintoviableprojectsanddependingonthemomentumofinitialprojectsuccesses,offshoreprojectsmayprovideapathforacceleratingthedeploymentofLCO2vessels,asanimportantpieceoftheCO2valuechain.Intermsoftechnicalfeasibility,thelong-distancetransportationofCO2posesnomoreriskthannaturalgastransmission,sincetheassettechnologyismatureandmanyCO2pipelinenetworksalreadyexist.However,pipelinetransportationcostisverydependentondistance,soshippingisbeingforconsideredforspecificsituations.Oneofthedrawbacksofusingshippingistheneedforaliquefactionfacilityatthepointoforigin;incomparison,CO2canbecompressedtoitssupercriticalphaseandthentransportedviapipeline.Inaddition,shipping’sCO2transporttechnologyisnotyetconsideredmature,withonlyafewcommercialprojectscurrentlyoperational.2022a2030b2050c60050040030020010007002030d2050e2050fABSZEROCARBONOUTLOOKPAGE38OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONWithCCUSexpectedtotakeoffdramaticallyduringthisdecade,itisaveryimportantpartofthesolutionmixtoachievethegoalofnetzero.AsmoreoffshoreCCUSprojectscomeonlineandthecarbonvaluechainmatures,itisverylikelythatthedemandforLCO2carrierswillincreaseandwillbeakeypartofitssuccess.CARBONSEPARATIONForshippingtodecarbonize,choosingtherightpathwaywillbecomplex;butallpathwayswillrequiretheuseofcarboncapturetechnologiesatscaleandlow-carbonfuels.Thecarbontechnologiesinclude:CCUS,directaircapture,andbioenergywithCCS,whichistheprocessofcapturingandstoringCO2.Carboncanbeseparatedusingseveralmethods,includingmembranes,solidsorbentsandliquidsorbents,allofwhichhavebeenproveneffectiveinonshorecarboncaptureprojects.Figure35:CO2SeparationTechnologies.CARBONCAPTUREThecaptureofCO2canoccurpre-combustion(syngas),postcombustion(end-of-pipesolutions)andbyusingoxyfuels.ThecapturedCO2isthencompressedintoaliquidstateandtransportedbypipeline,shiportruck.Thepost-combustionmethodcapturestheCO2afterthefueliscombustedandproducesaproductthatwillrequireadditionaldrying,purificationandcompressionbeforetransportation.Thisisthemostmaturetechnology,butthelowpartialpressureoftheCO2inthefluegasisabigdownside.Pre-combustioncaptureinvolvestransformingthefuelintoanintermediatenon-carbonaceousformcalledsyngas,whichismostlycomposedofH2andCO2.TheCO2iscapturedbeforebeingcombustedandtheH2isthefuel,whencombusted,thatreleaseswatervapor.Oxy-combustioniswhentheburnersaremodifiedtoburnfuelinpureoxygen,insteadofairleadingtoapureCO2stream(thenitrogenoxidesarepreventedandthereisnoneedforCO2/N2separation)andincreasedenergyefficiency.ThedownsidesaretheneedforlargeamountsofO2andhighcombustionchambertemperatures.PrincipalCO2SeparationTechnologiesChemicalAbsorptionPhysicalSeparationDirectSeparationMembraneSeparationOxy-fuelSeparationCalciumLoopingChemicalLoopingChemicalabsorptionisthemostcommonpuriﬁcationtechnology.TheabsorptionprocessworksbycontactingCO2withachemicalinanabsorptioncolumn.Physicalseparationiscurrentlythemaincapturemethodusedinnaturalgasprocessingwithmostofthelarge-scalegasprocessingplantsusingproprietarysolvents.ThemembraneseparationprocessisusedtoseparatetheCO2fromthegasmixturebyusingapolymermembrane.Itconsumeslessenergy,sothecostischeaperthanothertypesofCCUS.Oxy-fuelseparationinvolvesthecombustionoffuelusingnearlypureoxygenandthesubsequentcaptureoftheCO2emitted.CalciumloopingisatechnologythatinvolvesCO2captureatahightemperatureusingtwomainreactors.Intheﬁrstreactor,lime(CaO)isusedasasorbenttocaptureCO2fromagasstreamtoformcalciumcarbonate(CaCO3).Chemicalloopingissimilartwo-reactortechnology.Intheﬁrstreactor,smallparticlesofmetalareusedtobindoxygenfromtheairtoformametaloutside,whichisthentransportedtothesecondreactorwhereitreactswithfuel,producingenergyandaconcentratedstreamofCO2,regeneratingthereducedformofthemetal.DirectseparationinvolvesthecaptureofCO2processemissionsfromcementproductionbyindirectlyheatingthelimestoneusingaspecialcalciner.ThistechnologystripsCO2directlyfromthelimestone,withoutmixingitwithothercombustiongases,thusconsiderablyreducingenergycostsrelatedtogasseparation.PAGE39SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure36:Threecarboncaptureapproaches.DIRECTAIRCAPTURE(DAC)DACtechnologiesdirectlycaptureCO2fromtheatmosphereinsteadofapointsource,suchasapowerplantwithhigherCO2concentrations,andcanbestoredindeepgeologicalformations,utilizedinfoodprocessingorcombinedwithhydrogentoproducesyn-fuels.ThetwocommonlyusedtechnologiesareliquidandsolidDAC.InthecaseofliquidDAC,theairpassesthroughacausticsolutionsuchasahydroxidesolutionwhichremovestheCO2,thenthechemicalsarerecycledintotheprocessandtheairispumpedbackintotheatmospherewithouttheCO2.SolidDACusessorbentsfiltersthatbindtheCO2tothesurfaceofthefilter.Thefiltersareheatedtoahightemperature,releasingtheboundCO2asconcentratedCO2,whichcanthenbecapturedforstorageorutilization.TheCO2intheatmosphereisoflowconcentrationwhencomparedtofluegasfromanindustrialsourceandhence,theenergyneedsarehigheranddecarbonizationoftheenergysourceisparamounttotrulymaketheprocessnetnegative.Capturecostscurrentlyvarybetween$100pertonneto$1,000pertonnewhichmakesitveryexpensive,andthecostscanonlybereducedwithadditionaldeployment.Asof2021,thereare19DACplantsoperatingworldwide,capturingabout0.01MtCO2peryear,withadvanceddevelopmentsunderwayintheU.S.whichcouldreachnearlyoneMtCO2peryear.InSeptember2021,afourkiloton(Kt)CO2peryearplantcameonlineinIcelandthatstorestheCO2inbasaltformations.TheIEA’s2050net-zeroemissionsscenariorequiresDACtobescaledupto85MtCO2peryearby2030and980MtCO2peryearby2050.Pre-combustionCaptureMethodFuelCOCOHOWaterCOExhaustGasesOtherGasesCO+WaterAirChamberGasSeparationCombustionReformingOxy-CombustionCOStorageOxy-fuelCaptureMethodPost-combustionCaptureMethod1,0008006004002000Mt2020DACwithuseDACS203020402050Figure37:CO2capturebydirectaircaptureinthenet-zeroscenario,2020-2030.IEA(2022).DirectAirCapture:Akeytechnologyfornetzero.Allrightsreserved.ABSZEROCARBONOUTLOOKPAGE40OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONDACisreceivinggreatattentionfromprivateandpublicsectors.Privatecompanies,particularlyinthetransportationsector,areverysupportiveofDACandmanyareinvestingtobecomecarbonneutralby2050.DAChasaveryimportantroletoplay,butitisstillverynascentasof2021andthevolumesofremovalaremagnitudeslowerthatwhatiscurrentlyrequired.Asthetechnologyisfurtherdeployedandtherearereductionsinthecostofremoval,DACwillbecomeanimportantpartoftheenergytransitionjourney[96].ALTERNATIVEFUELSANDTHEINTERFACEWITHTHEHYDROGENVALUECHAINAsestablishedinnumerousstudies,themostpromisinglow-carbonfuelsincludeammonia,methanol,hydrogen,methaneandbio-oils.ManyofthesewouldrequireCCStoachievelow-carbonstatus;forexample,bluehydrogenismanufacturedthroughaprocessofsteammethanereformingwithcarboncapture.Bluehydrogen’sbiggestchallengewillbecontrollingtheupstreamfugitivemethaneemissionsfromtheproductionandtransmissionofnaturalgas;thesemayeventuallypreventitfrombeingconsideredalow-carbonfuelwhentheentiresupplychainistakenintoconsideration.Methanehasa20-yearglobalwarmingpotential(GWP)whichis86timeshigherthanCO2;its100-yearGWPis25timeshigherthanCO2.AGWPisdefinedastheheatthatisabsorbedbyanyGHGintheatmosphere,asamultipleoftheheatthatwouldbeabsorbedbythesamemassofCO2.Methane’sGWPratesitamongthesuperpollutants.Overthemediumterm,controllingitwillplayanoutsizedroleinkeepingtheaveragechangeinglobaltemperaturebelow1.5°Ccomparedtopre-industriallevels,atargetsetintheParisAccord[88].Creatingthegreentypesofhydrogen,ammonia,methanolandmethaneallrequiretheuseofrenewableenergy;themainrestrictiontotheirproductionwillbebuildingthecapacitytocreateenoughrenewableenergy.Thecleanestpathwaytodecarbonization,incomparisontolow-sulfurfueloil(LSFO)isrenewableelectricity,butthecostofelectrolyzers,asystemthatuseselectricitytobreakwaterinhydrogenandoxygen,andanybottleneckscausedbyalimitedcapacitytoproducerenewableenergywillpreventitsgrowth.Figure38:Overviewofdifferentfuelproductionpathways.MærskMc-KinneyMøllerCenterforZeroCarbonShippingFeedstocksEmissions(vs.LSFO)RelativecomparisonstoLSFOemissionsof96gCO-eq/MJ(directemissionswell-to-wake)by2030.FuelproductionFuelsGreenelectricityElectrolysisofwaterNaturalgasSteammethanereformingBiomassBiowasteCarbonstorageBiofuelsynthesisCarboncaptureLiquefactionHaber-BoschprocessSynthesisSynthesis&LiquefactionCOCOHe-HydrogenBlueHydrogene-AmmoniaBlueammoniae-MethanolBiomethanole-MethaneBiomethaneBio-oils-1%17%-1%19%-1%-2%6%12%12%PAGE41SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONAccordingtoarecentreport,theamountoffinancingrequiredforshippingtomeetnetzeroby2050isabout$2.4trillion(T),with$1.7Taloneneededtodevelopalternativefuels[89].Mostoftheexpenditurewillberequiredoftheenergyandchemicalindustriestoproducehydrogenfeedstock,forfuelsynthesis,storageanddistribution.Shippingisexpectedtoinvestabout$200million(M)onnewenginesandonboardstoragesolutions.Thisanticipatedcapitaloutlaywillbeahugemarketopportunityforthefuelmanufacturersbutalsoforthosefreightoperatorsthatgetaheadofthecurveintransitioningtowardsalternativelow-carbonfueloperationsasitisexpectedthatmanyclimate-consciousconsumersmaybewillingtopayasmallcarbonpremium,whichwillcreateanewequilibriuminthemarketplacefromapricingstandpoint.Thealternativefuelsmarketisahugeopportunityfortheoilandgasindustry,aswellasforengineandturbinemanufacturers.ControlsystemmanufacturersthatdesignonboardCCUSdeviceswillneedtofindwaystomaketheirproductsmorecostcompetitiveandresolvetheCO2storage,powerconsumptionandspaceissuesonvessels.Oncetheyareproventobetechnicallyfeasible,end-of-pipesolutionswillberapidlydeployedtosupportdecarbonization.Figure39:Thetotalglobalinvestmentrequired,2020–2050.CCUSASANEND-OF-PIPESOLUTIONFORREDUCINGVESSELEMISSIONSAsanend-of-pipesolutiontoreducevesselemissions,CCUSisstillinitsinfancy;presentland-basedCCUSequipmentcannotbeusedonshipsbecauseitspowerconsumptionandspacerequirementsarehugechallenges.Inaddition,thesystem’scaptureefficienciesarenotproven,andstorageonboardisdifficult.Solidificationtominimizetheimpactofoceanwaveshasbeenproposed[90].IntegratingaCCUSsystemonboardwouldinvolveadditionalcapitalandoperationalcostsfromretrofittingandtherewouldneedtobeaclearvaluechainestablishedforcapturedcarbonforittobeeconomicallyviable[91].However,afewoperationalprojectshaveshownpromise.MitsubishiHeavyIndustrieshasbegunverificationtestingofamarine-basedCO2capturesystemaspartofits“CC-Ocean”projectinpartnershipwithKawasakiKisenKaisha,Ltd.(“K”Line)[92].Itwastheworld’sfirstdemonstrationtesttobeconductedduringoceannavigation,andthecapturedstreamproducedapurityof99.99percent,aqualitythatcanbeusedinseveralapplications.Digitalsolutionstooptimizerouting,speed,engine,energysystemsandhullperformanceTechnologiesrelatedtodragreduction,exhausttreatmentandpowersystemsintheglobalﬂeet$2.4TTotal$0.1TOperationalEciency$0.6T5%TechnicalEciency$1.7TFutureFuels$0.2TOnboardEnginesandStorage$0.7THydrogenProduction$0.7TFuelSynthesis,StorageandDistributionTheSectorsinvolvedbyLeverMarine-freightTransportsEnergyChemicalsReprintedwithpermissionfrom,“GlobalShipping’sNetzeroTransformationChallenge”©2022BostonConsultingABSZEROCARBONOUTLOOKPAGE42OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONSUMMARYOFCCUSINSHIPPINGAstheworldaggressivelydecarbonizesandtheCO2supplychainmatures,theroleofCCUSwillonlygrow.ThegrowthofCCUScouldhelpfilldemandformorelong-distancetransportationandbringtheshippingindustrytotheforefront.Withtheshippingindustryhavingplayedamajorroleindevelopingthemarinesupplychainsfornaturalgases,itisonlyamatteroftimebeforeitsservicesbecomeindispensabletotheCO2supplychain.Inaddition,thedevelopmentofalternativefuelstodecarbonizesectorsthataredifficulttoabate,whichincludelong-distanceshipping,willgiveCCUSanimportantroleinbuildingthehydrogenandammoniaeconomies.Shippingwillbeakeycomponentinthelong-distancetransportofammonia.EffortstoputCCUSonboardvesselsareverymuchintheirinfancy;withjustafewpilotstudiesexecuted,ithasalongwaytogobeforeitcanbeconsideredaviabletechnology.However,thereareafewgreenshootsanditwillmoveupthematurityscaleveryquicklywithmoreadoption.3.4ROLEOFDROP-INTRANSITIONFUELSOneofthetransitionalstrategiestoaddresstheemissions-reductiongoalsoftheIMOandotherregulatorybodiesistoidentifythebiofuelsthatcouldbereadilyusedintwo-strokeorfour-strokemarinedieselengineswithminimumorzeromodifications.Apartfromactingasadrop-in,carbon-neutralsolutionthatcansupportthetransitionoftheexistingfleettolowercarbonintensity,biomasscanalsoprovidetherequiredcarbonforsynthesizingothercarbon-neutralfuels,supportingtheconversionofhydrogentootherenergycarrierssuchasmethanol.Processessuchasgasificationofwastebiomass,willprovidetherequiredcarbonmoleculesthatcanbeusedinordertoconverthydrogenproducedbyrenewableenergysourcesintoothercarbon-neutralfuelssuchasmethanol.Similarprocessescanbeusedtodeliversyntheticnaturalgas(SNG).Regardingbio-oilfuelblends,anincreasingnumberofshipownershavestartedtotestbiofuelblends,asthedegreeofcarbonreductionscanbedeterminedbytheratioofthebiofuelblendedintothefossilfuelofchoice.Industryispresentlyfocusedontheonboardtestingofhigherblendratios(B20-50).Theseblendsmainlyconsistofapercentage(20to50percent)offattyacidmethylesters(FAME)blendedintoaverylowsulfurfueloil(VLSFO).ABSishelpingshipownerstomeasuretherelatedexhaust-gasemissionsinanumberofprojects.THEPROSANDCONSUsingbiofuelscanreduceasignificantamountofthewell-to-tankpartoftheoverallGHGemissions.However,anexhaustivelife-cycleanalysismustbecarriedouttoensureallpartsofbiofuelproduction—suchasfeedstocks,conversiontechnologyandtransportationprocesses—aresourcedandconductedinthemostsustainablewaypossible.Biofuelsareclassifiedinfourdistinctcategoriesbasedonthefeedstockusedfortheirproduction.Theseinclude:•Firstgenerationbiofuelsarederivedfromfoodcrops•Secondgenerationbiofuelsarebasedon(non-food)biomass,whichincludelignocellulosicfeedstockanddifferentkindsofwasteproducts•Thirdgenerationbiofuelsarebasedonalgae—thetechnologytoproducethiscategoryofbiofuelisintheresearchphase.•Fourthgenerationbiofuelsarealsointheresearchphase;thegoalisforthemtobedevelopedusinggeneticallymodifiedmicro-organismsandcropsasfeedstocksAccordingtotheInternationalCouncilonCleanTransportation(ICCT),themostimportantfactorintheproductionprocessthatdeterminesasustainabilityratingforeachbiofuelisthefeedstock.Assuch,thefirstgenerationofbiofuelsarelesslikelytobeusedtosupportthemaritimeindustry’sdemandforcleanerfuels,asthisalsowouldhaveadirectimpactontheareasavailableforfoodproduction.PAGE43SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONThesecondgenerationisamoreappealingoptionbecausewasteproductsareusedasfeedstock;however,theavailability,qualityandquantityofthesefeedstockscanaddcomplexitytotheproductionofbiofuels.Herearesomeotherfactorsrestrictingtherapiduptakeofbiofuelsinthemaritimeindustry:1.Thepotentialeffectofcarbondepositsinthecombustionchamber,dependingonthepercentageblended.2.Watercontaminationcanleadtohighermicrobialgrowthandgellingatlowtemperatures.3.Maintenanceconsiderationsforbiofuelstoragetanks—microbialinfestationcanhaveasignificantimpactontankstructureandcoating.4.Scalingupthebiofuelsupplychainswillrequireasignificantamountoftime—availabilityatscaleisstillquestionable.5.Otherindustries(especiallyhard-to-abatesectors)willcompeteforbiofuelquantities.Ontheotherhand,biofuelscanbeusedasdrop-infuelsthatcanbereadilyusedinexistingengineswithoutmodificationandtheinherentdowntime.Additionally,theirtransport,handlingandstorageoperationsaresimpleandcost-effective.Belowisaholisticoverviewofbiofuels,productionpathwaysandbiomassfeedstockgroups.ABSZEROCARBONOUTLOOKPAGE44OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure40:Productionpathwaysandbiomass-feedstocksources[28].PRICECONSIDERATIONSIntermsofprice,biofuelsareexpectedtohavecompetitiveand,insomecases,lowerpricesthanassociatede-fuels,mainlyduetothelowerpowerrequirementsrequiredfortheirsynthesis.Thefollowingfigureillustratestheexpectedpricerangesforbiofuels,e-fuelsandtraditionalfuels,followingdifferentmodelingscenarios.Itshowsthepriceadvantageofbiofuelsin2030comparedtotheire-fuelequivalents.Biofuelsareexpectedtodropmarginallyinpriceapproaching2050,whilethepriceofe-fuelsareexpectedtofallsignificantly(duetoincreasedefficiencyandlowertechnologycosts).Nonetheless,biofuelswillremainattractivein2050.FuelOilsBiofuelReplacedfuelBiodieselsBioalcoholsStraightVegetableOil(SVO)PyrolysisoilBiocrudesGaseousbiofuelsLiqueﬁedNaturalGas(LNG)DistillatesFattyAcidMethylEster(FAME)HydrotreatedVegetableOil(HVO)Fischer-Tropsch(FT)dieselDimethylEther(DME)MethanolEthanolHydrothermalLiquefaction(HTL)biocrudeSolvolysisoilLiqueﬁedbiomethane(LBM)PAGE45SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure41:Comparisonofcostsforalternativefueloptions.Biomass-baseddieselsmakeupagrowingshareoftheworld’sproductionofbiofuel.AccordingtocollaborativeworkbytheOrganizationforEconomicCooperationandDevelopmentandtheUnitedNations’(U.N.’)FoodandAgricultureOrganization(OECD-FAO),theirAgriculturalOutlook2019to2029expectstheglobalproductionofbiodieseltoincreasefrom11billiongallonsin2020to12.15billionby2029.However,thislevelofproductionmaydependonthesupportofgovernmentpolicy,afactorthatcouldimpedeoracceleratethebiofuelagenda.Forthatproductiongrowthtobeachieved,high-levelinfluencefrompolicyandregulationmayberequired.Thecurrentamountoffeedstockavailableforbiofuelsislimitedduetocompetitionwiththeagricultural,automotive,aviation,plasticandchemical,cementandbuildingmaterialindustriesandmanymore[29].Inpractice,allindustrieswillbecompetingforcarbon-neutralfeedstocks;thiswillcreateanincreaseddemandforcarbonfeedstocksandpossiblyincreasedinvestmentintodirectaircapture.Overall,theavailabilityoffeedstockandfuelmayvarydependingonconditionsassociatedwithlocation,season,regulationsandtheenvironment.AccordingtoarecentmodeldevelopedbyZeroCarbonShipping,biofuelsupplyisexpectedtogrowuntil2050;biomethanolisexpectedtodominatethesupplyby2045(whichcanbeseeninthefigurebelow).Figure42:EvolutionofbiofuelsupplyformaritimeindustryasperZCSITSStudy[11].Bio-oilsGlobalizedest.FuelProductionCostsGlobalizedest.FuelPrices~22~5Biomethanol~22030$/GJEectofCarbonPricingat$230/tCO2eq2050~24Biomethane~3~1~1~1~22~23LSFO~11~20~11~20LNG~8~16~9~16~22~16e-Ammonia~32~17e-Methanol~44~23e-Methane~45~26BlueAmmonia~4~3~24~21MærskMc-KinneyMøllerCenterforZeroCarbonShipping20181614121086420EJ/year20202025203020402050Biomethanol20452035Bio-oilsBiomethaneMaritimeenergydemand,modeledinvariousscenariosMærskMc-KinneyMøllerCenterforZeroCarbonShippingABSZEROCARBONOUTLOOKPAGE46OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONENGINECOMPATIBILITYANDDIFFERENTTYPESOFBIOFUELSBiofuelshavedifferentfuelpropertiesthantraditionalfossilfuels(differentheatingvalues,iodineandcetanevalues,etc.).Becausebiofuelpropertiesdeviatefromthefuelsthatenginesweredesignedfor,therecanbeaslightincreaseinnitrogenoxides(NOx)andotherexhaust-gasemissions.Mostbiofuelsfollowadefinedsetofstandardstokeeptheirfuelpropertieswithinamanageablerange.Someofthestandardsinclude:EN14214andASTMD6751;forblendsASTMD6751andEN16709.Enginemanufacturersareunabletotesteverybiofuelandblendforpracticalreasons,sotheycannotsuggesthowusingsomefuelswillaffecttheirengines.Overall,calculatingtheeffectsofusingbiofuelsonanengine,andtheresultantexhaust-gasemissions,ismadeevenmorecomplexbythedifferentinjectionsystemsandcombustiontemperatures.ThatiswhymanyshipownersperformextensivetestingofbiofuelsandtheirblendstoensurethatNOxandotheremissionsstaywithinlimitsduringoperation.TheunsaturatedfattyacidscontainedinseveralbiofuelscanhaveadirectinfluenceonNOxemissionsandaccordingtoInternationalConventionforthePreventionofPollutionfromShips(MARPOL)AnnexVI(Reg.18.3.2.2),“non-petroleumfuelsshallnotcauseanenginetoexcessapplicableNOxemissionlimit.”Therearesomebiofuelsthatarenotreadilycompatiblewithmarineenginesorwhoseusewouldrequirelowerblendingpercentages.Amongthoseispyrolysisoil,whichduetoitspropertiescannotbereadilyusedinmarineenginesorsupplysystems,hydrothermalliquefactionfuelsandFAME.Lately,ithasbeenfoundthatpyrolysisoilcanbetreatedwithhydrogentoincreaseitslowercalorificvalue(LCV),makingitcompatiblewiththemarineenginesoftoday.METHODOLOGIESFORLIFE-CYCLEANALYSISWhenconsideringdrop-infuelsforafleet’sdecarbonizationstrategy,shipownersneedtotakelife-cycleemissionsintoaccount.Whileonatank-to-wakebasismostbio/drop-infuelshavesimilarCO2andcarbondioxideequivalent(CO2eq)emissions,theirproductionpathwaysmayresultinloweremissionsfromthewell-to-tankcomponentoftheirlifecycle.However,theindustrycurrentlylacksinternationallyacceptedstandardsonhowtomeasurethelife-cycleimpactofmaritimefuels.Manystandardsarebeingused,amongwhicharetheGREETmodel,REDII(inrelationtoFuelEU),U.K.DEFRAandothers.Forthesamefuelandproductionpathway,thesemodelscanproducedifferentassessmentsoflife-cycleemissions;onestandardmayreturnacarbon-neutralassessment,whileanotherassessesthesamefuelashavingahigherlife-cycleimpactthantraditionalfuels.Thereasonsforthisareknownandincludedifferentassumptionsinthemodels,differentboundariesforlife-cycleanalysis,attributionalversusconsequentiallife-cycleanalysis,etc.Increasingly,customersarebecomingmoreawareofthelife-cycleemissionsofspecificproducts.Andasthemainconduitforinternationaltrade,maritimeshippingneedstointegrateitsemissionsintothoseofthefulllogisticssupplychain.Inthatsense,theindustrywouldbenefitfromthecreationofacommonlyacceptedinternationalstandard.Currently,theIMOislookingatintroducingdedicatedlife-cycleGHGandcarbonintensityguidelinesformarinefuels,whichcouldimpactotherIMOregulations.Inparallel,theindustryisworkingtowardsafullerintegrationofthesupplychainsfromdifferentmodesoftransport,suchasthoseenvisionedbytheGlobalLogisticsEmissionsCouncil’sframework[30].3.5THEROLEOFENERGYSTORAGEAsweexplorethehydrogenvaluechain,weidentifythatthefrequentintermittencyofrenewableenergypowerisachallengefortheexpansionofrenewableenergysources.Therefore,energystoragesystemsareconsideredasolutionthatwouldhelptheintermittencyproblem,provideconstantpowerwhenrequiredandsupportthevaluechain.Inthissectionweexaminesometechnologiesthatareindifferentstagesofmaturityordevelopment,andwealsodiscusshowthesametechnologiescanprovidedecarbonizationopportunitiesforships.PAGE47SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONLI-IONBATTERYTECHNOLOGYLithium-ion(Li-ion)batteriesarepresentlydominatingthemaritimeindustry’senergystoragesystems(ESS)marketbecausetheyareanefficientwaytostoreanddistributeelectricalenergyonvessels.Nevertheless,thetechnologyhasmanylimitations,including:•Therequirementforcomplexmonitoringequipmentandcrewtrainingregimes(theymustbeoperatedwithinaspecificrangeoftemperaturesandvoltages).•Susceptibilitytothermalrunaway;risingtemperaturecancauseaself-sustainingchemicalreaction,whichultimatelycanleadtobatteryfailureandincreasedrisksofexplosionorfire.•Extensivebatterymanagementandfireprotectionsystemsareneeded.•ThetheoreticalenergyandpowerdensityofLi-ionbatteriesishardtoreach,limitingtheirpotentialforuseinthemaritimeindustry,wherehigherpowerandenergylevelscanbeneeded.•Theaccommodationspaceforthesesystemscanhaveadirecteffectoncargopayloadsandengineroomarrangements.ContainerizedLi-ionbatteriesare,however,aratherpracticalsolutionforsmallercontainervessels.DEVELOPMENTSINBATTERYTECHNOLOGYThesafetyrisksandenergylimitationsofLi-ionbatteriesisdrivingresearchanddevelopmentforalternativebatterytechnologies,suchastheMetal-Air,RedoxFlow,andtheammonia-relatedandsolid-staterangesofbatteries.Thereareseveraltechnologiesindevelopment,withLi-ioncurrentlybeingthemostcommon(seetablebelow);theonlyothertechnologycurrentlydeployedformarineuseisthemoltensaltbatteryvariety[129].Figure43:Electricitystoragetechnologiesmaturitycurve.Acomparisonoftheprosandcons,researchstatusandassociateddataforpromisingbatterytypescanbeseeninthetablesonthefollowingpages[129].AdvancedLeadAcidbatteries2HydrogenFlowbatteriesFlywheel(lowspeed)Compressed-airenergystorage(CAES)Sodium-sulfur(NaS)batteriesLithium-IonbatteriesMoltensaltPumpedhydrostorage(PHS)SupercapacitorSuperconductingmagneticenergystorage(SMES)ResearchCapitalrequirementxTechnologyrisk1.CAEScompressed-airenergystorage2.ValveregulatedLeadAddbatteriesisamaturetechnologyDevelopmentDemonstrationDeploymentMatureTechnologyLegend:MechanicalstorageElectro-chemicalstorageThermalstorageElectricalstorageChemicalstorageSyntheticnaturalgasAdiabaticCAES1A.T.KearneyABSZEROCARBONOUTLOOKPAGE48OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONADVANTAGESDRAWBACKSPHS1Commercial,largescale,efficient,scalableinpowerratingLowenergydensity,availabilityofsites,dependsonavailabilityofwaterCAES2Cost,flexiblesizing,largescale,leveragesexistinggasturbinetechnologyLackofsuitablegeology,lowenergydensity,needtoheattheairwithgas,possibleexposuretonaturalgaspricesFlywheelsPowerdensity,efficient,scalableCost,lowenergydensityNaSbattery3Efficient,density(powerandenergy),cycling(vs.otherbattery)Safety,dischargerate(vs.otherbattery),mustbekepthotLi-ionbattery4Efficient,density(powerandenergy),matureformobilityCost,safetyFlowbatteryIndependentenergyandpowersizing,scalable,longlifespanCost(morecomplexbalanceofsystem),reducedefficiencySupercapacitorHighpowerdensity,efficientandresponsiveLowenergydensity,cost($/kWh),voltagechangesSMES5Highpowerdensity,efficientandresponsiveLowenergydensity,cost($/kWh),notwidelydemonstratedMoltensaltCommercial,largescaleNicheforconcentratingsolarpowerplantsHydrogenHighenergydensity,versatilityofhydrogencarrierLowround-tripefficiency,cost,safetySNG6Highenergydensity,leveragecurrentinfrastructureLowround-tripefficiency,costTable8:Prosandconsofselectedelectricitystoragetechnologies.1.PHS:pumpedhydrostorage;2.CAES:compressed-airenergystorage;3.NaS:sodium-sulfur;4.Li-ion:lithium-ion;5.SMES:superconductingmagneticenergystorage;6.SNG:syntheticnaturalgas.Source:A.T.KearneyEnergyTransitionInstituteanalysis;IRENA(2012),“ElectricityStorage—TechnologyBrief”.Source:EnergyTransitionInstitutePAGE49SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONBatteryTypeVoltage(V)SpecificEnergy(Wh/kg)EnergyDensity(Wh/L)CycleLifePowerDensity(mW/cm2)LithiumIon3.7265670HighMetal-AirBatteriesLithium-AirBatteries2.963,4632,004LowZinc-AirBatteries1.651,0851,670Low479Aluminum-AirBatteries2.712,791LowRedoxFlowBatteriesVanadiumRedoxFlowBatteries1.252015–25HighIron-ChromiumFlowBatteries0.94High70–100AmmoniaBatteriesThermallyRegenerativeAmmoniaBatteries1.03VeryLow3.7AmmoniaFlowBatteriesVeryLow2.80at55°CSolidStateBatteries2.6350MediumTable9:Batterytechnologydata.indicatestheoreticalvalue,indicatesnoestablishedvalueBatteryTypeLithiumIonMetal-AirRedoxFlowAmmoniaSolidStateRateofChargeFastMediumSlowFastTable10:Batteryrateofchargecomparison.Currentmetal-airbatteriesarerechargedmechanicallybyreplacingtheanodesandelectrolyteRedoxflowbatteriescanalsoberechargedmechanicallybyreplacingtheelectrolytesinadditiontostandardchargingmethods.UNITCOSTSDROPPINGThepriceperkilowatt-hour(kWh)forlithiumbatterieshasdroppeddramaticallyinthelastdecade(seefollowingtable);becausetheyarelikelytofallevenfurther,itwillbedifficultforcompetingtechnologiestocapturemarketshare,leavingLi-ionbatterytechnologyasthefrontrunnerfortheforeseeablefuture.ABSZEROCARBONOUTLOOKPAGE50OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure44:Lithium-ionbatterypriceoutlook.Withthemaritimeindustry’sdecarbonizationjourneywellunderway,interestinESSisrising,especiallyforshort-seashippingoperators.Theelectrificationofvesselsisprovingtobeaverypromisingdecarbonizationpathway,particularlywhenusedwithlow-carbonfuelssuchashydrogen,ammonia,methanolandLNG.Forownersconsideringtheelectrificationoftheirships,therearethreemaintechnologyoptionscurrentlyavailable:1.Diesel-electricgenerators:Thesecombustdieseltogeneratetheelectricitytodriveanelectricenginethatmovestheship’spropeller[83].2.Hybriddrives:Batteriessupplementthefuelsusedintheinternal-combustionengine.Theystoreenergyandallowthevesseltoswitchtoelectricityforshortperiodsoftime[83].3.Fullyelectricdrives:Allenergyisderivedfrombatteries[83].Currently,batterytechnologiesareinthenascentstagesoftheirdevelopmentformaritimeuse;theirlowenergydensitycurrentlyprecludesthemfrombeingusedforlongerdistancesduetotheprohibitivebatterysizesthatwouldbeneeded.Anotherbarriertotheiradoptionforwidermarineuseisthattheonshorecharginginfrastructurehasyettobedeveloped,thiswouldrequireportoperatorstomakesignificantinvestmentsaheadofthemarket[83].Inhybridsystems,ESScanbeusedforpeakshavingpurposestoassistdieselenginesthatareworkingatoptimalloads.AlltheaboveESSoptionshavethepotentialtoreducefuelconsumptionandhaveasignificantimpactononboardenergyefficiency,especiallywhenthesystemsarecoupledwithrenewableenergysources,suchassolarpanelsorwindharnessingdevices.MARKETDEMANDEventhoughsomeESStechnologieswillneedtomaturebeforeawiderapplicationwillbepossible,themarketappearsconfidentinthepromisetheyhold.ThesizeoftheEuropeanmarketforelectricships,forexample,isprojectedtoalmosttripleto$5.3Bby2030(from$1.6Bin2020);lithium-ion(Li-ion)batteriesareexpectedtobethemostdominanttechnology,followedbyelectro-solar,leadacidandfuelcells.1,2001,0008006004002000BatteryCost(€/kWh)Year201520202025203020351,054519360211180140100BloombergNEFPAGE51SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONAsillustratedinthechartbelow,thenumberofshipswithbatteriesincreasedsignificantlybetween2010and2021;therewereeightshipswiththesetechnologiesin2010,whiletherearecurrently436shipseitherinoperationoronorder.Figure45:SizeoftheEuropeanmarketforfullyelectricshipsfrom2018to2020,withaforecastthrough2030,bypowersource(inmillion$).Figure46:Numberofshipswithbatteriesinoperationandonorderworldwidefrom2010to2021.LOWERCARBONPRODUCTIONArecentreport(2022)fromtheIMO’sLow-CarbonGlobalIndustryAlliancefoundbatteriestohavethelowestpotentialtocontributetoglobalwarmingwhencomparedtootheralternativefuels(greenhydrogen,bluehydrogen/ammonia,biofuelsfromnon-wastesourcesandenergycarriers).Mostofthealternativefuelsinvestigatedweretypicallylowcarbon,dependingontheproductionpathway.Whileelectricmotorsdonotproduceemissionsatthepointofrelease,theyhavethepotentialtosimplytransferthegenerationofemissionsfrommobiletostationarysources,i.e.,frommarineenginestopowerplants.Inthiscontext,theoriginalsourceoftheelectricpowerisveryimportant;ifthegridisdirty—i.e.,thepowerisgeneratedfromcoal/naturalgaswithoutCCS—theelectricityisfarlesslikelytobeconsideredalow-carbonsourceofpower.01,0002,0003,0004,0005,0006,000203020282025202020192018Lithium-ionbatteryLead-acidbatteryElectro-solarFuelcellsStatista50045040035030025020015010050020108182652697710112716830339843620112012201320142015201620172018201920202021NumberofShipsStatistaABSZEROCARBONOUTLOOKPAGE52OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONFigure47:Globalemission-relatedimpactcategoriesandindicators,withindicationoflikelyrelevance.DRIVINGCHANGETheevolutionofbatterytechnologiesiscurrentlybeingdrivenbytheautomotiveindustry,whereLi-ionbatteriesarethedominanttype.Li-ionbatteriesalsoappeartobethemostprominenttechnologyforcurrentmaritimeapplications;ferriesandtugsarethefirstmovershiptypesduetothelowdistancestheytravelandtheirlowerpowerapplications.Inaddition,therearesomeinterestingearlydevelopmentsintheelectrificationofcargoships,wherestartupsarelookingatthepotentialforbatteryswappingtothesolvethecurrentproblemsassociatedwithsizesandweightsofthecurrenttechnologies[97].Theseprojectsareworkingonbuildingbatteriesinstandard20feet(ft)shippingcontainerstoallowforquickreplacementsduringportvisits.Assmallershipsoperateatmultipleportsforeachtransit,thissolutionisseenashavingpotential[97].CONSTRAINTSONADOPTIONAnimportantconstraintonthelow-carbonpotentialofelectrificationisthelife-cycleimpactofbatteryproduction.TherawmaterialsneededtoproduceLi-ionbatteries(e.g.,lithiumandcobalt)requiresignificantquantitiesofenergyandwatertobeusedintheirextraction;thedisposalofthesebatteriescanalsohaveadetrimentalimpactontheenvironment.Itwillbeimportantforpolicymakersandinternationalorganizationstoregulatetherecyclingofbatterysystemsandincentivizeagreenerextractionprocessfortheassociatedrawmaterials.Additionally,anincreaseincross-industrydemandforESSisexpectedtochallengethesupplyofmaterialssuchaslithium,cobaltandnickel.CHARGINGTECHNOLOGYThegrowingnumberofESS-equippedvesselshasgivenrisetoinnovativebatterychargingconcepts,includingwirelessmethods.Justaswithmodernsmartphones,severaltechnologyprovidersareofferingwirelesschargingoptionsforshipssailingonshort-tomedium-lengthroutes;someoftheseoptionspromisesaferchargingoperations(eliminatingtheriskofconnection/disconnectiondamage),areductioninmaintenancecostsandshorterchargingtimes.ImpactindicatorFuels/energycarriersandassociatedsupplychains“Green”fuels(H2,NH3,CH4,CH3OH)GlobalWarmingPotential(GWP)OzoneDepletionPotential(ODP)“Blue”fuels(H2,NH3)H2fromplasticwasteBiofuels(bio-CH4bioethanol,biodiesel)fromorganicwaste1stgenerationbiofuels(bioethanol,biodiesel)fromnon-wasteresourcesElectricity(foruseinbatteryelectricpowertrains)L/MaLc/MdLeLfLLLLLLHeMbIndicationoflikelyrelevance:L(ow)/M(edium)/H(igh)aPotentiallymedforCH2/CH3OHandNH3dueto,respectively,fugitiveCH4andN2OemissionsbPotentiallylowGWPforH2ifusingCCScAssumingcut-oruleassigningzeroupstreamimpacttowastesubstratedIfcarbonemissionsfromplasticwastearesimplyvented(insteadofcaptured)eHighimpactduetoLUCemissionsfDependsonmixoftechnologiesusedforelectricitygeneration(lowimpactforrenewablesandnuclear);impactpertonne-kmisfavorablyinﬂuencedbycomparativelyhigherpowertraineciency©IMOPAGE53SETTINGTHECOURSETOLOWCARBONSHIPPINGABSOVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBONELECTRIC-POWEREDSHIPSBelowarerecentexamplesofelectric-poweredvesselswithindicativepowercapacities[98].1.StenaJutlandica—50,000kWh,ferryoperatedbetweencitiesinSwedenandDenmark.2.AIDAperla—10,000kWh,aGermancruiseline,whichcancarrymorethan4,000passengersandcrew.3.Ellen—4,300kWh,Danishferry4.Projecte5—4,000kWh,Japanesefuel-supplyvessel5.Guangzhoutanker—2,400kWh,ChinesecoaltransportationvesselWithnumerouselectrificationprojectsoperational,andmoreunderconstruction,ESSsolutionsareexpectedtoplayabiggerroleintheworld’smarinedecarbonizationpathways.Whilemuchprogressneedstobemade,wideradoptionofESSisexpectedtocreateadominoeffectthatwillleadtotheelectrificationofthemaritimepowerrequirementsinsomesectors:asadoptionescalatesbatterytechnologieswillimprove;renewableenergycapacitywillexpand;andtheimpetuswillgrowtobuildthecharginginfrastructure.TheIMO’saggressivedecarbonizationtargetsandcommitmentsbymajorfreightchartererssuchasAmazonandIkeatozero-carbonoceanshippingby2040[99]shoulddrivegreateradoptionofESS.Thebarrierstomaritimedeploymentcanbeexpectedtofalland,ultimately,ESSuseshouldmirrorthatofmanyland-basedindustries:inotherwords—demand-drivendeploymentas,whenandwhererequired.ABSZEROCARBONOUTLOOKPAGE54OVERVIEWOFTWOEMERGINGVALUECHAINS:HYDROGENANDCARBON4CARBONMARKETSANDPRICINGMECHANISMSPuttingapriceonthevolumeofthecarbondioxide(CO2)emittedallowstheexternalcostsassociatedwithgreenhousegas(GHG)emissionstobecapturedandtiedtotheirsources.Thesearesignificantcostsforwhichthepublicindirectlypays,suchascropdamage,healthcarecostsfromheatwavesanddroughtsandpropertylossesduetofloodingandrisingsealevels.Byputtingapriceoncarbon,thosewhoareresponsibleandabletopreventGHGemissionscanshouldermoreofthefinancialburdenfortheharmtheycause.Apricealsogivesemittersafinancialincentivetochangetheirpracticesandreducetheiremissions,ratherthandictatinghowreducingemissionsshouldbeachieved.Thiswayenvironmentalgoalsareachievedbysocietyinthemostflexibleandcost-efficientwaypossible.AnadequatepriceforGHGemissionsisessentialtoincorporatethecostsofclimatechangeintothewidestpossiblerangeofeconomicdecision-making,andtoencouragethedevelopmentofenvironmentally-friendlytechnologiesandpractices.Cleantechnologiesandmarketinnovationcanbefueledbynew,low-carboneconomicdrivers,ifthefinancialinvestmentsneededtostimulatethemcanbemobilized.4.1GLOBALCARBONPRICINGCarbonpricing'spotentialroleinthetransitiontoalow-carboneconomyisgainingacceptancefromgovernmentsandbusinessesalike.Climatepoliciesthatincludemechanismssuchascarbonpricingaccountfortransitionrisksandopportunities,allowingforthereassessmentofstrategiestostimulatecleantechnologyandmarketinnovation.Manyoftoday’sbusinessesuseinternalcarboncalculationstoevaluatethepotentialimpactofmandatorycarbonpricesontheiroperations,andtoidentifypotentialclimaterisksandrevenueopportunities.Finally,long-terminvestorsusecarbonpricingtoassesstheimpactofclimatechangepoliciesontheirinvestmentportfolios,allowingthemtoreassessinvestmentstrategiesandreallocatecapitaltolow-carbonorclimate-resilientactivities.Theillustrationbelowhighlightsthefivemaintypesofcarbonpricing;theseoptionscontinuetobefine-tuned,adaptingtonewcircumstancesandincorporatinglessonslearned.Figure48:Themaintypesofcarbonpricing[32].EmissionTradingSystem(ETS)Asystemwhereemitterscantradeemissionunitstomeettheiremissioncompliancetargets.Bycreatingsupplyanddemandforemissionsunits,anETSestablishesamarketpriceforGHGemissions.CarbonTaxTaxdirectlysetsapriceoncarbonbydeﬁninganexplicittaxrateonGHGemissionsi.e.apricepertCOe.OsetMechanismAnosetmechanismisusuallyproject-orprogram-based,whichoerscarboncreditstoentitiesinaccordancewithanaccountingprotocolortheirownregistry.Result-basedClimateFinance(RBCF)RBCFmakespaymentstoprogramswhichareveriﬁedtohaveclimatechangemitigatingoutcomes,suchasemissionreductions.InternalCarbonPricing(ICP)Organizationsusuallyuseinternalcarbonpricingtodirecttheirdecision-makingprocessrelatedtotheeects,risksandopportunitiesofclimatechange.PAGE55SETTINGTHECOURSETOLOWCARBONSHIPPINGABS4.2TAXINGCARBONANDSUBSIDIZINGALTERNATIVEENERGYSOLUTIONSAcarbontaxisafeeoneachunitofCO2andisindicativeofthesocialcostofthesecarbonemissions.Thereiseconomictheorytosupportcarbonpricingasapotentiallyeffectiveandpowerfultoolforincentivizingreducingandremovingemissionsatthelowestpossiblecost.Italsodrivesbehavioralchange,technologicalinnovationandinvestmentdecisions—particularlyintheprivatesector.Carbonpricingimposedbygovernments,whetherthroughanemissionstradingsystem(ETS)oracarbontax,canbeaneconomicallyefficientmethodofreducingemissions,asitallowsforselectingtheleastexpensiveoptions.Acap-and-tradeprogramcapsthemaximumamountofCO2allowed;forindustrieslookingtoexpand,afinitecarbonmarketwillbeavailabletobuycarboncredits.Asof2021,nearly27nationalandsub-nationaljurisdictionshaveimplementedacarbontaxinstrument,withmanyadditionaljurisdictionsscheduledtoimplementandafewmoretakingitintoconsideration.ThisdoesnotincludethejurisdictionsthathaveanETS.Thenon-ETSschemesareestimatedtocovernearly2.99gigatons(Gt)ofcarbondioxideequivalent(CO2e)emissions,orroughly5.5percentoftheglobalGHGemissions.Figure49:Summarymapofregional,nationalandsubnationalcarbonpricinginitiative[33].WorldBankETSimplementedorscheduledforimplementationCarbontaximplementedorscheduledforimplementationETSorcarbontaxunderconsiderationETSandcarbontaximplementedorscheduledETSimplementedorscheduled,ETSorcarbontaxunderconsiderationCarbontaximplementedorscheduled,ETSunderconsiderationABSZEROCARBONOUTLOOKPAGE56CARBONMARKETSANDPRICINGMECHANISMSFigure50:ShareofglobalGHGemissionscoveredunderselectedregional,nationalandsubnationalcarbonpricinginitiatives[33].TheUnitedStates(U.S.)currentlydoesnothaveacarbontax,buttherehavebeennumerousproposalsatthefederallevel,rangingfrom$20to$160perton[34].Carbontaxasapolicyisdifficulttolegislateinmanyjurisdictionsbecauseitisaregressivetaxthatwilldisproportionatelyimpactrelativelypoorerpeople.Hence,itiscurrentlyinimplementationingenerallyrichormiddle-incomecountries,withtheU.S.beinganexception.WhiletheU.S.doeshaveacap-and-tradeprograminafewofthesub-nationaljurisdictions(California,Massachusetts,Virginia,OregonandWashington),thereisnofederalcap-and-tradeprogram,noristhereafederalmechanismforcarbontaxes.Globally,thelevelofcarbontaxesleviedasofApril2021rangesfromamaximumof$137pertoninSwedento$1pertoninPoland[35].TheinitiativeinSwedenisoneexampleofacasewhereithasbeenshownthatcarbonemissionscanbedecoupledfromeconomicgrowth[36].There,GHGemissionsfellby26percentbetween1990and2017,whilegrossdomesticproduct(GDP)grewcumulativelyby78percentoverthesameperiod.Swedenisagreatcasestudyoncreatingeconomicincentivestopushtheeconomydownasustainablepathwithoutimpactingtheprospectsforeconomicgrowth.WorldBank6%5%4%3%2%1%0%FinlandcarbontaxSwedencarbontaxEstoniacarbontaxLiechtensteincarbontaxIrelandcarbontaxU.K.carbonpricesupportSpaincarbontaxColombiacarbontaxSingaporecarbontaxPrinceEdwardIslandcarbontaxNewBrunswickcarbontaxLuxembourgcarbontaxPolandcarbontaxDenmarkcarbontaxLatviacarbontaxBCcarbontaxUkrainecarbontaxFrancecarbontaxPortugalcarbontaxZacatecascarbontaxNewfoundlandandLabradorcarbontaxSouthAfricacarbontaxTamaulipascarbontax1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020ShareofannualglobalgreenhousegasemissionsYearofimplementation2NorwaycarbontaxSloveniacarbontaxSwitzerlandcarbontaxIcelandcarbontaxJapancarbontaxMexicocarbontaxChilecarbontaxArgentinacarbontaxCanadafederalfuelchargeNorthwestTerritoriescarbontaxNetherlandscarbontax4555566667777888811111314151619202023243031PAGE57SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSWiththeETSandcarbontaxalreadyinplaceandmanyotherproposalsintheworks,thereisnoshortageofcarbonpricingoptions.ThemaritimeindustryismakingagoodfaithefforttohelptheInternationalMaritimeOrganization(IMO)reachitsglobalgoalsforreducingcarbonemissionsandthevariouscarbonpricingmechanismswillplayanimportantrole.TheInternationalChamberofShipping(ICS),whichrepresents80percentoftheworld’smerchantfleet,recentlysubmittedaproposaltotheIMOthatrecommendedthecreationofaclimatefundusingagloballevyonthecarbonemissionsfromships.Theproposalincludesamandatorycontributionfromshipsgreaterthan5,000Gt)tradingglobally.Thelevywillbeusedtoclosethecarbonemissionsgapbetweenconventionalandlow-carbonfuels,whilethecapitalraisedwillbeusedtodeveloptheinfrastructureforammoniaandhydrogenbunkeringatports.Whilezero-carbonfuelsarenotcommerciallyviableatpresent,thefundwillhelptoreducethecostofalternativefuelsandclosethepricegapwithtraditionalcarbon-basedvarietals.Currently,theEuropeanUnionEmissionsTradingSystem(EUETS)programcreatesamarket-basedmechanism,butitsinfluenceappliesonlytotheEU,whichrepresentsabout7.5percentofglobalshippingGHGemissions,makingthecaseforagloballevy.TheaboveproposedICSgloballevyisinadditiontoaproposedfundof$5billion(B)tofuelresearchanddevelopmentofalternativezero-carbonfuels[37].AccordingtotheCenterforZeroCarbonShipping,aflatcarbonlevyof$250pertonofGHGwouldraise$3.7trillion(T)by2050.Inthesamestudy,differentmodellingassumptionsimplyestimatesforannualcarbonrevenuesfrominternationalshippingthatrangefromanaverageof$40Bto$60B[38].AccordingtoanotherstudyfromtheGettingtoZeroCoalition,theaveragecarbonpricewouldneedtobearound$191pertonofCO2andreachamaximumof$358pertonofCO2by2050tofullydecarbonizeinternationalshipping.Bythismeasure,ifallrevenueswererecycledtosupportthedecarbonizationofshipping,thiscouldreducethecarbonpricebyuptohalf,toanaverageof$96pertonofCO2andamaximumof$179pertonofCO2(butthiswouldleavenorevenueforotherpurposes,suchasenablinganequitabletransition)[26].Itis,however,inalignmentwiththeICSgoalsandhasasimilargoalofhelpingbridgethegapbetweenconventionalandlow-carbonfuels[39].Inaddition,somePacificIslandnations,whicharethemostvulnerabletoeffectsofclimatechange,haveproposedacarbonpriceof$100pertononbunkerfuel;thishasbeenstronglyopposedbyemergingeconomies.TheproposalsandactionsoftheIMO,theICS(thebiggestmerchantshippingtradegroup),MærskandtheEUclearlyhighlightthedirectioninwhichcarbonpricingisheadingforshippingandhowitwillimpacttheindustry.Alternativefuelswillplayacriticalroleinshipping’sdecarbonizationjourney;thecostoffuelsandlackofrelatedinfrastructureatportsarethebiggestimpedimenttothetransition.Inthenextfewyears,agloballevyoncarbonemissionsandmoreregionalmechanismsareexpectedtoenterintoforcetohelpshippingalignwithIMO’sgoalofreducingcarbonintensityby40percentby2030andabsoluteemissionsby50percentby2050[40].GDPDevelopmentGHGEmissions+78%Index(1990=100)-26%170150130110907019902017Figure51:EconomicgrowthandGHGemissionsdecoupleinSwedenfrom1990to2017.ABSZEROCARBONOUTLOOKPAGE58CARBONMARKETSANDPRICINGMECHANISMS4.3ANATOMYOFEMISSIONSTRADINGSYSTEMSAnETS,alsoreferredtoasacap-and-tradesystem,isanefficientwaytoreduceGHGemissions.ThesesystemsaregenerallymanagedbygoverningjurisdictionsorbodiesthatsetlimitsontheamountofGHGsallowedandallowancesaredistributedtoentitieswithinthesystem.Theentitieswhichexceedtheirallowedemissionsneedtopurchaseanextraallowanceunitfromtheentitiesthatemitlessthantheirallocation.Bycreatingsupplyanddemandforemissionallowances,anETScreatesamarketpriceforGHGemissions,whichisaformofacarbonprice.Thecapontheemissionsensuresthatemitterswilltrytokeeptheiroutputwithintheirallocatedcarbonbudget.Iftheyareunabletodoso,theyhavetopayapricefortheexcessemissionstheygeneratebypurchasingcarboncreditsorallowanceunitsfromthemarket.Figure52:Carbonpricingmap2021[27].Withmoreandmorecountriesembracingnet-zerocommitmentstocombatclimatechangeandstarttheirjourneyofdecarbonization,agrowingnumberofnationaltradingsystemshavebeencreatedtocontrolcarbonemissions.In2021,64carbonpricinginstrumentswereactiveworldwide,including30ETS(seefigureabove)[27].Forinstance,ChinalaunchedthenationalETSinFebruary2021andstartedtradinginJuly;itisnowthelargestcarbonmarketintheworld.Thepricepertonofcarbonemittedexperiencedtremendousgrowthin2021inallmajorETS,raisingexpectationsforatighteremissionstradingpolicy(seefigureonfollowingpage).ETSimplementedorscheduledforimplementationCarbontaximplementedorscheduledforimplementationETSorcarbontaxunderconsiderationTCI-P=TransportationandclimateinitiativeProgramRGGI=RegionalGreenhouseGasInitiativeETSandcarbontaximplementedorscheduledCarbontaximplementedorscheduled,ETSunderconsiderationETSimplementedorscheduled,ETSorcarbontaxunderconsiderationETSandcarbontaximplementedorscheduled,ETSorcarbontaxAlbertaManitobaOntarioQuébecTCI-PPennsylvaniaMassachusettsRGGINewBrunswickNovaScotiaPrinceEdwardIslandNewfoundlandandLabradorSaskatchewanNorthwestTerritoriesCanadaCaliforniaOregonWashingtonBritishColumbiaHawaiiSenegalTurkeyIndonesiaPakistanKazakhstanChinaVietnamNewZealandThailandRepublicofKoreaEUIcelandCôted’IvoireBrazilArgentinaChileSouthAfricaBajaCaliforniaZacatecasTamaulipasMexicoColombiaJaliscoDenmarkTurkeyMontenegroGermanyTheNetherlandsUKIrelandLuxembourgPortugalSpainFinlandEstoniaLatviaPolandUkraineSerbiaSloveniaLiechtensteinSwitzerlandAustriaNorwaySwedenTaiwan,ChinaShenzhenShanghaiTianjinBeijingShenyangHubeiChongqingBruneiSingaporeGuangdongFujianSaltamaTokyoWorldBankPAGE59SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSFigure53:CarbonPricesasofApril1,2021[27].NominalpricesonApril1,2021,shownforillustrativepurposeonly.ChinanationalETS,MexicopilotETSandUKETSarenotshowninthisgraphaspriceinformationisnotavailableforthoseinitiatives.Pricesarenotnecessarilycomparablebetweencarbonpricinginitiativesbecauseofdifferencesinthesectorscoveredandallocationmethodsapplied.specificexemptions.anddifferentcompensationmethods.The2020carbonpricecorridoristherecommendationoftheWorldBank's2017High-LevelCommissiononCarbonPricesReport.Thedifferentjurisdictionshaveappliedmarket-specificdesignsforeachETS,includinggeographicalscopes,industrialsectors,typesofemissions,allocations,etc.Thesetradingsystemscanbecategorizedintoremitlevels:supranational,national,regionalandcitylevel,asshowninthefigurebelow.Figure54:LevelsofETS[41].SUPRANATIONALSYSTEMe.g.,TheEuropeanUnionEmissionsTradingSystem(EUETS)NATIONALSYSTEMSe.g.,China,Kazakhstan,Korea,Mexico,NewZealandandSwitzerlandREGIONAL,PROVINCIALORSTATELEVELSYSTEMSe.g.,Alberta,California,Fujian,Guangdong,Hubei,Massachusetts,NovaScotia,Quebec,theRegionalGreenhouseGasInitiative(RGGI)andthefederalOutput-BasedPricingSystem(OBPS)CITYLEVELSYSTEMSe.g.,Beijing,Chongqing,Saitama,Shanghai,Shenzhen,TianjinandTokyo140120100806040200<1<111123OilCokeCarbonTaxETS3-<14444455556667899121314161818182020202424242425252829323232323235363946505210110113728-2435-2035-2069-473-62F-gasesReducedRateonNaturalGasonEUETSInstallationsAllFossilFuelsF-gasesF-gasesAllOtherFuelsinHeatandElectricityGenerationTransportFuelsLiquidandGaseousFossilFuelsAllFossilFuelsDieselFuelAviationFuelPolandUkraineShenzhenKazakhstanFujianEstoniaJapanMexicoSingaporeChongqingTianjinBeijingHubeiTokyoChileColombiaSaitamaArgentinaGuangdongShanghaiMassachusettsBajaCaliforniaRGGISouthAfricaZacatecasTamaulipasLatviaKoreaQuébecSpainCaliforniaNovaScotiaBritishColumbiaSloveniaNewfoundlandandLabradorNewfoundlandandLabradorNorthwestTerritoriesPrinceEdwardIslandUnitedKingdomNewZealandDenmarkPortugalGermanyAlbertaCanadaCanadaNewBrunswickSaskatchewanIcelandNetherlandsBritishColumbiaIrelandLuxembourgSwitzerlandEuropeanUnionFranceNorwayFinlandLeichtensteinSwitzerlandSweden2020CarbonPriceCorridorWorldBankABSZEROCARBONOUTLOOKPAGE60CARBONMARKETSANDPRICINGMECHANISMSOVERVIEWOFEUETSLaunchedin2005,theEUETSistheworld’sfirstsupranationalETS,whichincludes27EUmemberStatesandthreestatesfromtheEuropeanEconomicArea-EuropeanFreeTradeAssociation(EEA-EFTA):Iceland,LiechtensteinandNorway.TheEUETSisoneoftheEU’skeypoliciesforreducingcarbonemissions.Ithasalreadycompletedthreephasesfrom2005to2020;thefourthphasestartedinJanuary2021.Thehistoryisbrieflyrecappedinthefigurebelow.Figure55:FourPhasesofEUETS[42].Itisatypicalcap-and-tradesystem,coveringCO2emissionsfromtheindustry,powerandaviationsectors,nitrousoxide(N2O)fromcertainchemicalsectorsandperfluorocarbonsfromaluminumproduction.Similartoothercap-and-tradesystems,thelegislationfortheEUETSsetstheannualcap,whichinturndeterminesthenumberofallowancesinthismarket;thecapisalsodesignedtobereducedeachyeartograduallycuttheemissions.Theseallowancesareallocatedtoparticipantsforfreeorsoldthroughauctions.Thefreeallocationsaregiventothesectors(suchasindustryandaviation)basedonbenchmarkingandhistoricaldata.Then,theEUETSallowsparticipantstotradetheirallowancesonthemarkettoensuretheircompliancewiththeregulation.Finesandpenaltiesareappliedtoparticipantswhofailtocomplywiththeirallowancelimitattheendoftheyear.NATIONALTRADINGSYSTEMSNationalETSshavebeenintroducedinseveralcountries,withmorebeingconsideredandscheduledforthecomingyears.InJanuary2021,theU.K.stoppedparticipatingintheEUETSandlaunchedU.K.ETSafterleavingtheEU.TheU.K.ETScoversemissionsfromthepowersector,otherenergyintensiveindustriesandaviation.Additionally,aGermanETSwaslaunchedin2021inlinewiththeFuelEmissionsTradingAct,whichcoversallheatingandtransportfuelsthatarenotundertheregulationoftheEUETS.TheallowancesbeingsoldintheGermanETShaveafixedprice,andauctionsareexpectedtobeginin2026.Inthesameyear,China’snationalETSgainedattentionfromobservers.TheChinaETSiscurrentlylimitedtotheCO2emissionsfromthepowersector,aswellascombinedheatandpowerandcaptivepowerplantsfromothersectors.Itoptedforthefreeallocationofallowances,whicharedistributedaccordingtobenchmarkingresults.Phase1workedasapilotphasetotestpriceformationandbuildupthemonitoring,reportingandveriﬁcationschemesforemissions.Thecapoftheemissionwasestimatedduetolackofdata.Phase1wasaimedtoensureEUmemberStatesmettheircommitmentsundertheKyotoProtocol.BusinesscouldonlytradeonunitsgeneratedundertheKyotoProtocolmechanisms—cleandevelopmentmechanism(CDM).Phase2hadthesameperiodastheﬁrstcommitmentsperiodundertheKyotoProtocol.AviationemissionswereincludedinEUETSattheendofthisperiod.Phase2allowedtradingonbothCDMandjointimplementation(JI)emissionreductionunits.Phase3hadthesameperiodasthesecondcommitmentsperiodundertheKyotoProtocol.AnEU-widecapreplacedthepreviousnationalcaps.DuringPhase3,auctioningwassetasthedefaultmethodforallocatingallowancesinsteadoffreeallocation.Moresectorsandgaseswereincludedinthisphase.AmoreambitiouscapofEUETSwasinitiatedbyannouncementoftheEuropeanGreenDealrecoverypackageandnew2030mitigationtargets.EUETSplannedtoincludethemarinetransportsector,andpossiblyroadtransportandbuildings.Phase12005–2007Phase22008–2012Phase32013–2020Phase42021–nowPAGE61SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSREGIONALANDCITY-LEVELTRADINGSYSTEMSRegionalandcity-leveltradingsystemsareconsideredtobesubnationalETSs.Forinstance,theRegionalGreenhouseGasInitiative(RGGI),thefirstmandatoryETSintheU.S.,wasimplementedin2009withcollaborationfrom10statesinthenortheastandmid-Atlanticareasofthecountry.ThiscarbonmarketcoversCO2emissionsfrompowerplants,andallowancesaredistributedtothestatesthroughquarterlyauctions.TheinclusionofPennsylvania,whichwouldsignificantlyaffectthesizeofRGGI,iscurrentlyunderreview.InJapan,theTokyoETSoperatesunderaslightlydifferentmechanism.Asthecountry’sfirstmandatoryETS,itcoverslargeCO2emittersfromthepower,industryandbuildingsectors.Anemissionsbaselineisgiventoeachfacility,whichisdeterminedbyhistoricalperformanceandacompliancefactordeterminedbyregulators.Extracreditsaregiventofacilitieswhichemitbelowthebaselineandthosecreditscaneitherbetradedtoothersorbankedforfuturecompliance.THEEUETS’SIMPACTONTHEMARITIMESECTORIftheEuropeanCouncilvotestoformallyextendtheEUETStoshippingbeginningfrom2023,themaritimeindustrywillgetitsfirsttasteofwhatalow-carboneconomylookslike.Despiteitsstatusasaregionalregulation,theEUETSwillhaveasignificantimpactoninternationalandintra-EUshipping.Itwillinitiallyraisecostsforshipownersandwillusherinacarbonmarketthatcouldinpartreshapevesselfinancingandoperations.Whilethelong-termeffectsshouldbepositivefortheenvironment,theestablishmentofamaritimecarbonmarketwillcreateasmanychallengesasopportunities.TheEUETS,whichwouldapplytoallshipsof5,000gtormore,willputapriceoncarbonandlowerthecaponemissionseveryyear.ItsgoalistoaligntheEUETSwiththeEU'sambitiontoreachamandatory55percentreductioninnetemissionsby2030,aspartofthecontinent’sFitfor55package.TheEUETSmakesthepartyresponsiblefortheoperationoftheshipundertheInternationalSafetyManagement(ISM)CodeliableforitsCO2emissions.ThescopeoftheEUETSexpansionincludes50percentofemissionsfromvesselsarrivingatanddepartingfromEUportsoninternationalvoyages.ShippingisscheduledtobephasedintotheEUETSfrom2023,withawiderinclusionby2025.Duringthefirstthreeyearsofoperation,carbonwillnotbetraded;theEUETSwilleffectivelybeataxonvesselemissions.Thefirstyearwillrequiretheownertosurrenderallowancesequivalentto33.3percentofverifiedemissions,increasingto66.6percentinthesecondyearand100percentby2025.Thepenaltiesincludefinesleviedagainstshippingcompaniesandtheblacklistingofvesselsfornon-compliance.€200,000€150,0000MethanolLNGConventionalBulker:Kamsarmax€100,000€50,000202320242025EUETSCostProjectionABSZEROCARBONOUTLOOKPAGE62CARBONMARKETSANDPRICINGMECHANISMSTheinitialproposedregulationdraftsforEUETSinmaritimeandFuelEU,alongwiththeiramendmentsduringthepublicconsultationphase,provideusaguidelineforaninitialimpactassessmentforsometypicalvesseltypesthataretradinginEuropeandarelikelytobeaffectedbythesemeasures.Thedifferentvesselconfigurationswithalternativefuelslikeliquefiednaturalgas(LNG)andmethanolwillhaveadifferenteconomicimpactfromsuchmeasures,whichmakethevariousbusinesscasesforenergytransitiontoalternativeandlow-carbonfuelsaviablesolutioninthemid-andlong-term.TounderstandtheimpactoftheEUETS,ABSmodeledarepresentativekamsarmaxbulkcarrier,calculatingthedirectimpactofcarbonemissions,fuelcarbonintensityandconsumptionforvoyagesin,outandwithinEuropeanportsunderthephasedadoptionfrom2023to2025.Forthisvesseltouseheavyfueloil(HFO),theownerwouldberequiredtosurrenderallowancesequivalentto€330kin2023through2025.Withnocarbontradingtakingplace,theemissionsareastraightforwardcalculationbasedonEUmonitoring,reportingandverification(MRV)data,ratherthanavariableamount.€200,000€150,0000MethanolLNGConventionalTanker:VLCC€100,000€50,000202320242025EUETSCostProjection€200,000€250,000€300,000€350,000€150,0000MethanolLNGConventionalContainership:14KTEU€100,000€50,000202320242025EUETSCostProjectionPAGE63SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSTheclearchallengeisthatshipowners—especiallyoperatorsofsmallerfleetswhoarelessabletoimplementenergyefficiencymeasures,ortoconsolidateorpoolemissionsacrossafleet—mayfindtheiroperationalcostsincreasingsharply.Foranoperatorofaverylargecrudecarrier(VLCC)withahighCarbonIntensityIndicator(CII)performanceusingconventionalfuel,ownerscouldbecalledupontosurrender€340kby2025,asimilarleveltothatforalargeLNGcarrier,accordingtoABSanalysis.Theoperatorofa14,000twenty-footequivalentunit(TEU)containershipwithahighCIIperformancecouldbeliableforasmuchas€700kinallowancesbytheendof2026.COSTCOMPLICATIONSThesituationisfurthercomplicatedbythecloselyrelatedFuelEUMaritimeproposal.Designedtoacceleratethemaritimeindustry'sdecarbonizationthroughtheadoptionofrenewableandlow-carbonfuelsandtechnologies,itwillapplyagoal-basedreductionofGHGenergyintensityfrom2025.AfurthercomplicationisthatFuelEUMaritimeemploysawell-to-wakeorlife-cycleassessmentmethodologytomeasurethecarbonintensityoffuelsfromproductiontoconsumption,whereastheEUETSemploysthetank-to-wakemeasurecurrentlyusedbytheIMO.UnderFuelEUMaritime,thekamsarmaxwouldincurpenaltiesimmediatelyifpoweredbymethanolorHFO,butthosewouldonlystartfrom2035ifitwaspoweredbydualfuel/LNG.IftheVLCCwaspoweredbydualfuel/LNG,itwouldstartincurringpenaltiesaround2035,whiledualfuel/methanolandHFOfallintothedeficitrange.Asimilarperformanceisexpectedforthe14,000TEUcontainershippoweredbydualfuel/LNG.ThefinesundertheFuelEUMaritimepenaltyschemearederivedfromaGHGintensitylimitthattightensovertimeandcouldrepresentsignificantadditionalcapitalcosts;non-compliancewiththerequirementsofFuelEUcouldaddupto€1.5minpenaltiesby2040.However,FuelEUMaritimeallowsforpoolingofcarbonintensity,meaningownerscanaverageemissionsacrossafleetandhedgebyborrowingintensityallowancesfromnextyeartocompensateforshortages.Bulker:KamsarmaxFuelEUPenalty€3,500,000€3,000,000€2,500,000€2,000,000€1,500,000€1,000,000€500,000€02025ConventionalLNGMethanole-Methanol20302035204020502045Tanker:VLCCFuelEUPenalty€3,500,000€3,000,000€2,500,000€2,000,000€1,500,000€1,000,000€500,000€02025HFOLNGMethanole-Methanol20302035204020502045Containership:14KTEUFuelEUPenalty€3,500,000€3,000,000€2,500,000€2,000,000€1,500,000€1,000,000€500,000€02025HFOLNGMethanole-Methanol20302035204020502045ABSZEROCARBONOUTLOOKPAGE64CARBONMARKETSANDPRICINGMECHANISMSFortheoperatorsoflargerfleets,everyyeartheyspendinsurplusisanopportunitytooffsettheirwidercarbonfootprint,pooleffortsacrosstheirfleetorevenconsolidateoperationswithsmallerowners,forwhomtheregulatoryburdenprovestooonerous.Cash-richownersalreadyhavemadeinvestmentsinrenewableenergytoprovidesimilarrevenueandoffsettingopportunities.OncetheEUETSbecomesfullytradable,furtheropportunitieswillariseinfinancialmarketsandshipfinance,aswellasinthenewcarbonandhydrogenmarketsthatwilldevelopasregulationandmarketforcesdrivethedecarbonizedmaritimeeconomy.4.4PROMOTINGCOOPERATIONANDBREAKINGIMPASSEThechallengepresentedbyclimatechangeisonethatimpactseverycountryandwillrequireglobalcooperation.Iftherearecountriesthatseektobenefitfromthedecarbonizationeffortsofotherstosolveclimatechange,allcountrieswilllosetheirincentivetoreducecarbonemissions[43].Therefore,globaldecarbonizationeffortsarecurrentlyatanimpasse,andsolvingclimatechangewillrequireahighdegreeofglobalcooperation.Thedecarbonizationofthemaritimeindustrycanbeacceleratedbysomeinitiatives,suchasthosethatadoptenergyefficiencymeasures,alternativefuels,globalcarbonpricing,andthosethatprovideincentivestofirstmovers.Acarbonpricingmechanismthatadequatelymeasuresthesocialandenvironmentalcostofcarboncouldbeausefulpolicyinstrumentforaninternationalcommoncommitment.ONEGLOBALCARBONPRICEAglobalcarbonpricehasnotgainedmuchattentionininternationalnegotiationsuntilnow.Anagreementwouldprovideanimportantstepforinternationalcooperationonmitigationeffortsanditcouldeffectivelyaddressthenegativesocialexternalities.Itwouldalsorequirecountriestopricetheirdomesticcarbonemissionsatleastashigh,onaverage,astheagreed-uponglobalcarbonprice.Eachcountrywouldneedtocommittoapplyingachargeontheuseoffossilfuelswhichultimatelymeetstheglobalcarbonpricereachedbyinternationalconsensus[43].Thiscommitmentwouldalsohavetoinvolvereciprocitytocreateincentivesforcooperationandbreakthecurrentimpasseinclimatenegotiations[43].ThemaritimeindustryandregulatorybodiessuchastheIMOwouldhavetocoordinatetheirworkandsetupaformofglobalcarbonpricing.Suchaschemewouldneedtoovercometheobjectionsofmanynationstomarket-basedmeasures(MBMs)andmandatorylevies[44].Thefigurebelowexaminesthewaysinwhichglobalcarbonpricingcanplayanimportantroleinpromotinginternationalcooperation.Figure56:Roleofaglobalcarbonpriceinachievingdecarbonizationofthemaritimeindustry[11].Itispossibletorealizezerocarbonshippingby2050Aglobalcarbonpricealongwithappropriateindustrialcollaborationandglobalregulation,areimportantinrealizingzerocarbonshippingby2050.ReducegapsbycombiningindustryactionandglobalcarbonpricingTopavethewaytoazerocarbonfuture,aglobalcarbonpricingregulationshouldcombinewithlowercostsoffuelsandgreenﬁnancing,andhigherconsumer’sdemandandenergyeciencyadoption.ThedesignofacarbonpricingiscrucialIfrevenueisgivenbacktothesector,aglobalcarbonpricebetween$50–150/tCOeqcanassistbothdevelopingcountries,aswellasearlyadoptersofalternatefuels.PAGE65SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSBuildingaconsensusonaglobalcarbonpricewouldyieldthefollowingbenefits:•Itwouldpromotetheconceptofburdensharingandcommonresponsibility,whichwouldencouragemultiplecountriesandsectorstotakeactionatnationalandlocallevels.•Unlikeothermechanisms,pricingwouldnotrequirestringentregulationsandwouldbemoremarketdriven.Thiswouldprovideincreasedflexibilitytothedifferentstakeholders.•Itwouldalsoprovideahigherdegreeofcertaintyforthetrajectoryofindustrydecarbonization.4.5DECARBONIZINGTHEMARINEANDOFFSHOREINDUSTRIESTHROUGHCARBONPRICINGBuildingdecarbonizationpathways,developinglow-carbontechnologyandupscalingsupply-sideinfrastructureareallcapital-intensiveprogramsforwhichpricingmechanismscanprovidefunds,incentivizingbothresearchanddevelopmentandtheearlyadopterswhobearthebiggestfinancialrisks.Carbon-pricingmechanismsarethemeansbywhichshipping’semissionsgoalscanbeachieved;forexample,theywouldbeaneffectivewaytomeettheIMO’scarbon-reductiongoalsfor2050[112].Atthegloballevel,theregulationsforpricingandimplementationhaveyettobeset.Earlydecarbonizationinitiativeshavefocusedonshort-termpolicymeasuresaimedattechnicalandoperationalareas.However,carbonpricinghasthepotentialtobeamedium-andlong-termsolutionfortheIMO.Today’scarbon-pricinginitiativesareappliedthroughtwomainvehicles,anETSoracarbontax[113].TheETSmechanismisbasedonacap-and-tradeprinciplethatallowsbusinessownerstoparticipateinthepurchaseandsaleofcarbonallowances,whicharedecidedbyimposingacaponemissionswithinthescheme’sjurisdiction[113].Thepriceofthetradableallowancesisdeterminedbythenumberofallowancesgeneratedbythesystem’soverperformersanddemandfromtheunderperformers;thesecanbecontrolledbyadjustingthecap.Thismechanismisnotsuitableforraisingfundsforresearchanddevelopment,asanytradingismutualtradeamongthebusinessowners.Acarbonlevyisadirectorindirecttaximposedontheemissionsgeneratedbyabusinessowner.Unlikethecap-and-trademethod,thereisnolimitonemissionsandtheircostisbornebybusinessownersandnotcontrolledbymarketforces.Therevenuecanbeusedforresearchanddevelopment,andtheamountcanbecontrolledbyadjustingthetax.Whilethereisnoglobalcarbontax,itexistsatthelocallevelinNorwayfortheoffshoreindustryanditisabouttobeappliedtothemaritimeindustryinEuropefrom2023.TheICS,supportedbyInternationalAssociationofDryCargoShipowners(INTERCARGO),hasproposedaninternationallevytotheUnitedNations(U.N.),aswellasMBMs,toencouragetheadoptionandmarketpenetrationofe-fuelsbydevelopingbunkeringinfrastructurefromtheIMO’sclimatefund[114].A$5BresearchanddevelopmentfundhasbeenproposedattheIMO,withmoneytoberaisedbyimplementingamandatory$2levypertononfuelandtobeusedtosupportthedevelopmentofnewpropulsiontechnologiesandzero-carbonfuels.WhiletheIMOhasyettodecidewhethertoimposecarbonpricingonships’emissions,asapartoftheEuropeanGreenDeal,theEUhasincludedemissionsfromshippingintotheEUETSeffectivefrom2023[116][117].However,theproposedpriceforallowanceswillnotbeabletofullyfundtheorganization’sdecarbonizationinitiatives.AccordingtothePoseidonPrinciples,aglobalframeworkcreatedbyfinancialinstitutionstointegrateclimatestrategieswithlendingdecisionsanddecarbonizeinternationalshipping,implementingcarbonpricingwillsignificantlyaffectthemarketbyreducingthecreditworthinessofshipowners[118].ToachievetheIMO’s2050targetforcarbonintensity,evennewershipsandthoseonorderwillhavetobemodifiedorretrofittedtomaintaintheircarboncompetitiveness,implyingthatconsiderablecapitalwillbeneededtoupgradetheseassets;moreconservativeassessmentswillneedtobeformedfortransitionrisksandearlierdepreciationsofassetvalues.ABSZEROCARBONOUTLOOKPAGE66CARBONMARKETSANDPRICINGMECHANISMSREGIONALANDGLOBALPRICINGSCHEMESSomecriticalfactorsthatneedtobeconsideredbeforecreatingaschemeforpricingcarboninclude:thescopeoftheemissions;thepoliticalagreementandwillingnessoftheparties,anyregulatoryloopholesthatmakeiteasytoavoidtaxation,andtheavailabilityandverifiabilityofthedata.Regionalcarbonpricingschemesarepronetoevasionbecauseoftheirgeographicalboundaries.Theregulatedentitiesmaybypassspecificroutesandportstoavoidpurchasingfuelsthataretaxedandtoskipcarbonpenalties.Tosomedegree,thistypeofabusecanbelimitedbysettingcarbonpricesinlinewiththoseimposedonalternativeroutes,decreasingtheincentivetocheat.Whiledesigningamaritimepricingscheme,externalfactorsthatinfluenceemissionsoutput,suchasmarketfluctuations,technologyandthesourceoffuel,shouldbetakenintoconsideration.Shipping,beinginternationalinnature,involvescross-borderissuesthatneedtobeaddressedtocreatealevelplayingfieldforallparticipants.TheEUETSfollowstheEUMRVframework[116],inwhichtheregulatedentityistheshippingcompany.Theemissionscountingcovers50percentofincomingandoutgoingvoyagesinadditionto100percentofvoyageswithintheEuropeanEconomicArea,includingportstays.TheEUcap-and-tradesystemisdesignedtonotallowtradingallowanceswithothersectorscoveredbytheETS.Conceptually,theETSisasystemthatallowsparticipantstoreduceemissionswheretheyaremostcosteffective.Butthisapproachraisesthepossibilitythatemission-reducinginitiativeswilloccurinsectorswhereitischeaperthanthemaritimesector,wherethecostisestimatedtobe$400pertonofCO2.Thisseemstofavorsector-specificcapandlinearreductionfactorsforthemaritimesector.However,aclosedsystemisunabletoabsorbsupplyanddemandshocksintradableallowances,itispronetopriceuncertaintyandmayresultinpricevolatilityifauctioned,necessitatingmeasurestostabilizetheprice.ThemarineEUETShasyettobescheduledfortrading.Anothercarbon-pricingmechanisminthepipelineistheFuelEUMaritimeinitiative[67].OtherupcomingregionalschemesthatcouldbelinkedtoformaglobalmaritimeETSnetworkarefromtheU.S.U.K.,ChinaandJapan.LegislationhasbeenintroducedintheNaturalResourcesCommitteeoftheU.S.HouseofRepresentativesandisaimedatdevelopingamonitoringsysteminlinewiththeEUMRV,whichcouldeventuallyleadtocarbonpricing.ThereportingdataincludesCO2emittedintheU.S.ExclusiveEconomicZonebyallvesselsover5,000gt.China’snationalETSisalreadyinplace,butitawaitstheinclusionoftheshippingindustry.SincetheEUpolicyisbeingimplementedearlier,itcanhelptheIMOtoacceleratetheintroductionofcarbonpricingatthegloballevelwhich,forthemarineandoffshoreindustries,islikelytoemergefromtheintegrationofindependentregionalpricingschemes.AligningthefeaturesandrequirementsofthoseschemeswiththeIMO’smonitoringsystemwouldbeacentralpieceofthatintegration.Becauseaglobalpricingschemewouldnaturallyincludeagreaternumberofvessels,morefundswillaccumulate,potentiallyresolvingliquidityissues.Thiswouldalsoeliminatetheconcernsaboutcross-bordercarbonleakageandacarbonborderadjustmentmechanismastherewouldbenoopportunitiestobuyfuelfromcountrieswithlaxercarbonpricesthatwouldbenefitthebuyer.TheinclusionofthemaritimesectorintotheEUETSwastriggeredbyanimpactassessmentconductedbytheEuropeanCommission(EC2013);accordingtothereport,anauction-basedETScouldreducethecumulativeCO2emissionsfromEurope’smaritimesectorby336millionmetrictons(Mt)by2030.TheproposedstepsforinclusionweredesignedtonavigateanydisparitieswithIMOinitiatives.TheIMO’sshort-(to2023),medium-(2023to2030)andlong-term(post2030)measurestoreduceGHGsareprovidedinthefollowingtable,incomparisonwiththeEUETS.TheIMOstrategiesforGHGreductionatagloballevelincludetechnicalmeasuressuchasenergy-efficientdesignsandoperationalindicesforships,alternativefuels,andinfrastructural/financialmeasuressuchastheInternationalMaritimeResearchandDevelopmentBoard(IMRB)fundandMBMs.Imposingastandardforemission-intensityindiceswouldnotassureanabsolutereductionincarbonemissionsanddefiningthesameforspecifictypesandsizeswouldposeasignificantchallenge.PAGE67SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSNUMBERDESCRIPTIONTYPEOFMEASURETYPEOFPOLICYINTERACTIONWITHEUETSCandidateshort-termmeasures1.ImproveEEDIandSEEMPShipdesignStandardComplementary2.TechnicalandoperationalenergyefficiencyfornewandexistingshipsShipdesignandoperationStandardComplementary3.ExistingFleetImprovementProgramShipdesignStandardComplementary4.SpeedoptimizationandspeedreductionShipoperationStandardComplementary5.AddressmethaneandVOCemissionsShipdesignStandardComplementary6.EncouragenationalactionplansMonitoringVoluntaryeffortbycountriesNone7.EnhanceITCPCapacitybuildingVoluntaryeffortbycountriesNone8.PortinfrastructureandrenewableonshorepowersupplyInfrastructureStandardComplementary9.IMRBFundResearchanddevelopmentMarket-basedOverlapping10.IncentivesforfirstmoversDeploymentSubsidyComplementary11.Developguidelinesforlife-cycleGHGintensityoffuelsMonitoringStandardSupportive12.PromotionofIMO'sworkonGHGreductionOutreachJointIMOeffortNone13.UndertakeGHGemissionstudiesMonitoringJointIMOeffortNoneCandidatemid-termmeasures1.Implementationprogramforuptakeofzero-carbonfuelsFuelsStandardComplementary2.TechnicalandoperationalenergyefficiencyfornewandexistingshipsShipdesignandoperationStandardComplementary3.Market-basedmeasures(MBMs)ShipdesignandoperationMarket-basedOverlapping4.EnhanceITCPCapacitybuildingVoluntaryeffortbycountriesNone5.FeedbackmechanismonlessonslearnedMonitoringJointIMOeffortNoneCandidatelong-termmeasures1.Developmentandprovisionofzero-carbonfuelsFuelsStandardComplementary2.InnovativeemissionreductionmechanismResearch,DevelopmentandDeploymentSubsidyComplementaryTable11:IMOcandidatemeasures(Source:IntegrationofmaritimetransportintheEUEmissionsTradingSystem).ABSZEROCARBONOUTLOOKPAGE68CARBONMARKETSANDPRICINGMECHANISMSISSUESWITHRESPONSIBILITYThenatureoftheglobalshippingindustryposesissuesthatwouldrestricta"polluterpays"principle,suchassplitincentivesthatsometimesbenefitnon-investingentities;thewayresponsibilitiesandbenefitsaresharedbetweentheaccountingentityandtheconsigneecanalsobeuneven.Theshipowner,forexample,ismorecloselyandcontinuouslyconnectedtotheshipandisresponsibleforconstructionandretrofitinvestments,whereasthebenefitfromtheseactivitiesprimarilygoestothecharterers.However,thisissueissomewhatresolvedbythemarketcompetitivenessofhiringratesforshipsbasedontheirenvironmentalperformance,andbyincreasingtheavailabilityofgreenfinancingforemissions-reducingprojects.Itispossibletodefinethefuelsupplierastheentityresponsiblefortheemissions,butthisapproachismoresuitedtoglobalpricingthanregionalbecauseitcouldmakethefuelpriceuncompetitiveintheregionwherecarbonpricingisimposed.Asaresult,fuelpurchaserswillavoidpurchasinginthisregion,andeventuallytherevenuefromthecarbonpricingwilldecline.TheEUETScoversshipsabove5,000gt,whichisalignedwiththeIMOfueldatacollectionsystem(DCS).Thiscategoryofshipsconstitutes90percentofallmaritimeEUCO2emissionsand55percentofshipscallingportsintheEEA[116].Includingsmallershipswouldexpandthenumberofpolluterspayingfortheiremissions,particularlyinthecoastalandinlandwaterareas,whereshippingactivitieshaveagreaterimpactonthehealthoflocalcommunities.PRICESTABILITYCarbonmarketscanhavebetterliquidityandtransparencyifallowancesareallocatedbyauctioninsteadofbyfreeallowancesorgrandfathering;however,theauctioningsystemwouldcausepriceuncertainty.Therefore,whenintroducingthescheme,agradualchangetowardanauctionformatwouldhelptoavoidpriceshocks.FortheEUETS,thephase-inperiodwillseeagradualincreaseinthepercentageofemissionsforwhichallowancesmustbesurrendered.Repeatedfailureofsurrendermayleadtoconsequences,suchaspenalties,expulsion,detentionandbeingdeniedaccesstotheport.Ascharterersareresponsibleforfuelpurchases,thecarbonpricemaybeimposedonthem.IntheEU,thecarbonpriceisimposedontheimporterorshipper.Themismatchbetweenthecharterperiodandthecalendar-basedreportingperiodisaconstraintinthisregard.Theabsenceofapre-determinedpricealsoisaconstrainttoquantifyingthecarbonpriceinadvanceandtoincludeinthecharterparty.Inasystemwhereregulatedentitiespayapre-determinedcarbonprice,creatingacommonfundtopurchaseandsurrenderallowancesandhandlepricefluctuationscouldhelptoabsorbpriceshocks.ItisestimatedbytheUniversityMaritimeAdvisoryServices(UMAS)that$1Tto$1.4TwillberequiredtobuildandretrofitshipswithimprovedtechnologytoadoptnewfuelsandmeettheIMO2050goalof50percentreductioninGHGemissions.ToachievetheEU’sambitionofcarbonneutrality,$1.4Tto$1.9Twouldbeneededtofacilitatetheadoptionofalternativefuels,relatedinfrastructureandenergyefficienttechnologies(EETs).Accordingtothe“IntegrationofmaritimetransportintotheEUEmissionsTradingSystem”report[100],theEUETS,ifappliedonapartiallyorfullyauctionedbasis,couldaccumulateby2050approximatelybetween€0.003tnand€0.0043tnbasedonthecarbonpriceof€30/tCO2fortheEuropeanParliament’sOceanFund.Asperarecentreport,estimatedfundsraisedin2030bytheETSata€50($56)priceofpertonofCO2wouldbe$5B,and$9Bata€103($116)price.Thepriceofcarbon,eitherthroughatradingschemeorintheformofalevy,needstobebalancedsothatitdoesnotbecomeabarriertocontinuousshipoperationortooweaktocreateincentivesforadoptingtechnologyorfundsforresearchanddevelopment.202320%ofverifiedemissions202445%ofverifiedemissions202570%ofverifiedemissions2026andonward100%ofverifiedemissionsTable12:EUETSphasescheme.PAGE69SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSThereareotherdeterminantsthatplaycriticalrolesindecidingthecarbonprice,suchasthefundsrequiredtoencouragetheadoptionoflow-carbonfuels(byimprovingtheirpricecompetitiveness)andtheuserofshippingservices.Gradualchangesandadjustmentsincarbonpriceswillbenecessarytoavoidpriceshocksthatcoulddetractbusinessownersfromadoptinglow-carbonfuels.Certaintyofadefinitivecarbontaxhelpsprovideamorerobustcost-benefitanalysisasdecisionsupporttotheassetownerasopposedtoamarketdependentvolatilecarbonprice.Acost-benefitfeasibilitystudyisthepre-cursorofanyinvestmentproject.Forapositiveoutcomeofthefeasibilitystudytoadoptlow-carbontechnology,itisnecessarytoconfirmthatsavingsaremorethanexpenses,i.e.,theincentivesaccruedthroughoutanasset’slifecyclemustoutweighthecapitalinvestment.Carbonpricefluctuationisanobstructiontoconductingsuchanalysis.ALLOCATIONOFALLOWANCESThefreeallocationofallowancesbasedonpastbaselineemissions,knownasgrandfathering,issuitableforcompanieswithahighbaseline,butitdoesnotrecognizeveryrecentemissionreductions[113].Ingeneral,freeallocationsaresuitedtothoseoperatorswhoarepronetocross-bordercarbonleakageandunabletopasstheimpactontotheirconsumers.Thepotentialforcarbonleakageispresent,butnotsevereinthemarineandoffshoreindustries.Findinghistoricaldatatodefineabaselineisdifficultinshippingduetothedisparatetypesofships,changingtradingareas,ownersandoperators[113].Operationsandemissionintensityarenotuniformacrosstheindustry,sograndfatheringmaycausedistortions.Ontheotherhand,benchmarkingsector-specificemissionsintensitywouldrecognizetheeffortsofearlyimplementers.Bythismeasure,theemissionintensityshouldbedefinedcarefullybecausetheworkoutputismeasuredindifferentwaysfordifferenttypesofships,suchasLNGcarriers,drybulkers,ro/ros,passengerferries,etc.FUNDRAISINGANDUTILIZATIONFortheEU,thenumberofallowancesshouldbeenoughtostocktheEUInnovationFundthatisintendedtosupportdecarbonizationinitiatives,whichincludedevelopingalternativefuelssuchasgreenhydrogenanditsderivativesandnewpropulsiontechnologies.Atagloballevelandinotherregions,theInternationalMaritimeResearchFund(IMRF),establishedforthepurposeoffacilitatinggreentechnologiesandfuels,hasbeentaskedbytheICStoimposealevyof$2/tonforfuelspurchased.Thislevycouldbeexpectedtoraisenearly$5Bover10to15years[115].IntheMarineEnvironmentalProtectionCommittee(MEPC)76,amandatorylevyof$100pertonofCO2forvulnerablecountrieswasproposedbytheRepublicoftheMarshallIslandsandtheSalomonIslandstobeenforcedby2025,followedbyadjustmentseveryfiveyears.Trafigura,aprominentcharterer,madeasimilarproposalforimposingfeesandrebatesbasedonthecarbonintensityoffuelstoassistresearchanddevelopmentandthetransitionofdevelopingstatesonsmallislands.Trafiguraestimatedthatpricingat$250-300/tCO2eq,withfollow-upadjustments,wouldcompensateforpricedifferentialsbetweenconventionalfuelsande-fuels.POLICYOPTIONSINEUETSThescenariosintheEuropeanCommission’s2030ClimateTargetPlanforecastrenewableandlow-carbonfuelstocomprisesixpercentandninepercent,respectively,oftheinternationalmarinefuelmixin2030,and86to88percentby2050[117].Thefuelsofinterestareelectrification,biofuels,renewables,otherlow-carbonfuelsandhydrogenderivatives.ABSZEROCARBONOUTLOOKPAGE70CARBONMARKETSANDPRICINGMECHANISMSTheproposalsintheEC’sFitfor55package,whichwascreatedtosupporttheEUGreenDealrecommended:•TheEUETSfortank-to-wakeemissions.•TheFuelEUMaritimeforwell-to-wakeemissions.(Asupplychainforzero-carbonfuelsandthepowersystemtechnologiestousethemarenotyetmatureenoughorreadilyavailable.)•AreviseddirectiveonalternativefuelsinfrastructureforenhancedavailabilityofLNGby2025andshore-sideelectricitysupplyinmainEUportsby2030.(Theproposedstandardlimitsthecarbonintensityoffuelandcompelssomeshipstouseshorepowerwhilealongside.)•AreviseddirectiveonenergytaxationtoremovetaxexemptionsfortheconventionalmarinefuelssoldintheEUforvoyageswithintheEUwatersandtofacilitatealternativefuels.•Arevisedrenewable-energydirectiveforachievinga40percentshareofrenewableenergyinthefuelmixby2030forthetransportsectoranda13percentreductionofGHGintensityby2030.Dependingonthedynamicsofthepriceforcarbon,allthesepolicyoptionswillhavedifferentpositiveimpactsontheadoptionoflow-carbonfuelsbynarrowingtheirpricedifferentialwithconventionalfuels;theyalsohavethepotentialtoreduceemissionsbyimprovingenergyefficiencyandreducingfuelconsumption.CAPSANDLINEAR-REDUCTIONFACTORSINETSEmissioncapswillbeadjustedbythenumberofallowancesforemissionsandverifiedbyEUMRVdataandthenumberofallowancessurrendered.Theannuallinearreductionfactorbywhichtheemissionscapwillbereducedyearlyisappliedat4.2percentandadjustedalongwithaone-offcapadjustmenttoachievethesameeffectasifitwereimplementedin2021andinalignmentwiththeothersectorsundertheEUETS,i.e.,61percentemissionreductionby2030incomparisonwiththe2005level.Aperiodicalrevieweveryfiveyearsfrom2023willprovidefeedbacktotheECregardingtheresults,effectivenessandprogressoftheEUETSandIMOinstruments.VOLUNTARYCARBONMARKETAvoluntarycarbonmarketforthemarineandoffshoresectorsisinitsnascentstage.Aprivate-sectorledtaskforce—ScalingVoluntaryCarbonMarkets—hasbeencreatedandincludesanadvisortoU.K.PrimeMinisterforthe2021U.N.ClimateChangeConferenceoftheParties(COP26),StandardChartered,theInstituteofInternationalFinanceandaformercommissionertotheU.S.SecuritiesandExchangeCommission(SEC).ThetaskforceisworkingondevelopmentofkeyactionitemsthatwillbeimportanttobuildthevoluntarycarbonmarketaspublishedinitsconsultationdocumentinNovember2020.4.6THEROLEOFCARBONOFFSETSINACHIEVINGNET-ZEROEMISSIONSCARBONOFFSETTINGCarbonoffsettingcanbebroadlydefinedasanactionorprocessofcompensatingfortheCO2emissionsthatarisefromindustrialorotherhumanactivity,byparticipatinginschemesdesignedtomakeequivalentreductionsofCO2intheatmosphere.Incontrasttocompliancemarketsforcarbon,thevoluntarycarbonmarketisnotregulated,andnooneiscompelledtoparticipate.Itremainsextremelyfragmentedwithunequalpractices.Numerouscertificationlabelsexist;however,thetrendtoincreasethetransparencyoftheassociatedvaluechaincontinues[45].Giventhecomplexitiesofthevoluntarycarbonmarket,businessesseekingtoachievenet-zeroorcarbon-neutralstatusareadvisedtoparticipateinhigh-qualitycarbonoffsettingprogramstoreachtheirdecarbonizationcommitments,asillustratedintheCodeofBestPracticesbytheInternationalCarbonReduction&OffsetAlliance(ICROA)[45].PAGE71SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSAdditionally,theuseofthird-partyverificationorcertificationlabelshelpstoincreasethetransparencyofthetradingprocessbymonitoringandreportingtheamountofcarbonreductionacarbonoffsetachieves.CARBONOFFSETPROJECTSTAKEHOLDERThevariousstakeholdersandtheirrolesaredepictedinthediagrambelow.Eachstakeholdergroupinteractswithotherstobuildanoffsetcycle.Figure57:Stakeholdersinacarbonoffsetprogram.Aprojectstartswiththeappointmentofdevelopers,whoareresponsibleforsettinguptheproject[46].Theyworkwithauditors,consultantsandcertificationlabelstofinalizeandissuetheproject.Forexample,theproject’sscopecanbetoreplaceafossil-firedpowergenerationplantwitharenewableenergysolution,oritcouldbetoimproveasystemofforestmanagementordevelopacarboncapturesequestration/storagesystem.Consultantshelpprojectdevelopersexplorepotentialopportunities,estimatetheemissionreductions,planwaystoachievethemanddeveloptheProjectInitialNote(PIN)/ProjectDesignDocument(PDD).Certificationlabelsprovidestandardsandcriteriatoensurethequalityofaprojectwithvarioussetsofrules,suchasVerifiedCarbonStandard(VCS),theGoldStandardandtheAmericanCarbonRegistry(ACR)[47].Beforeissuance,athird-partyauditoraccreditedbythecertificationlabelsshouldverifytheemissionreductionsestimatedbytheproject.Whenaprojectisreadytobeissued,operatorsprovidealinkbetweenprojectdevelopersandthefinalclient.Brokersbuycarboncreditsfromaretailertraderandmarketthemtoanendbuyer,usuallywithacommission.Thefinalclientscanbeservicecompanies,individualsorlocalauthoritieswhowanttooffsettheircarbonfootprintthroughcarboncredits[45].FinalClientCarbonBrokersOperatorsDevelopersConsultantsAuditorsCertiﬁcationLabelsEitheracompany,localauthorityorindividualthatwantstoosetitsemissions.Eitherpeoplesettinguptheproject,workingontheﬁeld,orentitiesowningtheﬁnancialriskoftheproject.Assistthedeveloperinsettinguptheirproject,helpsthemwritetheProjectInitialNote(PIN)/ProjectDesignDocument(PDD).Independentbodycertifyingthequalityoftheproject.Hastobeaccreditedbyacertiﬁcationlabel.Certifythequalityofemissionsreductiondependingonvariouscriteria(social,environmental).Oerpartnershipsorstrategyconsultingtocorporatesoremissionscalculationtoolstoindividualsandosettingsolutionsonline.Assistoperatorsanddevelopersinthepurchase/sellingprocessofcarboncredits.ABSZEROCARBONOUTLOOKPAGE72CARBONMARKETSANDPRICINGMECHANISMSROLEOFCARBONOFFSETSINACHIEVINGNET-ZEROEMISSIONSTheroadtonetzeroisdifficult.AccordingtoareportbytheScienceBasedTargetsinitiative(SBTi),offsettingiscriticalforacompanytoreachnet-zerotargets,butitcannotsubstitutescientificmethodstoreduceemissionsfromthevaluechain[48].Thereportillustratestheimportanceofusingcarbonoffsetstoneutralizetheresidualemissions,whicharetheunabatedemissionsofacompanyduetotechnicaloreconomicconstraints[48].Inshort,carbonoffsetscanprovidenegativeemissionstoneutralizetheportionofemissionsthatcompaniesareunabletoeliminateontheirown.TheBritishStandardsInstitution(BSI)publishedthePAS2060standardin2010tohelporganizationsdemonstratethecredibilityandveracityoftheircarbon-neutralityclaimsandtoincreasecustomerconfidence.Itoutlinesproceduresforquantifying,reducingandoffsettingGHGemissionsinaspecificbusinesssector.Thesecanbeusedforactivities,products,services,structures,projects,citiesorevents.Whilebusinessescancalculatetheircarbonfootprints,purchasecreditsanddeclarecarbonneutrality,thePAS2060standardestablishesaframeworkforaccuracyandcertification,whichisbecomingincreasinglycriticalassocietyworkstowardanet-zeroworldby2050(seefigurebelow).Thestandard'sprimarybenefitsinclude:•Itistheonlyglobally-recognizedcertificationforthecarbonneutralityoforganizations.•Itassistsbusinessesinquantifyingtheircarbonfootprintandthenhelpsthemtoreduceemissionsthrougha12-monthreview.•Itencouragesthesupportoftheclimate-financeprojectsthataddsocialandenvironmentalvalue.•IthelpsbusinessesdemonstrateavoluntaryandamicablecommitmenttoclimateactionFigure58:BasicprinciplesofPAS2060composedoffourkeystages.Contrarytopopularbelief,notallcarbonoffsetsareequal.Therearetwobasictypes:emissionreductionsandcarbonremoval.Simplyput,traditionaloffsetsworktoretainemittedcarbon.Carbonremovalsentailtheremovalofcarbonfromthesystem.MeasureGHGemissionsbasedonaccuratemeasurementdataOsetExcessemissions,oftenbypurchasingcarboncreditsReduceEmissionsthroughatarget-drivencarbonmanagementplanDocumentandVerifyThroughqualifyingexplanatorystatementsandpublicdiscoursePAGE73SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMSFigure59:Twobasictypesofcarbonoffsets[49].Asaresult,thisrevealsthemanyissueswithcarbonoffsets.1.Additionality:Wouldthatcarbonhavebeenoffsetifthecreditwasnotgenerated?2.Leakage:WhatistheriskofdisplacingactivitiesthatcauseGHGemissionsfromtheprojectsitetoanothersite?3.Verification:Cantheoffsetbeverifiedthrougharegistryandscience-basedmethodology?4.Permanence:Whatistheriskofstoredcarbonbeingre-releasedintotheatmosphere?Manybusinesses,particularlythoseinsectorsthataredifficulttoabate,needtooffsettheiremissionstomeetdecarbonizationtargets,resultinginasurgeindemandforcredibleoffsets.Thecredibilityofvoluntarycarboncreditsintransitionplanswillbescrutinizedmoreclosely.Tofacilitateglobaldecarbonization,alarge,transparent,verifiableandrobustvoluntarycarbonmarketisrequired,onethatencouragesgenuineactionwithhighenvironmentalintegrity.Voluntarycarbonmarketscanalsoplayanimportantroleinloweringthecostcurvesforemergingclimatetechnologies,allowingthemtoenterthemarketearlierandbeusedindirectdecarbonizationefforts.Toreachnetzeroby2050orearlier,businessesareincreasinglycommittingtoneutralizeemissionstheycannotabatebypermanentlyremovingcarbon.Thismaynotbesufficient,however,as,ideally,inadditiontodecarbonizingoperationsandvaluechainsinlinewithscientificconsensus,businessesalsoshouldconsidercompensatingandneutralizingtheiremissionsonthepathtonetzero.Stayingwithinthecarbonbudgethasapositiveimpactoncommunitiesinemergingmarketsanddevelopingcountriesbyencouragingtheprotectionandrestorationofnaturalcarbonsinksandthefinancingofnewremovalandcarbon-reductiontechnologies.Ratherthanfocusingsolelyonnetzeroasadestination,forward-thinkingcompaniesneedtogoaboveandbeyond.Thisisreferredtoasthe“HighAmbitionPathtoNetZero”(asshowninthefollowingfigure).EmissionsreductionsakatraditionalosetsCarbonremovalsnet-zeroCO201tonneofCO2removed1tonneofCO2emitted1tonneofCO2emitted1tonneofCO2avoidedelsewhere1tonneofCO2emittedABSZEROCARBONOUTLOOKPAGE74CARBONMARKETSANDPRICINGMECHANISMSFigure60:Thehighambitionpathtonetzero.[50]DecarbonizationNetZeroasEndpointHigh-AmbitionPathtoNetZeroNetZeroNetZeroDecarbonizeyourownoperationsandvaluechaininlinewithscientiﬁcconsensusDecarbonize,andincreasinglyneutralizeunabatableemissionstoreachNetZeroasendpointDecarbonize,andneutralizeandcompensateallemissionsonthepathtoNetZeroCompanyAemissionsTonnesCOeImpactonglobalCOebudgetUseofcarboncreditsParis-aligned1.5degreepathwayGrossemissionsCompensation(avoidance/reduction):EcouragedCompensation(avoidance/reduction):ExpectedNeutralization(removal)•DrasticallylowertheratewithwhichthetotalstockofCOeintheatmosphereincreasesbydecarbonizingyourownvaluechainuntilitcangonofurther•None•DrasticallylowertheratewithwhichthetotalstockofCOeintheatmosphereincreasesbydecarbonizingyourownvaluechainuntilitcangonofurther•ReducetotalstockofCOeintheatmospherebyincreasinglyremovingCOefromitovertime•High-qualityremovalcredits•DrasticallylowertheratewithwhichthetotalstockofCOeintheatmosphereincreasesbydecarbonizingyourownvaluechainuntilitcangonofurther•ReducetotalstockofCOeintheatmospherebyremovingCOefromitnow(throughnewtechnology-basedremovalsuchasreforestation)orassoonaspossible(throughnewtechnology-basedremovalsuchasdirectaircapture)•Supportotherstoavoidemissionsandpreservenature(e.g.,avoiddeforestation)andtoreduceemissions(e.g.,switchtolow-carbontechnologies)•High-qualityremovalcredits•High-qualityavoidanceandreductioncredits©InstituteofInternationalFinance2021PAGE75SETTINGTHECOURSETOLOWCARBONSHIPPINGABSCARBONMARKETSANDPRICINGMECHANISMS5SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUM5.1ALTERNATIVEENERGIES:SCALINGUPTHEVALUECHAINIncreasedcommunitypressureonenvironmentalmattersandfortherequiredactionsacrossallindustriesandsectors,willlikelyrequireactionandmoreregulationtoloweremissionsandpromotethesector’sdecarbonization.InthisrespectwehaveseeninitiativestowardanaggressivedecarbonizationtrajectoryandpushtowardtheproactiveadoptionofcleanertypesofenergyfromregionalorindustrialstakeholderssuchastheEuropeanUnion(EU),financiers,charterers,portauthoritiesandgovernmentsaswellasshipowners’associations.Thiskindoforganicpressurefromthemarketsandlocalstakeholdersismorelikelytodrivechangeanddecarbonizationdecisivelyinthemid-termwithinitiativessuchasmarket-basedmeasures(MBMs),fundingresearchandpromotingexperimentation.Therequireddecarbonizationwillbemorereadilyrealizedbythedecisiveadoptionofthealternativeenergysources,eitherthroughrenewableandlow-carbonfuels,orbydirectcapture.Oneoftheforthcominginitiatives,undertheFuelEUproposedregulationinEurope,willrequireallcontainershipsandpassengervesselstoconnecttoshorepowerwheninport,after2030.Withthemaingoaltoeliminatethegreenhousegas(GHG)emissionsofthevesselswhentheyareatberth,thisrequirementopensuptheopportunitytouserenewableorlowercarbonproducedelectricity,improvingevenfurtherthecarbonfootprintofthevesselsinportandoverall.ELECTRIFICATIONInthequestforlowercarbonemissionsandhigherenergyefficiencies,electrificationofthepropulsiondrivetrainandotherenergyconsumersonboardvessels,providesaflexibleapproachtofacilitatetheadoptionofcleanersourcesofenergyandlow-carbonfuels.Atthesametime,moresophisticatedenergyefficiencytechnologies(EETs)harnessingrenewablesourcesofenergyareprovidingthenecessarystepimprovementtolowerGHGemissions.Figure61:Electricitygenerationbyenergysource.Batterytechnologyisadrivingforcefortheelectrificationofmodernvesselssinceenergystorageistheheartofanelectrifiedpowergenerationsystem.Batteriescanbebuiltandadjustedforanygivenuse,storingandconvertingelectrochemicalenergyintoelectricalenergy.Lead-acid(PbA),nickel-metalhydride(NiMH)andlithium-ion(Li-ion)aresomeofthechemicaltypestheyuse.BnTOEHydrogen9876543210201020122014201620182020202220242026202820302032203420362038204020422044204620482050BiofuelRenewablesNaturalGasCoalOilProductsCrudeOilNuclear©MSILtd.ABSZEROCARBONOUTLOOKPAGE76Supercapacitors,alsoknownasultracapacitors,ormoretechnically,electronic,double-layercapacitors(EDLCs),areatypeofelectrochemicalenergystoragedevicethatincludeselectrochemicalcapacitors(ECs).Thefutureofsupercapacitorslooksbright,withplanstocombineadouble-layeredinterfacewithexistingenergystoragetechnologies.Theadditionofanelectrochemicalcapacitortoapplicationsrunningonotherhybriddeviceshasresultedinsignificantimprovementsinchargeanddischargecycleperformance.Theuseofsupercapacitorsislikelytoincreaseonvesselsthatexperiencerapidchangesinelectricalload,suchasthosewithdynamicpositioningsystems,cranes,activeheavecompensation,orthatdrill,mine,orpumpcargo,duetotheirnearlyunlimitedcyclelife,immunitytothermalrunawayandsymmetricalandrapidcharging/dischargingrates.FUELCELLSFuelcellsareanotherpromisingtechnologythatwiththeadoptionoflow-andzero-carbonfuelssuchasammoniaandhydrogen,becomeagreatoptionforenergysourceandconversioninelectrifiedpropulsionconfigurations,whileeliminatingsignificantGHGemissions.Thefuelcellisanenergygenerationtechnologythatusesanelectrochemicalreactiontoconvertfuelandairintoelectricityandwater.Electricalenergyisproducedintheformofdirectcurrent(DC)power,similartoanelectrochemicalbattery.Thefuelandoxidantarestoredoutsidethecell,unlikeabattery,andaretransferredintothecellasthereactantsareconsumed.Thefuelcellconvertsenergyratherthanstoringit,anditcancontinueoperatingaslongasfuelisavailable.ABSisinvolvedindifferentjointindustryprojects(JIPs)thatinvestigatethetechnicalandeconomicfeasibilityofinnovativesolidoxidefuelcells(SOFCs)poweredbyammonia,amongothers.Attheinitialstage,suchprojectsexplorethetechnicalfeasibilityonanexperimentalbasis,withtheaimtobuildaworkingprototypethatcanbelaterdevelopedintoafullyfunctionalunittopowercommercialapplications.Suchapplicationsmaystartfromthefullpowersupplytoharborcraftsuchastugsandlaunchboatsandeventuallyincreasesubstantiallytointegrateintohybridsystemsoflargervesselswithversatileandhigh-powerdemand,suchascontainerships.5.2NEWBUNKERINGINFRASTRUCTURETOSUPPORTTHEMOMENTUMWithlow-carbonfuelsasenablersforthelongtermdecarbonizationgoals,thedevelopmentofnewsupplychainsisquitechallenging,asexistinginfrastructuremayberestrictedornotyetadoptedinthemaritimesector.Propulsionengines,fuelcellsandotherconsumersatlargescaleareexpectedinthenearfuture,andtheindustryneedstopreparethesupplychainandinfrastructureforthesenewfuels,addressingaseriesofsafety,technical,environmentalandcompatibilitychallenges.Thetwomainfuelcomponentsofthehydrogenvaluechainareammoniaandhydrogen,whichposetheirownchallengestothetransportandoverallsupplychain.Althoughtheyhavebeencarriedasliquidcargoforquitesometime,especiallyammoniawithoutsignificantchallenges,theiruseasfuelsisbeyondthecurrentframeworks.AMMONIABUNKERINGAmmonia,beinganeasierandsaferfueltohandle,hasbeenprioritizedforadoption,whilethereareseveralbunkeringfeasibilityprojectsinvestigatingtheviabilityofanammoniabunkersupplychaininmajorporthubslikeSingapore,Rotterdamandothers.InSingapore,withthesupportoftheMaritimePortAuthority(MPA),thereareacoupleofdifferentinitiativesinvestigatingthefeasibilityofammoniabunkeringintheportofSingapore,startingfromthesourcingofblueandgreenammonia,alongwiththetransportation,storageandbunkering.PurposebuiltammoniabunkervesselsarebeingdesignedwithABShavingawardedapprovalinprinciple(AIP)totwosuchvesselsdesignedforbunkeringoperationsinSingapore.Atpresent,theIMOandclasssocietieshaverequirementsforammonia(NH3)carriersbutnodetailedprescriptiveRulesorregulationstobuildandclassNH3fueledbunkervessels,andtherefore,designsneedtoapplytheInternationalCodefortheConstructionandEquipmentandShipsCarryingLiquefiedGasesinBulk(IGCCode),InternationalCodeofSafetyforShipsUsingGasesorOtherLow-flashpointFuels(IGFCode)andtheInternationalConventionfortheSafetyofLifeatSea(SOLAS)alternativedesignprocesscontainedtherein.TheIMO’sIGCCodecoversrequirementsfortransportationofanhydrousammoniainbulkandthoserequirementscanbeadoptedforfuelstorageonproposedshipswithsomemodificationforadditionalriskidentified.Likethemarineindustry,otherindustriesdonothaveextensiveexperienceusingNH3asfuel.AmmoniaiswidelyusedinrefrigerationandfarmingandthereisextensiveexperiencerelatedtohazardsofNH3.PAGE77SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMWiththeentryintoforceofIGFCodefromJanuary1,2017,manyothershiptypesarebeingbuiltusinggasesorlow-flashpointfuelsforpropulsion.TheIGFCodecurrentlydoesnotprovideprescriptiverequirementstocoverNH3asfuel;however,itprovidesthemechanismtoapprovealternativetechnicaldesignarrangementsforusingNH3asfuel,pendingacceptancebytheflagState.ThefirststepinthisprocessistoperformapreliminaryHAZIDstudyatthepreliminarydesignphaseoftheprojecttoidentifyhigh-levelrisk.TheHAZIDstudyisatechniqueforearlyidentificationofhazardsandthreatsandcanbeappliedattheconceptualordetaileddesignstage.Earlyidentificationandassessmentofhazardsprovidesessentialinputtoconceptdevelopmentdecisionsatatimewhenachangeofdesignhasaminimalcostpenalty.AHAZIDstudyiscarriedoutbyanexperiencedmulti-disciplineteamusingastructuredapproachbasedonachecklistofpotentialhazards.Potentialproblemsarehighlightedforactionoutsidethemeeting.Typicalhazardsconsideredincludeenvironmental,geographical,process,fireandexplosion,andhealth.ThisHAZIDsupportsthealternativedesignprocessandfollowsestablishedriskassessmentmethodologiestosatisfytheIGFCode(ammoniaasfuel)riskassessmentrequirementsdetailedunder4.2.1and4.2.3oftheIGFCodeasfollows:“4.2.1Ariskassessmentshallbeconductedtoensurethatrisksarisingfromtheuseoflow-flashpointfuelsaffectingpersonsonboard,theenvironment,thestructuralstrengthortheintegrityoftheshipareaddressed.Considerationshallbegiventothehazardsassociatedwithphysicallayout,operationandmaintenance,followinganyreasonablyforeseeablefailure.4.2.3Therisksshallbeanalyzedusingacceptableandrecognizedriskanalysistechniques,andlossoffunction,componentdamage,fire,explosionandelectricshockshallasaminimumbeconsidered.Theanalysisshallensurethatrisksareeliminatedwhereverpossible.Riskswhichcannotbeeliminatedshallbemitigatedasnecessary.Detailsofrisks,andthemeansbywhichtheyaremitigated,shallbedocumentedtothesatisfactionoftheAdministration.”Thisprocessistoensurethattherequirementsof2.3oftheIGFCodehavebeenmetsuchthatthearrangementsforammoniaasafuelmeettheintentofthegoalandfunctionalrequirementsoftheIGFCodeandprovideanequivalentlevelofsafetyoftherelevantchapters.HYDROGENEstablishingrobustbunkeringinfrastructureposesuniquechallengesduetothecapitalinvestmentrequiredtonotonlyscaleuptheproduction,butalsothetransportationandstorageofanysuchfuel.Withthisinmind,theUnitedStates(U.S.)DepartmentofEnergy(DOE)hasestablishedtheHydrogenShot,whichisaimedatreducingthepriceofhydrogenfrom$5to$2perkilogram(kg)by2026andto$1perkgwithinonedecade.IntheU.S.,theDOEhasnotonlyestablishedtheHydrogenShot,whichsetsthegoal,buthasalsoheavilyinvestedintheexpansionofhydrogenasafuel.TherecentpassageofthebipartisanInfrastructureBillallocated$9.5Btowardtheeffort,withtheallocationbeingdisplayedinthefollowingfigure.ABSZEROCARBONOUTLOOKPAGE78SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure62:Cleanhydrogenallocationininfrastructurebill.Theallocationcertainlyinformswheretwomajorhurdlesareasitrelatestoimplementingcleanhydrogenatscale.Muchofthespendingisallocatedtowardthedevelopmentofhydrogenhubs,whicharestrategicallyselectedlocationsinwhichthevaluechainofthehydrogeneconomywillinteractincloseproximity.Theestablishedcriteriafordeterminingahublocationarefeedstockdiversity,end-usediversity,geographicdiversity,naturalgasavailabilityandadditionaldiscretionarycriteria.Thevaluechainwouldincludetheproducers,consumersandtheconnectedinfrastructure.Keytothislistisconnectedinfrastructure,whichwouldbethemeansbywhichhydrogenisstoredandtransported.Centralissuesregardingtransportationandstoragethatthefundingistargetedtoassistinsolvingare:•WeightandVolume•Efficiency•Durability•RefuelingTime•CostDurability,weightandvolumeandtheuniquehazardsofhydrogenwillhavemajorimplicationsinthemaritimeindustryevenwhencomparedtootherliquefiedgases.Inadditiontoprovidingfinancialsupport,thebillalsoestablishesaframeworktodevelopanationalstrategyandroadmapforcleanhydrogen.Thestrategyandroadmapwilldescribethetechnicallyandeconomicallyfeasiblestepstobetakentoensurewidescaleproduction,processing,delivery,storageanduseofcleanhydrogen.Theinclusionofthestrategyandroadmapinthebillaffirmstheneedforcontinualgovernmentinvolvementatthehighestleveltoensuretheindustrycanachieveitsrobustdecarbonizationgoals.EUINITIATIVEFORH2INFRASTRUCTURESimilartotheU.S.,theEuropeanUnion(EU)hasestablishedaflurryofinitiativestoassistinscalingupgreenhydrogencapabilities.TheEUtookdeliberateactionin2020tocommittohydrogenthroughincorporatingthefuelintotheEUstrategyforenergysystemintegration.Concurrently,theyestablishedtheHydrogenEnergyNetwork,EuropeanCleanHydrogenAlliance,andtheHorizon2020researchprogram.TheEU’shydrogenstrategywasdevelopedtakingintoaccountthegoalofhydrogenmakingupapproximately13to14percentoftheenergymixinEuropeby2050.Thisgoalwasestablishedacknowledgingthegapsofapurelyelectrifiedeconomyrunbyrenewableenergy.TheEUenvisionsasocietyinwhichrenewablehydrogeniscommonplace,generatedprimarilyusingwindandsolarenergy.However,thisistheidealsolutionandintheinterim,stepsarenecessarytoensureaseamlesstransitionfromacarbonintensiveeconomytoacarbonneutralone.$1,000,000,000$500,000,000$8,000,000,000HydrogenHubsElectrolysisManufacturingandRecyclingR&DPAGE79SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMThefirstofthesestepsisthefurtherdevelopmentoflow-carbonhydrogencoupledwithcarboncapture.Thisstepismorecomplexthanmeetstheeyeastheinfrastructurefornotonlyhydrogen,butalsocarboncaptureandcarbondioxide(CO2)sequestrationneedstobefurtherdeveloped.TheEUstrategyforinfrastructuredevelopmentmirrorsthatoftheU.S.throughthedevelopmentofregionalhydrogeninfrastructurecalled“HydrogenValleys.”Thiswillfacilitatetheuseofdecentralizedrenewableenergysourcesandtheabilitytolocallydeveloptheproductionandstorageofhydrogen.Thisapproachisolatesthespecificchallengeoftransportation,atleastonalargescale,toincreasefeasibilityintheneartermwhilefurtherresearchanddevelopmentisconducted.Doingsowillalsospreadthecapitalinvestmentovermultipledecades,allowingforthetargetedinvestmentofhydrogenthroughoutthenextthreedecadesleadingupto2050.Thenecessarycapitalinvestmentisimpressivetosaytheleast,withtheEUlayingoutaninvestmentagendaforanarrayofactivitiesincludingelectrolyzers,solarandwindenergy,carboncaptureandstorage(CCS),thelogisticsofhydrogen,andend-usesectorssuchasthesteelindustry.ThetabletotherightshowsthenecessaryinvestmentinthevarioustopicsbytheEU.5.3THEROLEOFSUSTAINABLEFINANCEINSTRUMENTSAsinmanyotherindustries,themaritimesector'sdecarbonizationtargetsmustbemetbyallthepartnersinthevaluechain.Financialinstitutionswillplayacriticalrolebyusingsustainablefinancetofundthereductionofemissions.Giventhatmaritimetransportationsupportsadisparatenumberofsectors—includingtrade,fishing,offshore,navaloperations,passengertransportandtourism,financingtheirtransitiontosustainabilitywillbeacomplextask.Morethan50,000merchantshipsoperateglobally,transportingadiverserangeofcargo.Thisfleetisregisteredinmorethan150countriesandmannedbyatleastamillionseafarers.Shipsaretechnicallysophisticated,high-valueassets(larger,high-techvesselscancostmorethan$200million[M]tobuild),andmerchantshipoperationsgenerateanestimatedannualrevenueinexcessof$500billion(B)infreightratesalone[51].Thetablebelowsummarizesthemainsegmentsofthisindustry,alongwiththetypicaltypesofownershipandfinanciers.Table13:Maritimetransportationsegments:vesseltypes,ownership,financiers[52].VesselTypeFinancierTypesOwnershiptypePrivatePublicPrivateequityfundsLessorsDeptmarketsCommodityﬁnanciersInfrastructurefandsTradingconglomeratesPublicﬁnanceTradeﬁnanciersPassenger(cruise,ferries,recreational)ServicevesselsOshoreplatformsNavalvesselsContainershipsBulkcarriersOil/GastankersInsurance:vessel/cargoBanksandnon-bankslendersFishingvesselsElectrolyzers$24Bto$42BSolarandWind$220Bto$340BCCUS$11BLogistics$65BSteel160millionpermillABSZEROCARBONOUTLOOKPAGE80SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMIntheoffshoresector,asmultipleoilandgasfieldsreachtheendoftheirproductivelivesandtheworldtransitionstoalow-carboneconomyandnewsourcesofenergy,manyoffshoreplatformsandassociatedinfrastructurewillbecomeobsoleteinthenextdecade[53];arecentreportestimatedthatthesector’scostofdecommissioningwillreachnearly$100Bbetween2021and2030.Thepressurecomesfrommanysources,including:theUnitedNations’(U.N.)ParisAgreement(COP21);stateandindustryregulatorssuchastheIMO;financialinstitutions(PoseidonPrinciples);prominentcargoowners(SeaCargoCharter);andindividualcompanies’Scope3emissiontargets,whichimpacttheirentiresupplychains.TOOLSAVAILABLEINTHEFINANCIALMARKETSustainabledebtisoneofthefastest-growingassetclassesinfinance.Withinthatbroadcategory,therearemanydifferenttypesofdebtinstruments,someofwhichareattractingmoreattentionthanothers.Belowaresomeofthedifferenttypesofsustainabledebtcurrentlydrivinggrowthwithintheassetclassandhelpingtomakesustainabilityafundamentalpartofthedebtissuanceandinvestmentprocesses.Theworldofgreen,social,sustainableandsustainability-linked(GSSS)bondsisexpandingatanincrediblepace.GSSSbondissuancereachedarecordhighin2021;itisnowestimatedtoaccountformorethan11percentoftheglobalbondsissued,upfromlessthansevenpercentin2020.TheissuanceofGSSSbondsisexpectedtopassthetrillion-dollarbarrierforthesecondconsecutiveyearin2022,reaching$1.35trillion(T)[54].Thoughsustainabledebtremainsasmallportionofthetotaldebtmarket,the$1.6Tissuedin2021iscomparabletoCanada'sgrossdomesticproduct(GDP)in2020.Figure63:Annualsustainabledebtissuancefrom2013to2021[55].Mostofthegreendebtbeingissuedatthemomentisintheformofproceeds-basedinstrumentssuchasgreenbonds—the“G”inGSSS.Theseincludeanytypeofdebtinstrumentfromwhichtheproceedsareusedsolelytofinanceprojectswithaclearenvironmentalbenefit.Inotherwords,theyareactivitybased.Whilemostpeoplethinkofgreenbondsintermsofsolarorwindenergy,theyalsocanbeusedtofinanceanythingfromconservingbiodiversityandnaturalresourcestopollutioncontrol.However,GSSSencompassesmuchmorethanjustgreenbonds,andnotallformsofsustainablefinanceattractthesamelevelofinvestorinterest.Considertransitionbonds,whichfundprojectssuchasnatural-gaspowerplantsandaremoreenvironmentallyfriendlythancoal,butdonotqualifyasgreenenergy.Issuance($billion)Sustainability-linkedbond1,643.7762.7577.0314.8241.6144.788.268.228.7Source:BloombergNEF,BloombergL.P.Sustainability-linkedloanSocialbondSustainabilitybondGreenloanGreenbond1,8001,6001,4001,2001,0008006004002000201320142015201620172018201920202021©BloombergNEFPAGE81SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMInterestintransitionbondswanedin2021;lessthan$5Bwereissued,amidgrowingskepticismamonginvestorsaboutwhethertheseprojectsandsectorsrepresentedgenuineeffortstodecarbonizetheglobaleconomyorwhethertheysimplyrepresented“transitionwashing.”TOOLSTOADDRESSTHEDECARBONIZATIONCHALLENGE“Asustainablefinancialsystemisonethatcreates,valuesandtransactsfinancialassetsinwaysthatshaperealwealthtoservethelong-termneedsofaninclusive,environmentallysustainableeconomy.”[56]Sustainablefinanceencompassesallfinancialactivitiesthattargetsustainability—acrossassetclasses(includingequity,debt[bondsandloans],commoditiesorderivatives),productsandservices;theseactivitiescanalsoincludecorporateloansandretailmutualfundsthatinvestinsustainablecompanies.Greenfinancereferstosustainablefinancethatisfocusedonenvironmentalrisksandopportunities,mostfrequently(butnotalways)climatechange.Additionalgreentopicsincludewastemanagement,waterusage,theconservationofnaturalhabitatsandactivitiesthatpreventthelossofbiodiversity.Climatefinanceisanumbrellatermthatencompassesallfinancialflowsassociatedwithclimatechange,whetherformitigationoradaptation;ithasbeenhistoricallymoreassociatedwithpublic-sectorthanprivate-sectorfunding.Sustainablefinancehasbeenrapidlygainingpopularity,bothinitsbroadestsenseandinrelationtoitssubtypes,suchasgreenorclimatefinance.Itsgrowthcanbemeasuredinmanyways,fromtheamountofsustainableassetsundermanagementtotheproliferationofspecificfinancialinstruments.Giventhegrowingawarenessofsustainability,somefinancialfirmshavebeeninclinedtolabeltheirofferingsorpracticesassustainablewithoutharmonizingdefinitions.Industrystandardsandoversighthaveevolvedorganicallyandasaresultofregulatoryaction.Additionally,thereisgrowingagreementonhowtoincorporateenvironmental,socialandgovernance(ESG)factorsintolendingandinvestingpractices,specificallyintheformofportfolioscoresandmetrics.Theuseofspecific,definedandlabeledsustainablefinancialinstruments,suchasgreenbonds,hasalsogrowninpopularity.Thetrendinsustainablefinancetransactions,productsandofferingsisbeingdrivenbymanypartsofthefinancialsystem,including:mainstreambanks,insurers,assetmanagersandowners,stockexchanges,ratingagencies,etc.—someofwhichcreatededicatedsustainabilitydivisions.Therealsohasbeenanincreaseinthenumberofsmaller,pure-playgreenorESGfinancialfirms.SUSTAINABLEANDGREENFINANCIALPRODUCTSANDINSTRUMENTSAsisthecasewithconventionalcorporateloans,greenorsustainabilityloansaretypicallytheresultofanagreementbetweenasmallnumberofbanksandaborrowingcompany.Greenandothersustainabilitybondsareusedtoraisecapitalbyprivateandpublicentitiesandlikeothertypesofbonds,theyareunderwrittenbybanksandtradedonsecondarymarkets.Sustainableorgreen-fundproductsareavailabletoinstitutionalandretailinvestors.Thesemaybesustainableinstruments(forexample,abondfundcomprisedentirelyofgreenbonds)orotherassets(e.g.,sharesofsustainablecompanies).Ingeneral,sustainablefinancialproductsareclassifiedintothreebroadcategories.Inthefirst,theproceedsaredesignatedandring-fencedforlong-termuse(e.g.,greenbonds).Next,therearefinancialinstrumentsthatarelinkedtosustainabilitytargets;forexample,throughinterest-ratepenaltiesorrewardsformeetingspecifiedtargets.Inthelastsetofproducts,sustainabilityagainservesasselectioncriteria,suchasinclusioninasustainableequityfundorthroughtargetedengagementwithacompany'smanagement.Thekeydifferencebetweengreenandsustainability-linkedfinancialinstruments(suchasbondsandloans)ishowproceedsareused.ABSZEROCARBONOUTLOOKPAGE82SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure64:Approachestokeydecision-makinginsustainablefinanceinstruments[57].Aswithgreenbonds,greenloansarerelevantforborrowerswhohaveaclearassetbasethatqualifiesasgreen,suchasrenewableenergy,low-carbontransportationprojectsorenergy-efficiencyinvestments.Thesustainability-linkedbondsorloansapproachallowstheborrowertousetheloanforgeneralcorporatepurposes,withpricingandpossiblyothertermstiedtoimprovedlong-termsustainabilityperformance(seefigurebelow).Thistypeofloanisappropriateforacompanythatwantstolinkitscostofcapitaltoitssustainabilityperformance[57].Figure65:Useofproceedsfromsustainablefinance[57].Itisexpectedthatplayersinthemaritimeandoffshorevaluechainswillbecomemorereceptivetothesetypesofsustainablefinanceproductsasclimatechangeandsustainabledevelopmentbecomemoreprominentintheircorporatestrategiesandriskassessments.InitialESGAssessmentIncentiveincorporatedintoloandocumentationAgreewhichtargetsneedtobeimprovedKEYDECISIONGREEN/SUSTAINABILITYBONDSANDLOANSSUSTAINABILITYPERFORMANCELINKEDLOANSDOESASSETBASEEXIST?USEOFPROCEEDSAPPROACHSUSTAINABILITYPERFORMANCELINKEDAPPROACHNOYESCategorizeAssetsValueAssetsProgramEstablishmentExecutionSTAGEONESTAGETWOSTAGETHREESTAGEONESTAGETWOSTAGETHREESTAGEFOURBONDSLOANSGREENBONDSGREENLOANSSOCIALBONDSSOCIALLOANSSUSTAINABILITYBONDSSUSTAINABILITYLOANSPAGE83SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMREGULATORYTRENDSAgrowingportionofregulatoryactivityrelatingtosustainablefinanceisfocusedontheunderlyingeconomicactivitybeingfinanced,ratherthanonfinancialproductsordisclosures.Additionally,regulatorshavebeenworkingtobetterdefinesustainableactivities.Inthisregard,theEUhasadvancedthefurthest.TheEUtaxonomy,whichwasfirstpublishedindraftforminMarch2020,establishesperformancethresholds(referredtoas“technicalscreeningcriteria”)foreconomicactivities,sectorbysectorandsubsectorbysubsector.Thetaxonomyisagnosticregardingfinancialinstrumentsandfundingmechanisms.Onceitisimplemented,anyinvestmentorlendingforarecognizedactivitycountsassustainable,whetheritisaloan,agreenbondorprojectfinancing.TheEU’staxonomyisnotableforitslevelofprecisionindefiningeachsubsector.Toqualifyasgreen,activitiesmustmakeasignificantcontributiontoatleastoneofsixenvironmentalgoals:climate-changemitigation;adaptationtoclimatechange;sustainableuseandprotectionofwaterandmarineresources;transitiontoacirculareconomy;pollutionpreventionandcontrol;andprotectionandrestorationofbiodiversityandecosystems.Aconditionoftheirinclusionisthattheyalsomustexplicitlyavoidharminganyoftheotherfiveobjectives.FUTUREPROSPECTSTheproportionoffinancialactivitiesthatincorporatesustainabilityisexpectedtocontinuegrowing,asstakeholder,governmentandpeerpressureintensifies,andsustainabilitybecomesnormalizedinsociety.However,forsustainablefinancetodevelopfurther,additionalactionmayberequired,notonlyonharmonizationandregulatoryoversight,butalsoonmorefundamentalitemssuchascross-comparablemeasuresofnon-financialimpact.5.4VALUE-CHAINENABLERSHYDROGENVALUECHAINThedevelopmentofaholisticinfrastructureecosystemforthehydrogenvaluechainwillbethekeyenablerfortheadoptionofthelow-andzero-carbonalternativefuelslikehydrogenandammonia.Thetransportationofhydrogenisakeyelementofthisvaluechainandfundamentaltoitsdevelopment,similartotheproductionfacilitiesandenergyconsumers.Theinitialdevelopmentofliquidhydrogencarriers,intheearlyprototypestages,isfocusingontwodifferentsizecategories,of25,000cubicmeters(m3)and80,000m3,bothusingdouble-wall,sphericaltankscarryingliquidhydrogen(LH2)atambienttemperaturesand-253°C.ThesmallersizeshipisbasedonaslightlylargerversionofthesphericaltankscurrentlybeingbuiltbytheNationalAeronauticsandSpaceAdministration(NASA)forland-basedhydrogenstorage,whilethelargershiprepresentsareasonableextensionofcurrenttechnologytoapplythesameconceptstotheapproximatecapacityofthecurrentlargestsizerangeofliquefiedpetroleumgas(LPG)carriers.Boil-offrate(BOR)isasignificantissueforliquidhydrogenconsideringtheverylowtemperaturesrequired,andspecialtankdesign,aswellasspecialrefrigerationrequiredtocontrolthisboil-off.Thelatestintegratedrefrigerationandstorage(IRAS)underdevelopmentbyNASAhasbeenconsideredfortheseconceptdesigns.Hydrogen,ahighlyvolatilegas,remainsinitscriticalphaseforavastrangeofpressurevaluesattemperaturesabove-240°C.So,thebestdensityofhydrogenasacompressedgasatambienttemperaturesthatcanbeachievedbypressurevesselsisaround50kg/m3at700barandambienttemperatures.Thisiscurrentlypossibleonlyinverysmall,high-tensilesteelorcarbon-reinforcedplasticbottles.TanksforthispressureleveltypicallyholdonlyafewhundredkgofH2andarenotsuitableforlargeshipboardtanks.Instead,thedensityofliquidhydrogenat-253°Candambientpressureisapproximately73kg/m3.Thismakesliquidhydrogen(LH2)atcryogenictemperaturestheonlypracticalwaytostoreandtransportlargequantitiesofthisgas,evenignoringthecomplicationsandriskinherentinhigh-pressurestorage.Liquidhydrogencanonlybestoredindouble-walledsteeltankswithvacuuminsulationifBORistobeminimizedpriortorefrigeration.ABSZEROCARBONOUTLOOKPAGE84SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheIRASthroughaheliumrefrigeratorisneededinadditiontotheeffectiveinsulationinordertoachievezeroBOR.Thisisnotre-liquefactionoftheboil-off,butratherrefrigerationoftheliquidH2toatemperaturebelowtheboilingpointtominimizetheboil-off.Heliumrefrigeratorsofsufficientcapacityareavailable,buttheircapitalexpenditure(capex)canbesignificant.Smallheliumlossesfromtherefrigeratorareunavoidable,soregularheliumreplenishmentshouldbeconsidered.ZeroBORdoesnotmeanzerohydrogenleaks,ashydrogentendstoleakthroughanynon-weldedjointduetothesmallmolecularsize,evenwhensub-cooledanddensified.Furthermore,thesmallmolecularsizeisresponsibleforsteelembrittlement.Thesecharacteristicsimposedesignconstraintstothestoragesystemintermsofgeneralarchitectureandmaterialchoices.High-strengthsteelsarethealloysmostvulnerabletohydrogenembrittlement,thustheuseoflowerstrengthsteelsandreductionofresidualandappliedstressareparamounttoavoidfractureduetohydrogenembrittlement.Currently,thescalingofvacuum-insulatedtanksbeyond5,000m3isachallenge.Inprinciple,thepotentialBORreducesasthetankvolumegoesup,sinceheattransferisproportionaltothetanksurface,whileBORisexpressedintermsofapercentageofthetankvolumetriccapacity.However,largertankswouldexacerbateissueswithinsulationqualitycontrolandappropriaterefrigerationthroughouttheliquidvolume.TankshapealsohasaneffectonBOR,withsphereshavingthebestsurfacetovolumeratio.Cylindricaltankscanalsobeusedbutthesurfacetovolumeratio(andthustheBOR)progressivelygetsworseasthelengthtodiameterratiogrowsbigger.Cargotransferisasignificantaspectoftheoperationthatrequiresasimilarlevelofinsulationperformanceofthepipingandpumpsasusedforthestoragetanks,buttominimizeBORduringtransferitisalsoessentialthatpiperunlengthsarekepttoabareminimum.Inertinghydrogenlinesisalsoanissue.Although,formethane,inertingistypicallydonevianitrogen(N2)whichcanbegeneratedonboardviaanitrogengenerator,inertingofLH2pipingcannotbedonebyN2sinceN2willfreeze/solidify,thereforeheliummayneedtobesuppliedforLH2pipingsystems.Capexcanbeverysignificantbothintermsofvacuum-insulatedtanksandarefrigerationsystem.Capexofaheliumrefrigerationsystemisproportionaltoitsratedcapacity,sooptimizingtheinsulationofthestoragetanksalsomeansreducingthesizeoftherefrigerationplantandassociatedcost.Tankcapexisinsteadproportionaltothetankvolumetriccapacityaswellastheinsulationsystem.Typically,aperliteinsulatedtankof1,000m3costsintherangeof$3M.Thesametankmightneeda1.4kWheliumrefrigerationsystem,withanassociatedcapexofapproximately$1.5Mto$2M.Intermsofshipdesign,itisimportantthatradiationheattransferiskepttoaminimum.Severaltechniqueshavebeenemployedtoachievethis,thesimplestofwhichistousehighlyreflectivepaintfortheexternaltankshell.Ifthetanksarecompletelyinternaltotheship,similartechniquesmightalsobebeneficialforthedeckabove.PAGE85SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUM25,000LH2CARRIERThisdesignincorporatesadvancedtechnologiessimilartothoseemployedbyNASAforitshydrogenstorageextensionprogramattheKennedySpaceCenterinCapeCanaveral,Florida.However,toreflectthefeasibilityofcurrenttechnologytorealizesuchdesign,theship’smainandauxiliaryenginesarepoweredbyliquefiednaturalgas(LNG),whichisstoredinmembranetanksatthebow.Themainengineissizedtomeetthemaximumpropulsionpowercapacityof6.7megawatts(MW),plus3.2MWforauxiliaries.TheLH2storagesystemfeaturesNASA’sIRAStoachievezeroboil-off,ontheknowledgethat,evenatcurrentLNGprices,ventingofhydrogencargowouldnotonlybedangerousbutalsosignificantlymoreexpensivethanthemethaneneededbythecargorefrigerationsystemandassociatedcapex.Cargorefrigerationisprovidedbyaheliumplantneedingaround1.0MWofelectricalpower.Thepropulsionpowerisprovidedtotwinhigh-performancepropellersmatchedtorudderbulbs,havingassumedthattheremainingauxiliaries’powerwouldbeintherangeof0.85MWwhilesailing.Themainengineandfueltankcapacityaresizedtoprovideenoughpowertothevesseltosailat16.2knotswitha20percentseamarginfor15.5days,covering6,000nauticalmileswiththefullauxiliaryloadof1.85MW.Weareshowingtheliquidhydrogenstoredinsphericaldouble-skinsteeltanksinsulatedwithlow-vacuumglassbubble.Theseare12.1meters(m)inexternalradiusand10.6mininternalradiuswith25millimeters(mm)-thickinternalandexternalshells,andtheyweigharound1,500millionmetrictons(Mt)each.Thetanksareprotectedfromdirectsunirradiationbyatopandmaindeckpaintedinhigh-reflectivewhitepaint,ensuringamaximumtemperatureofthetanksoutershellof54°Cwhentheambienttemperaturereaches45°C.Cargotemperatureismaintainedat-253°C.BORcalculationshowsthatavalueof0.11percentisachievableinabsenceofIRASatambientpressure.However,highmaximumallowableworkingpressure(MAWP)of6.2bargauge(90psig)isthedrivingfactorforthewallthickness.Damagestabilityisensuredbyseparatingeachsphericaltankholdfromtheneighboringones.Furthermore,theLH2innertanksaredesignedsothattheywouldbefullycontainedwithintheship’sB/5IMOdamageboundaries,ensuringthatanycollisionwouldatworsecauseanincreaseoftheBORwhichthevesselwouldhavetocontainwithacombinationofover-pressure,refrigerationandcontrolledcargoventing/flaring.DATE:April22,2022REV:025Km3LH2CarrierSHT:1/125Km3LH2CarrierProfileMAINPARTICULARSLengthOverall198.681mLengthBetweenParticulars203.471mBreadth,Molded32.200mDepth,Molded17.950mCbatDesignDraft0.770Draft,Design7.823mLightship25,877.5MTDeadweightatDesignDraft13,653.4MTDisplacementatDesignDraft39,530.9MTPOWERINGMainEngine,Installed6660kWMainEngine,NCR5994kWAuxiliaryEngine3242kWTotalPower,Installed13143kWSpeed16.2knotsFuelConsumption,Propulsion40.0MT/dayAUXILIARYLOADSCargoRefrigeration900kWTANKCAPACITIESBallast26092.7m3LNG1307.0m3MDO600.0m3LH224910.0m3RangeatDesignDraft&Speed6000n.MilesABSZEROCARBONOUTLOOKPAGE86SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMLoadingconditionsforallLH2carriersarechallengingduetotheextremeratioofcargoweight/volume.ThisimpliesthatevenatfullloaddeparturethevesselwouldhavetousepartofthelargeSWBcapacityinordertoensurecontroloftrim,propellerimmersionandstructuralstrength.ItisalsoforthisreasonthatthehullfeaturesatwinpropellerwithagondolasternsimilartothehullsofmodernLNGcarrierssothatashallowdraftwouldhelpminimizetheneedforSWB.FurtherdesignoptimizationmightbeachievedconvertingsomeoftheSWBtankstopermanentFWB.80,000LH2CARRIERSimilartothe25,000m3LH2carrier,thisvesselcapacitymightbecomerequiredoncethehydrogenmarketismoreestablished.Thisdesignalsoincorporatesatwinscrewgondolasterntomaintainpropulsionefficiencyandalleviatetheneedforpermanentballast,butitisfullyelectricwithallpowerprovidedbyhydrogen-fueledprotonexchangemembranefuelcells(PEM-FC)fuelcellsandload-balancingbatteries.Thefuelcellsaresizedtomeetthemaximumpowercapacityof1.0MWforauxiliariesand13.9MWforpropulsion,givingatotalof14.9MW.Thepropulsionpowerisprovidedtoapairofcontra-rotatingpropellers,drivenbyconventionalshaftsdirectlyconnectedtoelectricmotorswithamaximumpowerequalto4.25MWeach,andasecondpairofpropellersonsteerablepodsalsodrivenbyelectricmotorswithamaximumpowerequalto2.7MWeach.Thereisaminimuminstalledbatterycapacityofabout169MWhwhichisusedforpowerconditioning,dynamicenergystability,andhybridoperationsformaintainingspeedinaseaway.AllhydrogenneededforthePEM-FCisprovidedbythecargoboil-off,controlledbyasmall0.5MWrefrigerationplant.ThisPEM-FC/batterysetissufficienttoprovideenoughpowertothemotorstotakethe20percentseamarginfor15.5daysat16.2knots,evenwiththefullauxiliaryload,thusprovidingthesame6,000nauticalmilesrange.TheLH2isstoredinsphericaldouble-skinE690steeltanksinsulatedwithalow-vacuumglassbubble.Theseare16.6minexternalradius,15.6minternalradius,40mmthickinternalandexternalshellsandweigharound2,500Mteach.BORisestimatedtobe0.39percentwhichissufficienttoprovidegaseoushydrogentothePEM-FCworkingatfullpoweratambientpressure.ThesmallIRASheliumplantisactivatedtolowerBORwhenlowerPEM-FCoutputisneeded.Intactstability,damagestabilityandcargoprotectionaresimilartothoseofthe25,000LH2carrier.DATE:April22,2022REV:080Km3LH2CarrierSHT:1/180Km3LH2CarrierProfileMAINPARTICULARSLengthOverall290.000mLengthBetweenParticulars297.000mBreadth,Molded47.000mDepth,Molded26.200mCbatDesignDraft0.770Draft,Design11.500mLightship46,237.3MTDeadweightatDesignDraft78,072.9MTDisplacementatDesignDraft124,310.2MTPOWERINGFuelCellCapacity14900kWBatteryCapacity166800kWhPropulsionMotors8500kWContrarotatingPods5400kWSpeed16.2knotsFuelConsumption,Propulsion24.0MT/dayAUXILIARYLOADSAuxiliaryPower1000kWTANKCAPACITIESBallast83611.3m3LH279403.5m3RangeatDesignDraft&Speed6000n.MilesPAGE87SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMCARBONVALUECHAINOverthelastfewyears,themaritimeindustryhasbeenexploringwaystoimplementzero-carbonfuels—suchasammonia,bluehydrogen,biofuelsande-fuels(e-ammonia,e-hydrogen,e-methanol.e-diesel,e-LNG)—andalignwiththeIMO’sGHGgoals,whichtranslatestoan85percentreductioninCO2emissionspershipby2050.However,thetechnologyreadinesslevel(TRL)formanyofthesetechnologiesiscurrentlyquitelow.Thefuelsarenotcost-competitivewithoutabridgingsubsidythatallowsoperatorstousethematscale.Inaddition,someoftheselow-carbonfuelsmaybelowcarbonatthepointofuse,butthatassessmentdoesnottakeintoconsiderationthelife-cycleemissionsofthefullproductionprocess(upstream,midstreamfugitiveemissions,etc.).AccordingtotheIMO,thefuturepriceofalternativefuelswith(bluehydrogen)andwithoutcarbon(greenhydrogen)areestimatedtohave“marginalabatement”costsof€258/tonand€416/ton,respectively.Fuel-savingmeasuressuchastheoptimizationofpropellers,windpowerandsolarpanelsalonecannotreduceCO2emissionsby85percentpervessel.Hence,usingalternativefuelswouldbeveryexpensive.Anotheroptionunderconsiderationisship-basedcarboncapturesystems(SBCC),whichinvolvecapturingthepost-combustionCO2fromtraditionalfuel-basedvesselssuchasdiesel,LNG,andmarinegasoil(MGO).TheCO2isthenliquifiedandstoredtemporarilyonboardavesselbeforebeingpermanentlysequesteredingeologicalsites(onshoreoroffshore).TherateatwhichCO2emissionsarereducedishigherthananyfuel-savingmeasures[101].GlobalSBCCSstudiesLuoandWang(LuoandWang,2017)conductedastudyona17MWdiesel-fueledshipandconcludedthatSBCCwasafeasibletechnologywithanestimatedcostof€77.50/tonwitha73percentcapturerate;thiswouldincreaseto€163.07/tonandwitha90percentcapturerateifadditionalequipmentwasinstalled[102].Feenstraetal.[103]discussedtheconceptualdesignandintegrationofanSBCCsystemonboardadieselandLNGship.Thetworeferenceshipswerea1.28MWinlandshipfueledbyLNGanddieselandathreeMWcargoshipfueledbyLNG.ThisstudyconcludedthattheSBCCconceptwasmostcost-efficientwhenimplementedonLNG-fueledships.Thecostofcarboncapturewascalculatedtobe€120/tonusingmonoethanolamine(MEA)asthecapturesolventand€98/tonusingpiperazine.TheauthorsalsoconcludedthatheatfromtheexhaustgascouldbetransferredtotheSBCCprocesstoachieveahighercaptureefficiency.In2020,Monteiroetal.[104]analyzedSBCCimplementationonthreeLNGfueledships:aoneMWinlandship;aneightMWdredger;anda36MWcruiseship.MEAwasthecapturesolventandthecapturerateswithheatintegrationbetweentheCO2productandtheLNGwerecalculatedat75percent,54percentand69percent,respectively.ThecostofCO2captureinthesethreecaseswasestimatedtobe€301/ton,€115/tonand€154/ton,respectively,dependingonthescaleofthesystemandtheavailabilityofheat.Additionally,in2021,Stecetal.[105]researchedusingSBCConamedium-rangetankerrunningonheavyfueloil(HFO)withapowerof9.96MWusingMEAasthesolvent.ItwasfoundthattheCO2captureraterangedbetween31.4percentand56.5percent,dependingontheambientconditions.Thereweremultipleotherstudiesconductedinthepasttwoyears.In2021,Longetal.[106]conductedastudyusingSBCConathreeMWdiesel-fueledshipandfoundthat,withMEAasthesolvent,upto87.4percentcapturewasachieved;usinganadvancedsolvent(amixtureofMEA+PZ,MDEA+PZ)madeitpossibletocaptureupto88.9percentand90percent,respectively,oftheCO2.AnadvancedprocessconfigurationwithMDEA+PZasthesolvent,increasedthecapturerateagainto94.7percent.Awoyomietal.[107]analyzedtheSBCCtechnologyonboardanLNG-fueledshipwithapowerof10.3MWusingaqueousammoniaasthecapturesolvent.Here,thecaptureratewasbetween60percentand90percent,withthecostofcapturebetween$149and$117perton,respectively.Ammoniadoeshaveafewadvantages,suchasnocorrosionproblems,higherloadingcapacity,multipollutantcaptureandproductionofvalue-addedproductsasby-products.ThedownsidesareslowkineticsandhighvolatilityleadingtolargerSBCCequipment.ABSZEROCARBONOUTLOOKPAGE88SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMInMarch2022,theMonaco-basedtankeroperator,ScorpioTankersInc.,signedamemorandumofunderstanding(MOU)withCarbonRidge,aCalifornia-basedcompany,todevelopanonboardcarbon-capturesystem.CarbonRidgeisastartupworkingoncommercializingcurrentgas-separationtechnologieswithouthavingtomakelargestructuralmodifications[108].In2021,theSouthKoreanshipbuilder,DaewooShipbuilding&MarineEngineeringCo.,Ltd,developedatechnologythatcollectsandstorestheCO2outputfromshipoperations.Itusesanammoniawater-absorbentandthecapturewasverifiedbyHiAirKorea[109].Alsoin2021,theJapaneseshippingcompanyKawasakiKisenKaisha,Ltd.separatedandcapturedCO2fromacoalcarrier[108].InEurope,theDutchmaritimetechnologycompany,ValueMaritime,hasdevelopedanonboardCO2captureandstoragesolutionthathastheoptionofchargingaCO2battery,whichthencanbeoffloadedandusedtosupportcropgrowth.Thisisanexampleofatrulycircularsolution[110].ONBOARDCCSTECHNOLOGIESThetechnologyenablingtheadoptionofcarboncaptureonboardisfocusedprimarilyaroundpost-combustioncapturewhichcapturescarbondioxidefromtheexhaustgasafterthecombustionoffossilfuel,asopposedtopre-combustionandoxy-fuelmethodsthatarenotsuitableforretrofitsonexistingvessels.Duringthepost-combustioncapture,the11to13percentcarboncontentoftheexhaustgasesisisolatedandstoredseparatelyforfurtherdisposal.•AmineAbsorptionofthecarboninpost-combustionisachievedbythemixingoftheabsorbentsolutionofMEAthatcapturesthecarbondioxideandlaterisregeneratedbyrecirculationthroughheatrecoveryexchange,producingwaterandCO2thatispurifiedandliquifiedforstorageonboard.ThistechnologyiswelldevelopedandhasaTRLofnine,meaningithasalreadybeenproveninashoresideoperationalenvironment.However,ithasmainlybeeninstalledonlarge-scalelandapplications,anditwouldhavetobescaleddownforship-sizedapplications.Itcanhaveaveryhighcapturerate,between90and98percent.ThevariablecapturecapabilitymightmakeitmorecompetitiveintheearlyyearsoftheGHGregulations,butstillfuture-compatiblewiththeincreasedregulationswithonlyadditionaloperatingexpense(opex)andpossiblynoadditionalcapex.Onboardship,thistechnologywouldperformbetteriftheshipwerealreadyfittedwithexhaustscrubberstolimitthesulfuroxide(SOx)andparticulateenteringthecarboncapturesystem.Thecarboncapturesystemwoulduseelectricalpowersuppliedbytheauxiliaryenginesorshaftgenerator,andheatenergyfromtheenginesand/ortheboiler.•Chemicalabsorptionwithsodiumhydroxideastheabsorbentcapturesthecarbonintheexhauststoproducewaterandsodiumcarbonate(Na2CO3),whichisfurtherprocessedwithcalciumoxidefortheendproductofasolidthatcanbestoredonboard.Ithasbeentestedinalab,butnotyetintherealworldwiththehighestcapturerateat78percent,butthisisvariablebasedonmanyfactors,suchasexhaustflowrateandtimethecarbonisincontactwiththesodiumhydroxide.Thismethodcanbemoreconvenientthantheliquidcarbonstoragesinceitrequiresnospecialtanksandtakesuplessspaceonboardthanstoringitasaliquidorgas.Additionally,therecouldbelesscomplicationsinstoringthecarbonby-product,anditmightalsobeeasiertodisposeofasasolid.•CryogenicseparationgenerateshigherpurityofLCO2bycoolingtheexhaustgasestothefrostorde-sublimationpointofCO2inaheatexchanger.Withthistechnologystillindevelopmentstage,thesignificantpowerdemandmakesthistechnologymoresuitableforLNGcarriers,whereLNGcanbeusedasacoolant.•AbsorptiontechnologycapturestheCO2withtheuseofconventionalabsorbentmaterialslikezeolites,carbonmaterialsandamine-basedsolids.Thesearelaterprocessedtoremovetheabsorbedcarbonandfurtherpurifybeforestorageonboard.•Membraneseparationisasimpletechnology,wherebythegaspassesthroughapolymeric,metallicorceramicmembranefortheseparationoftheCO2drivenbythepressuredifference.STORAGEANDHANDLINGTheCO2capturedthroughanyofthetechnologiesaboveisfurtherpressurizedandcooledforstorage,whichrequirescompressiontoatleastsixbarandrefrigerationtokeeptheCO2inliquidform.Althoughlow-temperatureCO2liquefactionisnotasimpleprocessaboardship,liquidCO2nearthetriplepointoccupies561timeslessvolumethangaseousCO2.Atambienttemperature,evenifcompressedtothesamepressureasthatnecessarytoliquefyit,gaseousCO2wouldstilloccupy94timesmorevolumethanliquidCO2ofthesamemass.PAGE89SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheCCSConceptDesignsTheCCSconceptdesignstakeintoaccountthreecommonshiptypesandsizes.Toavoidoverlypenalizingtheconceptofonboardcarboncaptureandstorage,theCO2storagecapacityhasbeensetat24daysofnormaloperationonmarinedieseloil(MDO)fuelorless.OnlyarudimentaryarrangementofCCSequipmentandCO2storagehasbeendeveloped.Theconceptdesignscouldtheoreticallybeappliedasaconversion,butthe90percentcaptureratessuggestthatnewshipconstructionisabetteroption.TheconceptdesignspresentedbelowareintegratingthemonoethanolamineabsorptionCCSsystemwithitsdedicatedsystemcomponentsoutlinedintheillustrations.ThesubsystemsmayincludeSOxscrubber,exhaustblower,MEACO2absorber,waterwashscrubber,MEACO2stripper,CO2compressorskid,CO2refrigerantskidandtheliquidCO2storagetanks.WhiletheSOxscrubber,exhaustblowerandMEACO2absorberaredimensionedforthetotalexhaustflow,thewaterwashscrubberissizedfortheexhaustflowminustheCO2captured,andtheremainderofequipmentlistedabove(exceptforthestoragetanks)aredimensionedtotheexpectedCO2productionrateandthepredeterminedvoyagedurations.Ideally,theexhaustblowershouldbeplacednearthefunnel,butexactproximityplacementisnotcritical.TheexhaustblowershallboosttheexhausttoovercomethebackpressureinducedbytheMEAabsorberandwaterwashscrubbers,withthetieintobejustdownstreamoftheSOxscrubber.Abypassvalveshouldbeinstalleddownstreamofthetie-intoallowexhaustgasestoemitfromtheSOxscrubbershouldmaintenanceorrepairsneedtobeperformedontheCCSsystem.ABSZEROCARBONOUTLOOKPAGE90SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheUltramaxBulkCarrierwith50PercentCCSTheintegrationofCCStotheultramaxbulkcarrierdesignisquitechallenging,withallequipmentlocatedaroundtheship’sfunnellocationandoverthefantail.Anewfunnelsuperstructurewillneedtobeerectedtoaccommodatethenewsystemcomponents.Thenewhousingrequiredshallconsistofanewpartialdeckoverthefantail,withfoundationsfortheCO2storagetanksPortandStarboard(P&S)overthefantail,asclosetotheshipsidesaspractical.TheCO2compressorandrefrigerationskidscanbeinstalledstackedoverthefantailoncenterline.VoyagedurationbasedoncapturedCO2capacityis18days;however,theCO2productionrateforthisconceptisonly50percentstoragetankcapacityandcouldberesizedtoaccommodatelongervoyagedurations.Theprofileabovehighlightsareasaffected.Thesketchbelowillustratesproposedequipmentplacement.Thetablebelowthesketchgivesestimatedsystemperformancemetricsandproposedsystemcomponentsizingparameters.TheSOxscrubberisshowntobeaninlineinstallationandinstalledinthefunnelasintended.BoththeMEAabsorberandwaterwashscrubberscanbeinstalledoneithersideofthefunnelonthesameframeordirectlyasternofthefunneloncenterline.MainEngine85PercentMCR6,640kWAssumedElectricalBaseDemand1,172kWVoyageDuration24DaysFuelBurnedw/oCCS31.1Mt/dayFuelBurnedw/CCS32.6Mt/dayAdditionalFuelDemandforCCS1.5Mt/dayAdditionalPowerDemandforCCS380kWAdditionalSteamDemandforCCS9.3Mt/dayCO2CapturedperDay50.1Mt/dayLiquidCO2StorageTankCapacity1,140m3(570m3x2Tanks)ExhaustBlower/SOxScrubber/MEAAbsorberExhaustCapacity29,785m3/hrWaterWashScrubberExhaustCapacity28,720m3/hrCO2CompressorSkidCapacity1,065m3/hrCO2RefrigerationSkidCapacity188kW(Ref.)PAGE91SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMABSZEROCARBONOUTLOOKPAGE92SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheUltramaxBulkCarrierwith90PercentCCSWhatisparticularlydifferenthereisthesizeofthestoragetanks.Similartothe50percentCCSconceptabove,thevoyagedurationwasshortenedfor18daysduetospaceconstraintsandstabilityconcerns.Theretrofitwouldrequireanewsystemhousingandnewdecktobebuiltoverthefantailandwidenedtothefullbreadthoftheshiptoenableinstallationofthestoragetanks.MainEngine85PercentMCR6,640kWAssumedElectricalBaseDemand1,172kWVoyageDuration24DaysFuelBurnedw/oCCS31.1Mt/dayFuelBurnedw/CCS33.4Mt/dayAdditionalFuelDemandforCCS2.4Mt/dayAdditionalPowerDemandforCCS500kWAdditionalSteamDemandforCCS16.9Mt/dayCO2CapturedperDay91.6Mt/dayLiquidCO2StorageTankCapacity2,080m3(1040m3x2Tanks)ExhaustBlower/SOxScrubber/MEAAbsorberExhaustCapacity30,250m3/hrWaterWashScrubberExhaustCapacity28,303m3/hrCO2CompressorSkidCapacity1,947m3/hrCO2RefrigerationSkidCapacity338kW(Ref.)PAGE93SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMABSZEROCARBONOUTLOOKPAGE94SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheSuexmaxTankerwith50PercentCCSThenewsuezmaxtankerwithCCSwillneedanewfunnelsuperstructuretoaccommodateplacementofsystemcomponents.TheSOxscrubberwillbeplacedinthefunnelasintended.BoththeMEAAbsorberandWaterWashScrubberscanbeinstalledoneithersideofthefunnelonthesameframeordirectlyasternofthefunneloncenterlineasitisshowninthesketchbelow.Therestoftheequipmentcanbeinstalledforwardofthesuperstructure,withtheCO2compressorandrefrigerationskidsabovethecargotanks,P&Softhepiperack.TheliquidCO2storagetankalsocanbeplacedforwardoftheCO2compressorandrefrigerationskids,overthecargotanks,P&Softhepiperack.Theoptimalpositionofthestoragetankswouldbeaftofthecargomanifold,oralternativelyforwardofthemanifold.Thevoyagedurationwasassumedtobe24days;although,thereissufficientspacetoenlargeoraddmoretankstoaccommodatelongervoyages;limitedbystabilityandcargoconstraints.Forwardofthesuperstructure,equipmentwillneedtoberatedexplosionproofforinstallationinhazardouszones.MainEngine85PercentMCR10,115kWAssumedElectricalBaseDemand1,785kWVoyageDuration24DaysFuelBurnedw/oCCS48.4Mt/dayFuelBurnedw/CCS53.8Mt/dayAdditionalFuelDemandforCCS5.1Mt/dayAdditionalPowerDemandforCCS875kWAdditionalSteamDemandforCCS26.9Mt/dayCO2CapturedperDay159.0Mt/dayLiquidCO2StorageTankCapacity2,980m3(1490m3x2Tanks)ExhaustBlower/SOx/MEAAbsorberScrubberExhaustCapacity48,482m3/hrWaterWashScrubberExhaustCapacity45,102m3/hrCO2CompressorSkidCapacity3,381m3/hrCO2RefrigerationSkidCapacity644.7kW(Ref.)PAGE95SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMABSZEROCARBONOUTLOOKPAGE96SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMThe14,000TEUContainershipwith50PercentCCSStartingfromanewfunnelsuperstructurethatwillneedtoberetrofittedtoaccommodateplacementofsystemcomponents,theSOxscrubberistobeaccommodatedtherein.BoththeMEAabsorberandwaterwashscrubberswillbeinstalledoneithersideofthefunnelonthesameframeasitisshowninthesketchbelow.TheliquidCO2storagetankswillneedtobeinstalledathwartshipatthebottomofthefirsttwocontainerbaysforwardoftheengineroom.Thesetanksdonotneedtobeaccessedregularly;thus,containerbayscanbemodifiedtoremovesomecargospace.Containerstowagecanbeplacedovertopofstoragespace.Theremainderoftheequipmentcanbeinstalledatthebottomofthecontainerbayforwardofthefunnel.Containerstowagecanalsobeplaceovertopofthisspace.The14,000TEUcontainershiprequirestheinstallationoftwoCO2refrigerationskids.TheseareplacedontheP&SsidesofthenewCO2CCSmachineryspace.TheCO2compressorskidalsoresidesinthisspaceonthecenterline.Thetablebelowthesketchgivesestimatedsystemperformancemetricsandproposedsystemcomponentsizingparameters.MainEngine85PercentMCR38,250kWAssumedElectricalBaseDemand8,500kWVoyageDuration24DaysFuelBurnedw/oCCS200Mt/dayFuelBurnedw/CCS209Mt/dayAdditionalFuelDemandforCCS9Mt/dayAdditionalPowerDemandforCCS1,850kWAdditionalSteamDemandforCCS40.6Mt/dayCO2CapturedperDay285Mt/dayLiquidCO2StorageTankCapacity7,140m3(3,570m3x2Tanks)ExhaustBlower/SOx/MEAAbsorberScrubberExhaustCapacity132,272m3/hrWaterWashScrubberExhaustCapacity126,330m3/hrCO2CompressorSkidCapacity6,063m3/hrCO2RefrigerationSkidCapacity975kW(Ref.)PAGE97SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMABSZEROCARBONOUTLOOKPAGE98SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMThe14,000TEUContainershipwith90PercentCCSForthe90percentCCS14,000TEUcontainership,anewfunnelhousingwillneedtobeerectedtoaccommodateplacementofsystemcomponentsinthesameconfigurationasthe50percentCCS14,000TEUcontainership.TheuniquenessofthisconceptisthatfourliquidCO2storagetankswillneedtobeaccommodatedathwartshipatthebottomofthefirstfourcontainerbaysforwardoftheengineroom.Thesetanksdonotneedtobeaccessedregularly;thus,containerbayscanbemodifiedtoremovesomecargospace.Containerstowagecanbeplacedovertopofstoragespace.Theremainderoftheequipmentcanbeinstalledatthebottomofthecontainerbayforwardofthefunnelinthesameconfigurationasthe50percentCCS14,000TEUcontainership.Containerstowagecanalsobeplaceovertopofthisspace.The14,000TEUcontainershiprequirestheinstallationoftwoCO2refrigerationskids,andtheseareplacedontheP&SsidesofthenewCO2CCSmachineryspace,togetherwiththeCO2compressorskid.MainEngine85PercentMCR38,250kWAssumedElectricalBaseDemand8,500kWVoyageDuration24DaysFuelBurnedw/oCCS200Mt/dayFuelBurnedw/CCS214Mt/dayAdditionalFuelDemandforCCS14Mt/dayAdditionalPowerDemandforCCS2,920kWAdditionalSteamDemandforCCS73.1Mt/dayCO2CapturedperDay525Mt/dayLiquidCO2StorageTankCapacity14,280m3(3,570m3x4Tanks)ExhaustBlower/SOx/MEAAbsorberScrubberExhaustCapacity364,797m3/hrWaterWashScrubberExhaustCapacity253,824m3/hrCO2CompressorSkidCapacity11,155m3/hrCO2RefrigerationSkidCapacity1,734kW(Ref.)PAGE99SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMABSZEROCARBONOUTLOOKPAGE100SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMLCO2CARRIERCONCEPTUALSHIPDESIGNS[111]ABShasalsoworkedwithHerbertEngineeringCorp(HEC)todevelopconceptualshipdesignsrelatedtothetransportofCO2.CO2carriershipsarecurrentlyintheirearlyprototypestagewithonlyexistingorplannedshipsbeingolder,suchasthe2004YaraGerda,1,800Mtcapacityat15barand-25°CandthecurrentlyproposedMitsubishi7,500m3designforthenorthernlightscarbonsequestrationproject.Theconceptdesignisbasedona10-baroperatingpressure,correspondingtoanoperationaltemperaturerangeof-45°Cto–50°Cwhichisbelievedtobeagoodcompromisetemperaturerangeforcontrolofliquidphaseandminimizationofoverallpressureforcylindricaltanks.Thetemperatureandpressurearekeptconstantbyarefrigerationplant.CO2isagasatambienttemperatureandpressureandtocarryitintheliquidform,thepressureneedstobegreaterthanitstriplepoint(5.18bar)andrefrigeratedtotemperatureveryclosetobutnotbelow56.6°C.MostcommerciallyavailableLCO2tanksoperateatpressuresbetween12and24barandattemperaturerangesbetween-15°to-35°C.ScalingupcylindricalC-tanksistechnicallyproblematic,sincetheoutershellsteelthicknessdependsonthemaximumoperatingpressurevaluesandthetankdiameter.Toincreasecapacity,tanklengthisincreasedwhilemaintainingarelativelysmalldiameter.ThefeasibilityofaverylargeCO2carrier(VLCC,greaterthan80,000m3)dependsonthemaximumoperatingpressurewhichinturndeterminestemperaturerangesthetankinsulationandrefrigerationsystemneedtomaintaintopreventsafetyvalvepressureventingfromboil-off.Theproposedconceptualdesignsarebasedona10-baroperatingpressurewhichcorrespondstoanoperationaltemperaturerangeof-45°Cto-50°CwhichisagoodoperatingenvelopetocontroltheliquidphaseandminimizeoverallpressureforC-typecylindricaltankconstruction.Thetemperatureandpressurearemaintainedbyarefrigerationplantandventingisallowedduringemergencies.25,000m3LCO2Carriers[111]DATE:April25,2022REV:025Km3LCO2CarrierSHT:1/125Km3LCO2CarrierProfileMAINPARTICULARSLengthOverall185.000mLengthBetweenParticulars181.600mBreadth,Molded28.400mDepth,Molded15.200mCbatDesignDraft0.800Draft,Design10.400mLightship11,744.1MTDeadweightatDesignDraft32,124.0MTDisplacementatDesignDraft43,868.0MTPOWERINGMainEngine,Installed5850kWMainEngine,NCR5265kWAuxiliaryEngines,Installed4950kWTotalPower,Installed10800kWSpeed14.5knotsFuelConsumption,Propulsion20.0MT/dayAUXILIARYLOADSCCSSystem1100kWTANKCAPACITIESBallast27200.0m3HFO1300.0m3MDO500.0m3LCO225500.0m3RangeatDesignDraft&Speed6000n.MilesPAGE101SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMThedesignphilosophychoicemadefortheseLCO2carrierswillbeusingconventionalfossilfuelpropulsionandauxiliaryplantsandwillhaveanappropriatelysizedCCSsystem.Thehighspecificgravitycargo(liquidCO2weighsapproximatelyoneMt/m3)andtheweightofthetankimposeslargeresidualbuoyancyinadditiontonetcargotankvolume.TheLCO2shipshavetwomaincargotanksoccupyingtheship’smid-bodyandasmallerCCStankatthebow.TheCCStankisverticalcylindertoaccommodateitinthefinerbowsections.Inaddition,theCCSliquefactionplantisseparatedfromthecargoandCCSrefrigerationplanttosimplifyandminimizeplantpowerrequirements.Sincethemarketisstillnascent,theshipsaredesignedtocarryalternativecargowhichiseasierforrefrigeratedLPGbutveryexpenseforammonia,sinceitwouldrequiredoublingtankthicknessandacomplexcargohandlingandpipingsystem.Thetwocargotanksare8.25minradiusand58.25minlengthandeachwithavolumeof11,900m3andhavea40mmthickshelliffabricatedinstainlesssteel.IfthetankisdesignedonlyforCO2orLPG,thethicknesscouldbereducedto17mm.TheCCStankis6.3minradiusand15.95minheightwithacapacityof1,730m3.ThemainengineMCRis5.85MWand4.95MWforauxiliaries,andtheCCSsystempowerrequirementstakeapproximately1.11MWtofeedanaminecarboncaptureplantinadditiontoaCO2liquefactionplant.Theremainingauxiliarypowerisusedforcargorefrigerationandshipboardconsumption.Theengineandfueltanksaredesignedtosailat14.5knotswitha20percentseamarginfor17.2dayscovering6,000nauticalmiles.82,000m3LCO2Carriers[111]Thedesignforthe82,000LCO2carrierissimilartothe25,000carrierwithtwocargotanksoccupyingtheship’smid-bodyandasmallerCCStankatthebow.Thetwocargotankshavearadiusof13.22mandmeasure74.22mand78.22minlength.Thetankcapacitiesare38,300m3and40,600m3,respectively.Iffabricatedinstainlesssteel,thethicknesswillbe62mmandifonlycarryingLPGandCO2,thethicknesscouldbereducedto26mm.TheCCStankwillbeeightminradius,24minheightwithacapacityof4,250m3witha25mmthickshell.DATE:April25,2022REV:082Km3LCO2CarrierSHT:1/182Km3LCO2CarrierProfileMAINPARTICULARSLengthOverall250.000mLengthBetweenParticulars239.000mBreadth,Molded44.000mDepth,Molded21.300mCbatDesignDraft0.810Draft,Design15.000mLightship29,124.5MTDeadweightatDesignDraft102,075.0MTDisplacementatDesignDraft131,199.8MTPOWERINGMainEngine,Installed12000kWMainEngine,NCR11000kWAuxiliaryEngines,Installed6600kWTotalPower,Installed18600kWSpeed14.5knotsFuelConsumption,Propulsion43.0MT/dayAUXILIARYLOADSCCSSystem2400kWTANKCAPACITIESBallast79200.0m3HFO2600.0m3MDO650.0m3LCO283200.0m3RangeatDesignDraft&Speed6000n.MilesABSZEROCARBONOUTLOOKPAGE102SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMThemainengineMCRis12MWplus6.6MWforauxiliaries,andtheCCSsystempowertakesapproximately2.4MWoftheauxiliarypowertofeedanaminecarboncaptureplantinadditiontoaCO2liquefactionplant.Propulsionisprovidedbyasingle8.4mdiameterhighperformancepropellermatchedtoarudderbulb.Themainengineandtankcapacityprovidethesamedistanceandseamarginasthe25,000LCO2carrier.WiththeconceptualdesignsreadyforverylargeCO2carriersandthemarketdemandexpectedtoincreasewithgrowthinoffshoreCO2storageprojects,itisonlyamatteroftimebeforetheseCO2carriersbecomeoperational.Currently,smallercarriers,mostlyinthefoodandbeverageindustries,areinoperationorhavebeenannounced,buttheverylargecrudecarriers(VLCCs)representaparadigmshiftindesignphilosophy,andweshouldexpecttoseemultipleannouncementsofnewbuildsoverthenextfewyears.Inaddition,onboardcarboncaptureisatechnicallyfeasiblesolutionwithnomajorbarriersexceptforissuesrelatedtoenergyusageandthespacerequiredforadditionalequipment(storagetanks,processingequipment,etc.),whichcanberesolved.Heatoptimizationmayhelptoreducefuelconsumptionandoperatingcosts.Thecommodity-pricingmarketforcapturedCO2couldplayamajorroleinhelpingonboardcarbon-capturetechnologytodevelopfurther.Inshort,SBCCseemslikeanexcellentbridgingoptionorevenalong-termsolutiontodecarbonizeshipping,whencomparedtothestateofalternativefuelsandtheirrelatedinfrastructureandinvestmentneeds.5.5UPDATEOFFUTUREFUELMIXTHEFUTUREFUELPATHWAYSTheindustryrecognizesthatthecurrentshort-termtechnicalandoperationalmeasures,suchasEnergyEfficiencyDesignIndex(EEDI),EnergyEfficiencyExistingShipIndex(EEXI)andCarbonIntensityIndicator(CII),arenotenoughontheirowntoputshippingonthenetzero-emissionpathway.Somedium-andlong-termmeasuresmustbeimplementedpromptly.Thetransitiontolow-andzero-carbonfuelswillbetheprimarypathwaystoachievetheIMO’sdecarbonizationgoalsfor2050.Thecurrentregulatoryframeworkisfocusedonvesselemissions(tank-to-wake)ratherthantheoveralllife-cycleemissionsofaspecificfuel(well-to-wake).However,itisrecognizedthroughouttheindustrythatthelife-cyclecarbonfootprintoffuelsprovidesthemostcompleteassessmentoftheirenvironmentalimpact.TheIMO’santicipatedintroductionoftherequirementtomeasureafuel’sfulllife-cyclecarbonfootprintwillallowtheshippingindustrytoachievezeroemissiontargetswhilestilldeployingthemostwidelyusedinternal-combustionengines—theleastdisruptivetechnicalsolution—alongwiththeadoptionofnewtypesoffuels.Identifyingtheoptimumfuelspecificationsforeachvesselandapplicationisachallengingtask,sincetherangeoftechnicalsolutionsisalreadywide,andgettingwider.However,byexaminingthefullrangeofonboardtechnologies—engines,aswellasfuel-containment,storageandsupplysystems—commontaxonomieswillarisetosimplifythedecision-makingprocess.InitsfirstSettingtheCoursetoLowCarbonShippingoutlook,ABScategorizedtheavailableandemergingfueloptionsintothreepathwaysthatcouldhelpthemaritimeindustrymeetitsdecarbonizationgoalsfor2030andbeyond.PAGE103SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheLightGasPathwayThiscategoryincludesfuelscomprisedofsmallmoleculeswithlowcarbon/hydrogen(C/H)ratios,whichcanhelptoreducecarbonemissions,andinthecaseofmethane(CH4),providecomparativelyhighenergycontent.However,thesefuelsrequirecryogenicstorageandmoredemandingdeliverysystems.ThispathwayincludesLNG,bio-LNG,andsyntheticnaturalgas(SNG)orrenewablenaturalgas(RNG),whichcanbeproducedfrombiomassand/orbyusingrenewableenergy.TheHeavyGasandAlcoholPathwaysThiscategoryincludesfuels—suchasLPG,methanol,ethanolandammonia—thatarecomprisedoflargermoleculesthanthoseinthelight-gasgroup.Assuch,theyhavehigherC/Hratios—therefore,lowerpotentialtoreducecarbonemissions—andlowerenergycontent.Theirfuelstorageandsupplyrequirementsarelessdemanding.TheBio/SyntheticFuelPathwayThiscategoryincludesfuelsthatareproducedfrombiomass,includingplants,wasteoilsandagriculturalwaste.Catalyticprocessingandbiomassupgradingcanproduceliquidfuelswithphysicalandchemicalpropertiesthatarecomparabletodieseloil;thisisdesirablefromadesignstandpointbecausetheycanbeusedasdrop-inbiofuelswithminimalornochangestomarineenginesandtheirfuel-deliverysystems.THEFUTUREFUELMIXAlternativefuelswillplayadominantroleinthedecarbonizationofthemarineandoffshoresectorsandareexpectedtoyieldthemostbenefitsforreducingGHGemissions.However,sincetherearemanychoicesforadoptingalternativefuels,oneofthemainchallengesforownersistodecidewhichalternativefuelisbestsuitedtosupportthetransitionto2050.AccordingtoClarkson’sdata,asofFebruary2022,1.4percentoftheglobalfleetispoweredbyalternativefuels.LNGBio-/Electro-MethaneHydrogenLPG,MeOHBio-/Electro-FuelsAmmoniaBio-/RenewableDieselGas-to-LiquidFuels2ndand3rdgenerationbiodieselABSZEROCARBONOUTLOOKPAGE104SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure66:Existingfleetpoweredbyalternativefuels.Intheorderbook,23percentofvesselsarescheduledtobepoweredbyalternativefuels(seefigurebelow).Figure67:Fleetpoweredbyalternativefuelsonorderbook.Intermsofthefuelmixusedinshipping,theuseofLNG,methanolandLPGhasincreasedmorerapidlyinrecentyearsthanwasanticipatedin2020(thoughthelatteris,asyet,confinedentirelytotheLPGcarriersector).Therehasalsobeensomeprogressintheprovisionaldevelopmentofammoniaasamarinefuel,withenginedesignsreceivingapprovalandseveralprojectsaimingtohavevesselsonthewaterbymid-decade.Weforecastedalternativefueladoptionforthisstudybasedontheassumptionthatmethanol,ammoniaandhydrogenwilltakecenterstageafter2030.Thisisnottosaythatthefuelusedinitiallyiscarbonneutral,andthereportmakesnoattempttoaddressprogressinproducingenoughgreenammoniaandmethanol,particularlyinthecontextofexistingmatureindustriesthatconsumethesechemicalsattemptingtotransitiontoacarbon-freefuture.Wearriveatamuchlowerlevelofoiluseby2050thanwedidinour2020study,assumingthatallshipsbuiltintheearlierpartofthenextdecadearenon-oilfueledandallowingfordifferentratesofupdatebyshiptypeandsegment.Thelatterwasmoreconcernedwithfiguringouthowtogettoa40percentoilusebytheendoftheforecastperiod.Themostrecentresearchacknowledgesprogressmadesincethenandsuggeststhatafasterdecarbonizationispossibleifenoughfuelisavailable.Bycombiningthederivedshipdemandwithaforecastforachangingfuelmixusedindeepseashipping,thescenariosforglobalenergyconsumptionaretranslatedintoglobalfuelconsumptionbyships.Ourforecastingmodelsforeachsectorproducetheavailablefleet,whichtakesintoaccountourtradeforecastsandshiftingrequirementsforvariousvesselsizes.Intheinitialanalysis,noassumptionsweremadeaboutchangesinengineefficiency,vesseltradingspeed,portefficiencyorfleetfuelmixovertheforecastperiod.HFO+Scrubber,MGO/MDO,LNG,LPG,methanol,ammonia/hydrogenareamongthefuelscenariosexamined.ExistingFleetPoweredbyAlt.Fuel0100LNGLPGMethanolEthaneHydrogenBiofuel200300400500600700ClarksonsResearch(https://www.clarksons.net)FleetPoweredbyAlt.FuelonOrderbookLNGLPGMethanolEthaneHydrogenBiofuel2000400600800ClarksonsResearch(https://www.clarksons.net)PAGE105SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure68:Totalglobalconsumptionbyenergycarrier.Theassumptionswe'vebuiltintoourenergymodelrevealthemagnitudeofthechangerequiredtodecarbonize.WithChina,EuropeandNorthAmericadominatingenergydemand,weexpecta30percentincreaseinglobalenergyconsumptionfrom2020to2050.Thefastest-growingregionsareexpectedtobeSouthAsiaandAfrica,whereenergyconsumptioncoulddoubleinthenextdecade.Zero-carbonenergyproductionwillincreasenearlysix-foldovertheperiod,withthesteepestdeclinesinfossilfuelconsumptioncomingfromcoal(50percent)andoil(20percent).ALTERNATIVEFUELUPTAKEThisupdatetakesintoaccounttherecentsignificantinvestmentinnewbuildingtonnage,withaparticularfocusoncontainershipsandgascarriers.Giventheorderbook,thispaintsaclearerpictureofthefleet'sexpansionto2025.In2025,thesetrendsindicatethatLNG,methanolandLPGwillhaveamuchhigherstartingpointasamaritimefuel.Thisisalmostentirelyduetotheactionsofmajorshippinglines,whichhaveembarkedonaremarkableinvestmentspreewithastrongfocusonalternativefuels,particularlyforlargervessels.Itshouldbenotedthatthefuelmixhasbeenforecastbyvesseltypeandsizesegmentsforthisupdateduetoclearevidenceoffuelchoicedifferentialsbysize.Forexample,largebulkcarriershaveshownastronginterestinLNGasafuel,butsmallervesselshaveshownnointerest.Althoughtherearesomeexceptions,therehasbeenaclearfocusonlargercontainerships.Becausethetankersectorhasseenverylittleinvestmentinrecentyears,adoptionofalternativefuelswilllagbehindtheothersectors.AframaxandVLCCshavereceivedthemajorityoftheinvestment,whileafewsmallertankershaveemergedforEurope-focusedoperators.BnTOEOil5.04.54.03.53.02.52.01.51.00.50.0201020122014201620182020202220242026202820302032203420362038204020422044204620482050CoalNaturalGasRenewablesBiofuelNuclearLPG+©MSIABSZEROCARBONOUTLOOKPAGE106SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure69:Consumptionbyshiptype(HFOequivalent).Figure70:Fuelmix(HFOequivalent).©MSI300250200150100500LNGBulkerLPGContainerPCTCTanker2020ForecastMnTHFOEquiv2020202520302035204020452050©MSIMnTHFOEquiv2020202520302035204020452050LiqueﬁedGas2020NotIncludingLNGCarbonFreeFuelsHFO/MGO/MDO250200150100500300PAGE107SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMTheproportionofexistingandnewfuelsusedinshippingisshownbyrecalculatingenergyconsumptionintonnesofHFOequivalent.ThisisthoughttobeeasiertounderstandthanusingJoulestomeasureenergy.Underourbasecasefortheshiptypesincludedinthisstudy,totalenergyconsumedbytheshippingindustrywillrisefrom185MnTHFOequivalentin2020to237MnTHFOequivalentin2050.Thisisduetothegrowingimportanceofcontainershipsand,toalesserextent,LNGcarriers.TheuseofLNGcargoasafuelonLNGcarriersislargelyresponsibleforthehighdemandforLNG.Othershiptypes'demandforLNGbunkerswillrisefromcurrentlowstoapeakof25MnT.(approximately10percentoftotaldemand).Theincreasingproportionofammonia/hydrogenisalsoobservedinthefuelmix.Althoughthesefuelsarelabeledascarbonfree,thisisbasedontheassumptionthatcarbon-neutralversionsofthesefuelscanbeproducedinsufficientquantities.Weassumethattheshippingindustrywilltransitiontothesefuelsifandwhenproductionbecomesavailable.Figure71:Fuelmixforecast.Becauseofthechangeinmethodologyusedinthisupdate,theshareofoil-basedfuelswilldeclinemuchfasterafter2030thanpredictedpreviously.Theadoptionofalternativefuelsisconsideredinthecontextofthefleetrenewalweexpectoverthenextfewyears,takingintoaccountourassumptionsaboutnewbuildingcontractingandshipdemolitionbysizeandtype.Thestepchangeafter2030iseminentlyfeasiblewiththenormalfleetrenewalprocessonthisbasis.GiventhatmanyofthedisincentivesforfittingLNGonsmallervesselswillalsoapplytothenewfuels,thiscouldbeseenasadownsideriskforammoniaandmethanoladoption.Asaresult,itemphasizesthataradicalrethinkingofshipdesignandtheincorporationofbunkertankswillberequiredtoensureuptake.Onthemethanolside,theindustry'sgrowinginterestandinvestmentinitsgreenproduction,makesitnowmoreapparentthatcarbon-neutralmethanolwillbeavailableandtakealargershareofthemarketbythemiddleofthenextdecade.Therehasbeenalotofdiscussionabouttheeconomicbenefitsofcontinuingtoburntraditionalmarinefuelsifcarboncapturetechnologybecomescommerciallyviableforonboarduse.Logically,ifonboardcarbon-capturesystemsareadopted,thesefuelswouldretainahigherproportionofthefuelmixforalongerperiod.90%80%40%30%20%10%0%2019202120232025202720292031203320352037203920412043204520472049LPGLNGAmmonia/HydrogenMethanolOilBased100%50%60%70%©MSIABSZEROCARBONOUTLOOKPAGE108SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFromanoperationalperspective,vesseloperatorswouldliketocontinuetousethesetraditionalfuelsandavoidtheaddedcostfromthecrewtrainingthatwouldberequiredfornewfuels.Forshipowners,thetraditionalfueloptionsofferalowerleveloffinancialrisks.AnincreasingnumberofindustrypractitionersconsiderLNGtobeanintermediatetransitionfuelonthedecarbonizationjourney,soitsuseisexpectedtoincreasesteadilyuntil2050.Inthefuture,more“renewable”formsofLNGmaycreateadedicatedLNGpathway.Electro-fuelshavethepotentialtooffercarbon-neutralpropulsionandcanprovidesolutionsinthemedium-tolong-term.Inadditiontofossilandbiomasssources,electro-fuelscanbeproducedbyaCO2recoveryprocessthatconvertsCO2tosyngas,whichinturncanbeusedtoproducebio-LNG.Ammonia,whichispotentiallyazero-carbonfuel,hasgreatpotentialtolowerthecarbonfootprintofshipping,particularlywhenmeasuredbytank-to-wakecriteria.Itsuseisexpectedtogrowduetoitszero-carboncontent,andcomparativeeaseofdistribution,storageandbunkeringwhencomparedtoLNGandhydrogen;itisalsocompatiblewithexistingandemergingtechnologiesforpropulsionandpowergeneration.Ammoniaandmethanolcurrentlyholdthemostpromiseamongtherenewablefuelsfortheinternationalshippingsectorasitstaysoncoursetomeetingitsdecarbonizationgoalsfor2050.Inthe1.5°CscenariooftheParisAgreement,renewableammoniaisexpectedtoplayarole4.5timesgreaterthanthatofrenewablemethanol.FUELCONSUMPTIONPROJECTIONFORDIFFERENTSHIPTYPESFigure72:Fuelmixfordrybulkcarriers.6050403020100HFO/MGO/MDOMethanolAmmonia/HydrogenLPGMnTHFOEquiv2020202520302035204020452050OilBased(2020Forecast)LNG70©MSIPAGE109SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure73:Fuelmixforoilandchemicaltankers.Figure74:Fuelmixforcontainerships.MnTHFOEquiv2020202520302035204020452050HFO/MGO/MDOMethanolAmmonia/HydrogenLPGOilBased(2020Forecast)LNG605040302010070©MSI120100806040200HFO/MGO/MDOMethanolAmmonia/HydrogenLPGMnTHFOEquiv2020202520302035204020452050OilBased(2020Forecast)LNG©MSIABSZEROCARBONOUTLOOKPAGE110SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure75:FuelmixforLNGcarriers.Figure76:FuelmixforLPGcarriers.302520151050LNGAmmonia/HydrogenMnTHFOEquiv2020202520302035204020452050LNGConsumed(2020Forecast)©MSI6543210LPGAmmonia/HydrogenMnTHFOEquiv20202025203020352040204520507HFO/MGO/MDOOilBased(2020Forecast)©MSIPAGE111SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMFigure77:FuelmixforPCTC.5.6GREENCORRIDORSGreencorridorsareaconceptualframeworkthataimtodevelopmaritimeroutesthatshowcaselow-andzero-emissionlife-cyclefuelsandtechnologieswiththeambitionofhelpingtheshippingindustryreachtheIMO’sgoalofreducingtotalCO2emissionsby50percentby2050comparedto2008.Shippingdecarbonizationhasnumerousmovingpartsandoneofthechallengeswithitsdecarbonizationisdeploymentofsolutionsatscalesincetheindustryisdiverse,disaggregatedandgloballyregulated.Greencorridorshelpshrinkthechallengeofcoordinationbetweenfuelinfrastructureandvessels,inthevaluechainandbetweencountries,downtoamoremanageablesizewhileretainingscale.Aspartofthe2021U.N.ClimateChangeConferenceoftheParties(COP26),19countriesincludingtheU.S.,U.K.,ChileandAustraliaamongothercountriessignedtheClydebankdeclarationwhoseaimistosupporttheestablishmentofatleastsixgreencorridorsbythemiddleofthisdecade,withtheaimofscalingupoverthedecade[58].6543210MnTHFOEquiv202020252030203520402045205087LPGLNGAmmonia/HydrogenMethanolHFO/MGO/MDO©MSIABSZEROCARBONOUTLOOKPAGE112SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMInApril2022,theU.S.DepartmentofState(DOS)announceditsaimtohelpsetupgreencorridorsandprovidedhigh-levelguidanceonwhatcanbeexpectedasthebuildingblocksofthecorridor.Thebuildingblocksincludethefollowingpossiblesteps[59]:•Definethescope,boundaries,metricsandtheframework•Incorporatelife-cycleemissionsestimates•Estimateabaselineemissionsinventoryforportand/orvesseloperationsthatcanbepubliclyavailabletoagreeuponemissionreductiontargets•Workwithstakeholdersandcommunitiestodevelopanimplementationplan•Someoftheimplementationstepsincludebutarenotlimitedto:−Alternativerefuelingorrecharginginfrastructuretosupportzero-emissionsportandterminalequipmentoperations−Supportvesselsandcommercialharborcraftusinglow-orzero-emissionfuelsandtechnologies−Ocean-goingvesselsusinglow-orzero-emissionfuelsandtechnologies−Zero-emissionfuels,bunkeringandrefuelingcapabilitiesforvesselsincludingelectrificationandcoldironing−EnergyefficiencyandoperationsoptimizationactivitiesthatleadtoreducedoverallenergyconsumptionandreduceGHGemissionsOtherGreenCorridors(Conceptual)Australia-JapanIronOreRouteIn2019,65milliontonnesofironwasexportedfromAustraliatoJapan,makingitthethirdlargestdrybulktraderouteintheworld.Shipscarryingironoreinthisrouteburnedapproximately550,000tonnesoffueloilin2019,leadingto1.7milliontonnesofCO2emissions.Thisroutehasbeenidentifiedasonewithstrongpotentialforagreencorridorwithstakeholdermomentum,favorableconditionsforzero-emissionfuelproduction(greenhydrogeninAustralia).Therouteisprimedforstakeholdercrosscollaborationbetweenminingcompanies,vesseloperators,steelmills,fuelproducersandgovernmentorganizationswitheachofthemhavingsetaggressivedecarbonizationtargets[60].Asia-EuropeContainerRoute[60]Thisisthelargestofthethreemajoreast-westcontainershiproutescausing35milliontonnesofCO2emissions,whichaccountsforthreepercentofglobalshippingemissions.ShanghaiisthelargestportontheAsiansideandRotterdamisthelargestontheEuropeansidewithSingaporeplayingtheroleofatransshipmentportontheroute.Thisroutehasallthebuildingblocksofagreencorridorwithmanycargooperatorssettingscopethreereductiontargets,apipelineofannouncedgreen-hydrogenprojectsinEurope,MiddleEast,andAustraliaandpolicyactionsuchastheEU’sFitfor55packageforshipping.PortofLosAngelesandShanghai[61]InFebruary2022,thesetwoportsannouncedapartnershiptocreateazero-carbonshippingcorridorby2030,andtheimplementationplanisexpectedbytheendof2022.Thetrans-Pacificshippingcorridorisoneofthebusiesttraderoutes,andthepotentialforreductionisveryhigh.CargoOwnersforZeroEmissionVessels(CoZEV)isaninitiativeofprivatesectoractorsandglobalretailergroupsthatincludesAmazonandIkeawhohavecommittedtoshippingproductssolelyonzero-emissionvehiclesby2040.Thisgreencorridorwillcreatea“market-making”effectforzero-emissionvehicleswithmajorretailersinvestinginit.ChileGreenCorridor[62]TheChileanMinistryofEnergy,TransportandTelecommunicationshasteamedupwiththeMaersk-McKinneyMollerCenterforZeroCarbonShippingtolaunchaprojecttoestablishgreenshippingcorridorsinthecountry.Theinitialstepwillinvolvemapping,assessmentandselectionofpromisinggreencorridorsandisexpectedtobecompletedbyendof2022.ChilewasamongthefirstcountriestosigntheClydebankDeclarationtosupportestablishmentofgreenshippingcorridors.With19countriessigningupfortheClydebankDeclarationandmanyofthesecountrieshavingstartedtakingfirststepstowardestablishinggreencorridors,thetrendisclearthatgreencorridorswillbeausefultacticaltooltohelpdecarbonizetheshippingsector.PAGE113SETTINGTHECOURSETOLOWCARBONSHIPPINGABSSCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUMGreencorridorsfundamentallyhelpsimplifytheproblemdowntoa“port-to-port”route,andsincetheseroutesarehigh-trafficoneswithfarreachingtradeimplications,thisisoneadditionaltooltohelpmeettheIMO’stargets.Greencorridorswilldirectlylinkglobaltradetodecarbonizationsincethesehigh-volumegreenrouteswillhelpdecoupletradegrowthfromcarbonemissionsoveraperiodoftime.Oneofthebiggestchallengesoftheshippingindustryisreducingthecarbonfootprintandatthesametimeservicinganever-growingclientdemandforshippingservices.Privatesectorstakeholdersarealsochippinginwiththeiraggressivenet-zerogoalsandareplayingtheroleofa“marketmaker”forzero-emissionvehicles.Greencorridorswillcreateadefinitivemarketforalternativefuelmanufacturersandhelpspurthedevelopmentofport-sideinfrastructure,too.ABSZEROCARBONOUTLOOKPAGE114SCALINGALTERNATIVEENERGIESANDDRIVINGMOMENTUM6CONCLUSIONS•TheParisAgreementandtheescalatingvisibilityandseverityofclimatechange'simpactshaveprovidedimpetusformoreeffectiveclimateaction.Recentadvancesinclimateambitionareencouraging,butmaritimestakeholdersstillneedthetoolstotrack,coordinateandrealizetheirstatedclimategoals.Thereisaconstantincreasingpressurefortakingmeasurestoaddressclimatechange,andgreenhousegas(GHG)emissionsreductiongoalsarebecomingmoreambitioustoward2050,althoughtheyneedtoremainrealistictowhatisattainable,giventheunderstandablydifferingapproachestoclimateactionacrossdifferentstakeholders.•Regulationofthemaritimeorshippingindustryemissionsintotheatmosphereisbecomingincreasinglystringent,withadditionalmeasuresexpectedtobeimplementedinthenextfewyears.Theupcomingmarket-basedmeasures(MBMs)andlife-cycleassessmentapproachareexpandingthescopeofGHGemissionsfromtank-to-waketowell-to-wake,whichwillenableaholisticapproachtowardemissionsreduction.Thisentailsanunderstandingoftheemissionsandotherimpactsassociatedwiththeproduction,storageanddistributionoffuels,aswellasemissionsgeneratedbyocean-goingvessels.•Usingawell-to-wakeapproachhasnumerousadvantages,themostimportantofwhichisthatitensuresthattheintendedGHGreductionbenefitsfromfuelsarerealized.Forthepurposeofsignificantlyreducingthesector'scarbonfootprint,settingagoalofnet-zeroemissionsbasedonthelife-cycleassessmentmethodmightbeareasonableandattainablegoal,andhencefurthercriteriashouldbeinvestigated.PAGE115SETTINGTHECOURSETOLOWCARBONSHIPPINGABS•Thepathtowardsnetzerowillstartwithdrop-intransitionfuels,progresswiththeadoptionofcarboncapturetechnologiesandeventuallyleadtoadoptionoflow-andzero-carbonfuelsproducedusingrenewableenergy.•Ouranalysisshowsthatadecisiveelementinthegrowthofthevaluechainsisefficiencyimprovements.Forexample,inthehydrogenvaluechaindependingontheefficiencyoftheequipment,therecouldbe20percentgainsincostefficiency.Therefore,theefficiencyimprovementateverystepoftheproductionprocesswillsupportthefurtherscalingupofthechainandtheintroductionoftheproducedfuels.•Followingtheanalysisinsection3,weseethatthescalingupofrenewablesandtherelatedeffectsofincreasedproductionwilldrivecostsofsyntheticfuelsdown.Fromthisperspectivegreenammoniaisexpectedtobethemostcostefficientby2050.•Intheshort-termtomid-termbio-oilsandbiomethanecanprovideacost-efficientcarbon-neutralsolution.Ammoniacouldbecomemorecostefficientafter2030asablueversionoftheparticularfuelareintroduced.Greenammoniacouldbecomeasmentionedabovemorecostcompetitiveinthelongtermattheendofthe2040.Inaddition,fossilfuelswillcontinuetobemorepricecompetitive,andacarbontaxcouldclosethepricegap.•Carbonpricingmechanismscouldclosethepricegapbetweenconventionalandalternativefuels.Introducingcarboneconomicselementswillbecriticalindraftingarobustdecarbonizationstrategy.•Theavailabilityofbiomassandthecarbonfeedstockthatisrequiredtoproducecarbon-neutralfuelsmightpresentchallengesasfuelsthatcontaincarbonatomsarebecominghigherindemand.•ConsideringthefindingsfromourSettingtheCoursetoLowCarbonShipping:ViewoftheValueChain,webelievethataproperassessmentoftheenvironmentalimpactoffuelsshouldbecarriedout,asweapplywell-to-wakeestimations.Aswehaveestablished,theproductionoffuelsisinstrumentalinunderstandingthetotalcarbonfootprintwhichisthecaseforgrayfuels,wheretheestimatedemissionsmightbegreaterthanthoseofconventionalfuelsinusetoday.•Accordingtothebasecasescenario,thereisstillgoingtobeanotablenumberofvesselsusingoil-basedfuels(28percentofenergydemand).Thisiswhyouranalysisshowsthattheintroductionofoil-basedcarbonneutralfuels(drop-in)couldprovideanimportantelementofsupport,ifshippingwillberequestedtogettonetzeroby2050.Thisisalsoakeydriverfortheexplorationofonboardemissionabatementtechnologiessuchasonboardcarboncapture.•Carboncapturetechnologieswillprovidearealisticsolutiontolowertheemissionsduringthetransitionphaseoffossilfueluse.Onboardcarboncaptureiscurrentlyunderdevelopmentandefficiencyimprovementshavetotakeplaceinorderforthetechnologytoprovideanapplicablesolution.Directaircaptureisstillatitsveryearlydevelopmentstagesandtherearesignificantefficiencychallengesrelatedtoitsimplementation.•SignificantuptakeofCCStechnologieswillberealizedwithasetofenablersstartingfromtheCCStechnologies,storageandliquidCO2(LCO2)carrierstofacilitatethedevelopmentofanentireecosystem.•Hydrogenisexpectedtoplayakeyroleasanenergycarrierfortheproductionofrenewableandlow-carbonfuels,whichwilldefinethehydrogenvaluechain,startingfromproductionfacilities,storageandtransportationinliquidhydrogen(LH2)carriers,aswellasbunkeringinfrastructureforhydrogenandotherhydrogen-basedfuelslikeammonia.Hydrogeniscentraltoreachingnet-zeroemissions.•Wehaveexploredtheboundariesofapplicabilitybasedoncurrenttechnologicalupdates.Whatweseeisthatshippingwillbeacenterpieceforthedevelopmentofboththehydrogenandcarbonvaluechains.Anet-zeroscenarioin2050,wouldprobablyrequireenergyforgreenhydrogenproductionwhichisequaltohalfoftherenewableenergyproductionin2021.ABSZEROCARBONOUTLOOKPAGE116CONCLUSIONS6REFERENCES[1]OECD,"Carbondioxideemissionsembodiedininternationaltrade,"OrganisationforEconomic,November2021.[Online].Available:https://www.oecd.org/sti/ind/carbondioxideemissionsembodiedininternationaltrade.htm.[Accessed4May2022].[2]A.Slodkowski,E.SugiuraandH.Dempsey,"ShippingheavyweightJapantablescarbontaxproposalfortheindustry,"FinancialTimes,3May2022.[Online].Available:https://www.ft.com/content/ae5893a1-4a7e-4152-8fb2-65679ebc73c4.[Accessed4May2022].[3]Cision,"World’sFirstAmmoniaReadyVesselDeliveredtoABSClass,"Cision,4February2022.[Online].Available:https://news.cision.com/american-bureau-of-shipping/r/world-s-first-ammonia-ready-vessel-delivered-to-abs-class,c3499402.[Accessed6May2022].[4]CommitteeontheEnvironment,PublicHealthandFoodSafety,"EuropeanParliament,"2022.[Online].Available:https://www.europarl.europa.eu/doceo/document/ENVI-PR-703068_EN.pdf.[5]W.F.&.Williams,"TheSustainabilityImperative:ESG—ReshapingtheFunding&GovernanceofShipping,"WatsonFarley&Williams,2021.[6]M.McGrath,"COP26:USandEUannounceglobalpledgetoslashmethane,"BBC,2November2021.[Online].Available:https://www.bbc.com/news/world-591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