The challenges of decarbonization ask questions for all stakeholders; regulators, shipowners, vendors and investors must all understand the implications, writes Georgios Plevrakis, Vice President, Global Sustainability, ABS.
The regulatory environment in 2022 shows every sign of continuing to be challenging for shipping. With the introduction of EEXI bench- marking, not to mention the ratchet of CII there are many ships in the global fleet with an uncertain future.
By way of example, around 80% of the global trading fleet will have to make technical upgrades to meet the minimum energy efficiency standards within EEXI. ABS research indicates that means almost 7,000 tankers will need to explore solutions to reach the requirements and seven out of 10 bulk carriers do not currently comply with the EEXI.
While EEXI is a one-time hurdle for vessels to clear, the CII represents a powerful new industry dynamic with widespread operational and business repercussions
Furthermore, there is still little clarity on frameworks and regulatory tools that could be used to assess compliance through the use efficiency technologies and fuels.
Existing fleets will have to manage the impact but over the next 5 years and plan for the long run as CII will extend until the end of the decade with a view to reduce Carbon intensity by 70% at 2050. Therefore, understanding how this will impact decision for new construction is also of utmost importance. Shipowners must make decisions on how to build new ships based on a regulatory environ- ment which is currently forming but will govern the life of the vessel for almost three decades.
MEPC77 left much to be decided relative to the short-term part of the strategy. As we approach 2023, we are moving from planning to execution and time margins are now becoming thin
Understanding the implications
The industry needs regulatory clarity and direction. Although the IMO has laid out end goals, the industry could benefit from signposts to guide us along the journey. There is still a lot more work that can be done relative to the boundary conditions of safety and scalability of the next generation of fuels, as well as ways to address the energy savings calculations and verifications of energy efficiency technologies before the 2030 and 2050 deadlines.
The issue for the industry is whether there are unintended safety consequences that could be born out of the rush for lower carbon operations. Regulators and the industry need to be clear that existing statutes are ready to handle the changes to come. A critical issue
is to revisit the ISM Code and look at the wider fabric of existing regulation to see how it fits together and whether further changes are needed.
The bigger question is whether the industry is on a common trajectory or whether there lots of competing trajectories that need to be brought together. There are short term and a long-term issues in play and we need to make progress on both but the speed of change may need to be faster.
We have undertaken extensive research as we are exploring decarbonization pathways to 2030 and 2050. Our latest work in the ABS Outlook showed that although 2030 is within reach, it will be a considerable challenge to get to 2050 if we do not have the proper policies in place to support the transition.
Policies are need to:
• Create incentives to support the transition;
• Create the proper regulatory frameworks to address the decarbonization impact of the alternative fuels and emerging decarbonization technologies;
• Lay the ground for the development of the required infrastructure. Governments have to step up and provide these frameworks and these will be reflected in the IMO decision making.
Identifying opportunity
Making investment choices is all about doing everything you can
to improve the performance of your vessel and operation. It’s all about digitalization, it’s about energy efficiency improvement, voyage optimization and management and looking carefully at the options relative to energy efficiency.
Let’s consider the options available to owners, the levers at their dis- posal. There’s no doubt that alternative low and carbon neutral fuels will provide the biggest contribution to decarbonization. But it is far from the only lever available today. We estimate you can get another 10% with improved energy efficiency that matches the operating profile.
The operational carbon intensity however can only be continuously improved with the application of a robust monitoring system by exploiting data and taking advantage of digital technologies. This is the low hanging fruit available to all shipowners in the short term. Ultimately, when it comes to decarbonization of the global fleet, we are talking about a value chain solution that will demand a full set of investment strategies, including retrofit of the existing fleet to a more sustainable footing, new vessels with low and zero carbon propulsion and the extensive deployment of digital technologies. Ships will have to be prepared by design to transition to lower carbon intensity operation.
Proper planning for the transition will provide a longer competitive life to the vessel. We will need to move to a collaborative attitude,
so that the technology we need will be developed in an accelerated timeframe. We will need to leave behind the present approach, where we have many silos of knowledge. We need standardization, universally accepted procedures and processes and frameworks – on the safety side and on the decarbonization solutions.
Shipowners, charterers, class, shipyards, cargo owners, manufacturers, banks and governments all have a key role to play and will need to complement one another. We will all need to work together to define decarbonization pathways.
* Vice President, Global Sustainability, ABS