With shipping emissions set to rise this year, alternative-fuelled vessels as yet accounting for a fraction of the global fleet and more clarity still required from regulators, from the standpoint of early 2023 the industry looks set to fall short of meeting emissions reduction targets, Cem Saral, CEO of the Cockett Group, told delegates today at the opening of this year’s Middle East Bunkering Convention in Dubai.
In his keynote speech, Saral said that recent geopolitical and market uncertainty will continue into 2023, and there remain many unknowns in terms of the pace of shipping’s decarbonisation.
Global CO2 emissions are set to rise this year and emissions from shipping are also heading north. In 2022, the sector’s CO2 emissions totalled 800 million tonnes and they are forecast to rise to 850 million tonnes this year and 855 million tonnes in 2024, at which point shipping’s emissions will still account for some 2.3-2.5% of the global total.
Looking at the shift to the use of new marine fuels, Saral noted that alternative fuelled tonnage is currently an extremely small percentage of the global fleet which, as at January 2023, stood at around 58,000 vessels. At present, 993 alternative fuelled vessels are on the water (up from 549 in 2020).
The figures may look more encouraging when it comes to the alternative-fuelled newbuild orderbook – with 1,015 vessels in the pipeline (accounting for 27% of total orders). However, if LNG-fuelled vessels are removed from the equation, then ordered vessels that will operate on any other of the future energy options currently only number 184.
Saral also highlighted that even when taking in-service and on order alternative fuelled vessels together, they will still only represent 3.3% of the global fleet.
‘Achieving 2015 Paris climate targets may be out of reach despite policy and technology advances to date,’ said Saral.
At present, some 5,000 vessels are equipped with scrubbers, with the container sector leading the pack, and Saral noted that when the current work book for scrubber fitted vessels is fulfilled, one in four containerships will be using this technology.
There are also many unknowns in terms of the impact of new and upcoming regulations, he said. For example, the Carbon Intensity Indicator (CII) came into play in January this year and, at this juncture, ‘a significant portion of the fleet appear to fail in achieving CII ratings,’ noted Saral, while there is still a question mark over the punitive action that may be taken should vessels consistently fail to improve their ratings performance.
Saral also highlighted uncertainties over the impact of the EU’s Emissions Trading System (ETS). Still subject to formal endorsement, maritime shipping emissions will be included within the scope of the EU ETS, with a gradual introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026.
Saral told delegates that, out of total global annual bunker fuel volumes of 235 million mt, around 40 million tonnes will be impacted by the EU ETS. With some projections indicating that the ETS could initially add 10-15% to the cost of VLSFO, Saral queried whether this would be a sufficient driver to accelerate a shift to new fuels or whether this level of supplementary cost would simply be passed down to end users.
Considering the pace of change that is going to be required on shipping’s decarbonisation between 2020-2030, and the actual progress that has been seen in the first three years of this decade, Saral suggested that regulation needs to be stepped up in order to encourage shipping stakeholders to move forward on fuel and technology innovation.