On 10 November 2021, 22 countries signed the Clydebank Declaration (the Declaration) at the sidelines of the UN COP26 climate conference in Glasgow
The Declaration agreed to establish “at least six green corridors”, defined as zero-emission routes between two or more ports, by 2025, with “many more” to be in operation by 2030. The aim of these corridors is to hasten the use of zero-emissions vessels (as opposed to “net zero” vessels) in deep-sea trades, and accelerate the development of the associated infrastructure, and implementation of required regulations. While it is still early days, with details of these green corridors still to be mutually agreed in coming months (if not years), the Declaration foresees bringing together national governments, non-governmental organisations, and private sector participants, including fuel producers, vessel operators, and cargo owners, in a voluntary and collaborative approach. For the time being, these corridors are not expected to be exclusive, with conventionally-fueled ships allowed to continue operations on these routes alongside zero-emissions vessels. Signatories to the pact include Australia, Canada, Germany, Japan, Morocco, New Zealand, France, Netherlands, Germany, Finland, Denmark, the UK and US; China and India are notably absent.
A detailed study entitled “The Next Wave: Green Corridors”, was published by the shipping industry association, Global Maritime Forum’s Getting to Zero Coalition (GZC). As the name suggests, the GZC’s mandate is to drive zero-emissions shipping, and the study provides some of the analytical framework for exploring the case for green corridors. Pre-feasibility studies conducted as part of the study found that the Australia-Japan iron ore route and the Asia-Europe container route (the second-largest East-West trade lane, on which liner operators deploy their largest vessels of 18,000 TEU capacity and above) provided “sufficient scale for impact and the necessary specificity—across fuel pathway, cargo, policy-making environment, and vessel type—to enable a feasible, accelerated decarbonisation roadmap for the shipping industry”.
As Infospectrum has maintained, decarbonisation in shipping not only requires technological innovations but also operational changes. Given the prevalence of tramp shipping in the dry bulk markets, liner trades may provide most promise. For instance, the aforementioned study finds that, in 2019, a majority of the total of 111 bulk carriers transporting approximately 50m tonnes of iron ore directly between Western Australia and Japan, conducted only one trip on this route, suggesting that decarbonising the route may require vessels that are dedicated to full-time service on the corridor. Since the container liners operate dedicated services, the benefits of scale can potentially be better achieved on these trade routes. However, since China is not a signatory to the Declaration, the eventual success of any improvements on the Asia-Europe container route may not be attributable solely to the Declaration.
To the extent that these green corridors provide demand incentives for zero-emissions vessels, they build on the momentum provided by charterers like Amazon, Ikea, Michelin, Unilever, Patagonia and others, that are reported to have announced targets to buy only zero-carbon freight by 2040. Zero-emissions fuels include biofuels, green methanol, green ammonia, green hydrogen, and synthetic diesel, which are in various stages of techno-commercial development. Other than biofuels (that have certain limitations of scale), currently, only methanol has been given interim approval by the IMO for use as a safe ship fuel. Most progress has been made in the liner industry, which also happens to be the largest contributor to emissions in the shipping sector. To date, relatively few liner vessels are utilising biofuels on any meaningful scale, although, a number of operators have trialed green fuels. However, the majority of the current global liner fleet (and the orderbook) uses conventional fuels, with scrubber technology. Of the circa 700 vessels in the orderbook, while 90 units are classed as “LNG capable”, and 37 as “LNG ready”, methanol-fueled and “ammonia ready” account for only nine and four units, respectively. LNG is not a zero-emissions fuel, and is positioned as a “transition fuel” with an emissions profile that is relatively favourable when compared to conventional fuel vessels dominating the orderbook. However, market acceptability and possible regulatory intervention still remain risk factors. The April 2021 World Bank report on decarbonising maritime transport specifically discouraged further investments in LNG bunkering infrastructure, due to its menthane slippage, with the August 2021 UN Intergovernmental Panel on Climate Change (IPCC) report specifically highlighting the adverse environmental effects of methane, which is emitted from LNG-powered vessels and in LNG processing. A shift towards zero-emissions vessels may limit the liner sector’s ability and willingness to invest in newer green fuel technologies, based on the experience garnered from LNG-related investments and its current market positioning. Despite the increased call for action by regulatory bodies and nation states, general sentiment among container sector owners/operators is that it will take time to develop alternative fuels, and more importantly, to ramp up production globally. Some industry sources anticipate that green methanol and green ammonia may not be adequately available by the time the newbuildings are delivered. As a result, until sufficient critical mass is achieved (at presumably competitive prices), many liner operators may continue to focus on emissions reduction and net-zero efforts, on which already considerable progress is being made. For instance, Maersk group states that (as of end-2020) its global fleet has reduced CO2 emissions by 46.3% when compared to 2008, and has a target of 60% by 2030.
Ultimately, developing zero-emissions fuel alternatives will require further research, financial incentives and regulatory mandates to facilitate widespread adoption. The IMO’s proposed USD 5bn IMO Maritime Research Fund, (IMRF) “would provide guaranteed levels of funding to all member countries at no cost to taxpayers, to accelerate the production of zero emission ships”. It is hoped that the IMRF, overseen by the IMO and financed via a mandatory tax on marine fuel of USD 2/tonne will, subject to individual government approvals, be launched in 2023. While a vote on the IMRF proposal was expected during the recently concluded IMO Marine Environment Protection Committee (MEPC) 77 session, the proposal has been postponed to MEPC 78, which is to be held in June 2022. The delay does not reflect the urgency shown by the IMO and the International Chamber of Shipping (ICS) at the COP26, wherein a proposal to avail up to USD 1.5m from the multinational Green Climate Fund to fast track the creation of IMRF was discussed. It should be noted that the objective of the USD 2/tonne tax is only to support research and development, and is not designed to provide the incentive for a switch to zero-emissions/low-emissions fuels, which would need to be a considerably higher carbon tax. A carbon tax is increasingly accepted as the most administratively and operationally straightforward market-based solution to incentivize low/zero-emissions vessels.
With circa 12 signatories located in Europe and Scandinavia, market feedback suggests that perhaps short-sea green corridors, including ferries, coastal trade and offshore wind servicing vessels, may hold more immediate promise for zero-emissions corridors. Moreover, certain sources suggest that for maximum impact, green corridors should perhaps be focused on smaller trade lanes where considerably more elderly and less efficient tonnage is deployed (which would counter the Asia to Europe liner trade corridor on which liner operators are already deploying their most modern and efficient vessels). The Declaration is intentionally ambitious, in order to give sufficient grounds for collaborative long-term solutions; its success will depend upon actions with far-reaching operational and technological challenges necessitating significant re-imagining across the global shipping industry.