An exclusive industry briefing, themed Fuel for Thought: The move to Methanol, at ING’s Singapore offices, jointly organised by ING Bank and Lloyd’s Register in partnership with Riviera Maritime Media, gathered more than 80 VIP attendees to discuss the vital roles financiers, charterers, owners and the wider industry needs to play in enabling and accelerating the maritime industry’s decarbonisation efforts
Following an opening presentation themed ‘A bank’s view on financing zero-carbon shipping projects’ by ING Bank director, sector coverage, transport and logistics, Jens Van Yperzeele, discussions broadened to feature comment from a panel comprising Lloyd’s Register regional maritime commercial markets manager Taylor Wamberg, ING Bank managing director, head of transport and logistics APAC Gerbrand Vroegop, Methanol Institute chief operating officer Chris Chatterton, Swire Bulk Pte Ltd general manager of sustainability and decarbonisation Susana Germino, and Rio Tinto head of commercial operations Laure Baratgin. The conversation was moderated by Riviera Maritime Media’s executive editor, Edwin Lampert, and conducted under The Chatham House Rule.
It was no surprise, given the setting, that financing the energy shift was a prominent theme. There was recognition that the Poseidon Principles, which integrate climate considerations into lending decisions, marked an important step. At the same time, concerns were expressed that metrics like the high-profile Annual Efficiency Ratio promoted by regulators have very real limitations that can result in an efficient, well-run ship getting a poor efficiency grade. The shared hope was regulators will maintain realistic dialogue with financiers amid the uncertainty ahead.
A recurrent theme was the need for partnering across the industry to balance out knowledge gaps. Banks, for example, are striving to rapidly educate themselves on decarbonisation but cannot rely exclusively on inhouse shipping expertise to navigate the tremendous technology transformation taking place. The required expertise can only be met through industry alliance.
The panel agreed robust data and standards for evaluating real-world emissions are still lacking, and pragmatic carbon pricing mechanisms are necessary to maintain affordable shipping services for society. The need for better alignment of incentives across the maritime value chain and harmonised sustainability regulations was also stressed. “We still collectively know very little,” admitted one participant. “We do our own internal climate analytics but also realise the limitations.”
It was agreed charterers must be at the heart of maritime decarbonisation, as they dictate routeing and speed optimisation choices that influence emissions. Charterers may also have more flexibility around the fuel premiums passed to customers based on cargo type. For example, container lines shipping high-value consumer goods (versus say dry bulk carriers moving commodities like grain and operating on lower profit margins) may have more room to absorb additional fuel premiums without significantly affecting their overall profitability. This reality, said the panel, calls out for a better alignment of incentives across the entire maritime value chain. There was also concern that disjointed and fragmented sustainability regulations could emerge across jurisdictions. Having to continually change operational rules from market to market adds huge complexity for global industries like shipping. To avoid such pitfalls, regulators must co-ordinate efforts and ensure frameworks are harmonised.
Regarding future propulsion requirements and fuel mix, the panel foresaw a gradual adoption of dual-fuel engines, with methanol standing out as an attractive transitional drop-in fuel due to its availability and engine compatibility. However, the varying production carbon intensity of methanol and the importance of traceability that spans product origin, production pathway and ideally a ‘fingerprint’ to audit quality, were highlighted. There was also a call for greater clarity on lifecycle emissions to ensure green investments.
On costs, it was felt efficiency modifications with under two-year payback periods will receive the most serious consideration. Retrofits remain expensive, so risk sharing is essential.
When asked to share their conclusions from the discussion, the panel almost spoke as one. Shipping, collectively, needs to take more considered risks to make real progress. As vast data deficiencies across the maritime industry start to close, and there is greater certainty on emissions regulations, confidence will build. Strategic partnerships and co-ordinated policy can propel shipping’s sustainable transition – but it remains a voyage requiring all hands on deck.
For more on Lloyd’s Register’s ’Fuel for thought’ alternative fuels series, click here.
Riviera’s two-day Maritime Decarbonisation, Europe: Conference, Awards & Exhibition 2023 returns to Amsterdam on 26-27 September 2023, seeking to bring clarity to regulatory directions and decarbonisation pathways for both newbuilds and existing vessels
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