Annus Horribilis
What a horrible year 2022 is turning out to be. 30 year peaks in Inflation. Rising interest rates. Recession. War in Ukraine. Capital flight from increasingly totalitarian China. Taiwan Tension. Gas shortages. A continuing Covid-19 pandemic.
In the light of geopolitical tension and macro-economic meltdown, we might all be forgiven for feeling a bit like Rishi Sunak, this month’s UK Prime Minister, who declined to go to COP 27, citing work pressures at home. He changed his mind after his ante-predecessor, Boris Johnson, got himself invited.
One year ago, COP 26 was a big moment for shipping. Not least because an annual Ocean and Climate Dialogue was established within the UN Framework Convention on Climate Change. The event included a number of maritime meetings and widespread coverage in the shipping media – we even ran three Ship Energy COP 26 podcast specials.
This year, we are hearing much less about shipping within the context of COP 27. The event slogan is “Together for Implementation”. Perhaps the big decisions have been taken and all that remains is to implement them – a cinch, no doubt (sarcasm, the lowest form of wit...)
Rather than being swayed by such groundless optimism, this year’s event is beset with doubts and fears. The IPCC warns that current policies will lead to 2.8 Celsius of warming by the year 2100 – within the lifespan of children already alive today. In order to reach the critical Paris Agreement goal of limiting warming to 1.5°C, global emissions need to peak by 2025 and nearly halve by 2030.
We are told by the still-reliable BBC that, even if anthropogenic GHG emissions were to miraculously stop today, the planet would continue to warm for another 20 years. The plangent and imperative Economist magazine says that limiting average temperature increases to 1.5 Celsius is no longer possible and we should switch our attention to mitigation rather than prevention.
Bottom of the S-Curve and Half-Way Up the Glass
Let’s not despair though. The UN Foundation’s Senior Advisor and Senior Director for Ocean and Climate, Susan Ruffo, responded to the question, is the glass half-full or half-empty, by saying, “It doesn’t really matter how full the glass is; our job is to fill it back up. We cannot give up. We have to keep pouring, even if the glass is cracked and leaking. Every year, we seem to be making it harder for ourselves rather than easier, but we can make progress, and we can’t give up.”
We also need to remind ourselves that the global economy, let alone shipping, is only at the bottom of the S-curve of change, though that change is now invevitable. Esben Poulsson, erstwhile Chairman of the International Chanber of Shipping, said earlier this year after an ICS meeting with Egypt’s Suez Canal Authority that, ‘the maritime industry is at an inflection point as we earnestly begin our transition to a renewable future. The conversations we have had this week leave me with great confidence that Egypt will be one of the leaders of industry’s green transition, leaning on its position at the heart of the maritime world.’
Egypt then is an appropriate place for COP27 to consider shipping’s decarbonisation. Around 19,000 transits a year of the Suez Canal make the country a key node in global logistics. The sheer number of vessels visible to politicians as they fly in will by itself give shipping greater visibility and recognition as the event begins.
I’m Rishi - Fly Me
As an aside, considering the emissions from the 30,000 delegates flying to Egypt, the annual CO2 ‘bill’ for COP meetings is yet to be declared. Maybe Rishi is right to think we can all work on Zoom and Teams now and save on the aviation emissions – but then his government has approved over two dozen regional airport expansions in the last few years so perhaps his demurral was more about staying at the helm of his unruly Westminster barque.
Rishi, his non-domiciled, untaxed wife, and the rest of the world’s richest 1% have been collared in a report by UK think tank Autonomy for emitting an equal amount of GHG over the 20 years to 2019 as the world’s poorest 10%. Maybe governments seeking to tear up global tax loopholes and inequality should take note: if you’re unwilling to tackle super-rich and corporate tax-border avoidance on the basis of profits, tax them on their emissions instead. Rishi likes raising taxes, so he might do well to consider this option while he jets off to Cairo.
UN secretary-general António Guterres has warned this week that rich countries must ‘sign an historic pact’ with poor countries or ‘we will be doomed…Present policies will be absolutely catastrophic… the truth is that we will not be able to change this situation if a pact is not put in place between developed countries and the emerging economies.’ His concept of a pact involves bigger cuts to GHG emissions in richer nations and more consistent financial assistance to poorer nations.
Previously agreed targets for financial support have been repeatedly missed. UN data show that the developed countries’ combined pledge of USD 100 Bn a year of contributions to developing nations was missed by nearly USD 17 Bn in 2020. Developed countries pledged to double adaptation finance at COP26 but there has been little action to report so far.
Guterres says that among developing nations, which face greater hardship from climate change, ‘there is a sense of frustration that is real and that deserves a response.’ He also called on the US and China to stop squabbling and cooperate to secure humanity’s future. Good luck with that, Mr G.
Progress Report
This year’s COP 27, as you can tell from this commentary and that global villian, the Mainstream Media, is likely to be focused on the relationships between nations and groups of nations rather than on industries and technical solutions. In one way that’s a pity because over the last year there has been great technological progress in renewable energy, particularly in the fields of solar and wind generation, electrolysis and fuel cell technology, direct air capture of CO2, bio-fuels and synthetic fuels, and hydrogen storage.
Progress on alternative transport fuels across land, sea and air has been so good that the IEA and others now think that we may have reached peak fossil fuel demand and that oil demand in particular may not exceed its pre-pandemic levels. The IEA cites the war in Ukraine, supply side constraints and extraordinarily high prices as reasons for consumers to ration their use of fossil fuels. (The economics don’t always make sense: a member of my family bought a brand-new, £22,000 hybrid electric car in order to save money on petrol.) In this scenario, says the IEA, aggregate energy demand growth to 2050 can be met entirely by renewables, indicating that there is no longer any commercial incentive to invest in fossil fuel production.
Analysts at Bloomberg reckon that fossil fuel emissions ‘have probably peaked already and they are expected to drop from more than 14 billion tons per year in 2022 to less than 10 billion tons by 2050.’ If fossil fuel demand has plateaued, then capital investment will go to the remaining cheapest resources, which is good news for Saudi Arabia and bad news for offshore oil and gas exploration and production. It is mixed news for oil tanker owners - oil isn’t going away yet, but there will be fewer customers for oil shipping in future. Tanker owners really ought to be looking into ammonia, methanol and LH2 tanker designs.
A Small, Calm Moment for Shipping
In shipping, we might allow ourselves a small, calm moment of satisfaction with our progress since COP 26, even though we know we are only in the foothills of the ascent to a zero carbon summit.
In the last 12 months, marine engine manufacturers have made regular announcements about dual fuel, tri-fuel and alternative fuel engines., the Poseidon Principles group of banks has expanded to 30 institutions and the Poseidon Principles for Marine Insurance has launched. Nearly 200 new ships with low-carbon fuel capability have been ordered and over 100 have been delivered. Ship owners, class societies, engineers and charterers have cooperated to be ready to implement the Carbon Intensity Index and to develop the necessary measures to achieve its 2030 emission reduction goal. Governments have partnered with industry to develop green corridors, synthetic fuel and biofuel production facilities.
The list goes on, as does the work. So while the rich nations get a ticking off in Cairo, we in shipping can let the spotlight focus on others while we get on with the elephantine task of decarbonisation, one bite at a time.