Who is setting the decarbonisation agenda?
Have you seen the images of the CMA-CGM Jacques Saadé? Named after the founder of CMA, later merged with CGM The French Line and now a top five global liner company. The CMA-CGM Jacques Saadé is the largest LNG powered containership in the world and is the first of a series of nine sisters to be built at CSSC Shanghai Shipyard. It looks fabulous with its blue-green paint job (have a look a the CMA-CGM website).
Officially listed as having 23,112 TEU capacity, the ship has a DWT of 236,583, making it bigger than a Newcastlemax bulk carrier. It is 61 metres wide and 400 metres long. Its 18,600 cubic metre LNG tanks give it two-months’ worth of fuel.
Using LNG as fuel exceeds the IMO’s MARPOL Annex VI regulations for cutting emissions of oxides of nitrogen (NOx) and sulphur (SOx). LNG emits 99% less SOx and 85% less NOx than marine fuel oil. LNG also emits up to 20% less carbon dioxide (CO2) than marine fuel oil, depending on how the two are burned.
LNG is also cheaper than marine fuel oil on a calorific basis. Such is the glut of methane and LNG on the global market that prices make LNG bunkering economically attractive, especially as there is now the shoreside capacity to bunker with LNG in all of the six nations that bunker nearly 70% of all the world’s feet – China, South Korea, Singapore, the UAE, the Netherlands and the US. A number of LNG bunker tankers have been launched, with more on the way, further extending the reach of gas molecules for ship propulsion.
While there are critics who say that LNG is no less an emitter of CO2 on a “well to wake” basis, there is no doubt that LNG is a crucial step towards the IMO’s goals of cutting CO2 emissions from shipping by at least 40% by 2030 compared to a baseline level in 2008 and by 50% by 2050.
Indeed, studies from Japan conclude that LNG will power a third of the global fleet by 2040 if the IMO’s goals are to be met. Two years ago, in 2018, Japan launched the Shipping Zero Emission project. It has suggested that LNG will represent one third of marine fuels by the middle of this century – but crucially, ships engines by then will be massively more efficient than today’s versions, burning 80% less fuel than the latest LNG powered ships.
But even this does not go far enough, so the Japanese are working on carbon capture technology to reduce further the greenhouse gas emissions from ocean transport. Japanese container ship owner and operator ‘K’ Line is to deploy a prototype small-scale carbon capture device on a ship in 2021 (ironically a coal-carrier on charter to TEPCO, an electricity generator).
This device will sequester only around 1% of the CO2 emitted by the ship’s exhaust, but the technology can be scaled up. “K” Line hopes to achieve 30% CO2 capture in future, while the Japan Ship Technology Research Association projects further gains to enable carbon-free shipping by 2050. They have blueprints for a 20,000 TEU container ship powered by methanol with on-board systems to sequester 86% of carbon output, storing CO2 in 12,800 cubic metre tanks. You can see it here: https://www.mlit.go.jp/common/001354314.pdf
CMA-CGM should be commended for being an early adopter of LNG for such large containerships. The technology is not new – LNG engine designs have been around for 70 years – but their application in maritime has not been economic until recently, with increased environmental regulation incentivising LNG producers like Shell to invest in the requisite infrastructure despite the lack of an immediate return.
CMA-CGM’s move to order these new ships could look smarter as the EU moves ahead to include shipping in its Emissions Trading Scheme. The drive to require ships sailing in EU waters to pay for the pollution they cause - regardless of where the ships are registered - has ignited debate and caused concern among ship owners about the EU jumping the gun ahead of the IMO, just as happened when the EU banned single hull tankers after the Erika and Prestige casualties. The IMO subsequently hastened to bring in its own double-hull rules which were applied from 2010.
If the EU is going to start unilaterally regulating shipping, then shipping needs to get its global response ready quickly. This is why I was interested to see over the weekend that Trafigura, one of the biggest cargo interests in the world as well as a sizeable investor in ships over the course of this century, has published its own paper proposing a solution to shipping’s decarbonisation dilemma.
Trafigura’s solution is a global carbon levy which ship owners could pass on to charterers. “this increase in operational costs will spur charterers to change behaviour to reduce emissions, charter more efficient ships and switch to lower carbon fuels” says Trafigura.
The proposed USD 250 – 300 per tonne of carbon output levy would raise hundreds of billions of dollars to fund research and development of alternative fuels such as methanol, ammonia and hydrogen (all of which are currently mostly made from reforming methane, so their creation has to be carbon-neutral if their use is to be carbon neutral). Trafigura arrived at the at number as it is, they say, the level needed “to close the competitiveness gap between carbon-intensive fuels and low- or zero- carbon alternatives.”
Several times in Macro Macchiato, I have ventured the opinion that if shipping is to find the means to invest in decarbonisation, it has to pass on the full environmental cost of shipping to charterers. Trafigura would appear to agree. Perhaps the message is starting to hit home: if charterers still want access to an independent shipping industry, they have to be part of the solution, which includes putting their hands into their own deep pockets.