Green shipping corridors: all hands on deck for maritime sustainability

The international community mainly agrees on the need to stop climate change by sapping its main root, fossil emissions of GHG. There is no consensus on the path to the reduction of the emissions of these gases and the pace of measures taken differs widely from region to region. 

Europe, Canada, Japan, Mexico, Chile, China or the US West coast are some of the countries and regions pushing for the decarbonization of the economy. The main measures are public investments, cap and trade schemes and carbon taxes, some focusing on specific sectors.

Maritime shipping accounts for 3% of the global GHG emissions while providing 90% of the global trade. Nonetheless it is important to start working on its decarbonization as it is unfortunately a hard to abate sector. 

Most ships require very high power to operate, and they navigate for long periods of time, hence the energy source must have high density, both gravimetric and volumetric. Current prospects for hydrogen and batteries render these solutions non suitable for the vessel’s needs.

Alternatives fuels and their challenges

Candidates to seize parts of the share of future energy fuels are methanol, ammonia, synthetic fuels and biofuels. These fuels may present some of the following challenges: toxicity, flammability, corrosiveness, scarcity of feedstock, scantness of experience in ports or lack of regulation. However, all of them share the same main drawback, higher price than fossil fuels.

As can be readily derived, the adoption of such fuels demands actions on several areas and from different stakeholders. Thus, the transition from a marine shipping sector based on fossil fuels to a decarbonized transport is complex and will require the collaboration of governments, port authorities, shipping companies and fuel providers, among many others. 

For this reason, in order to achieve the decarbonization targets as soon as possible, the concept of green shipping corridors (GSC) was born.  They are tools to facilitate cross-value collaboration, solve the chicken and egg problem and capture inertia to increase the share of customers willing to pay a premium for more sustainable products. The GSC are not a target on themselves but a clutch to start walking the unforgiving waters of a new economy based on renewable energy.

Why is the transition difficult? 

The first obstacle faced by those that want to start sailing towards zero emission shipping is the selection of fuel pathway. As mentioned before, there are different fuels each with their respective drawbacks. 

The investment required to build a new ship is very high, thus the decision to build it ready to operate with some of these fuels is hard to take, even more if the fuel presents risk of availability issues. 

Most choose to build dual-fuel ships, able to operate with two fuels, increasing the total investment but reducing its risk. Another option is to perform a retrofit on an existing ship, a costly operation as these ships were not designed to accommodate the required equipment and will have to remain in a shipyard for lengthy periods, constraining the capacity of the fleet.

Fuel producers suffer from the opposite affliction. They have to take the decision on investing in a new facility but do not see a sufficient demand for the fuel to be produced. This dichotomy is known as the chicken & egg problem. Moreover, the production technologies are not fully mature, and costs are being brought down consistently.

Ports will also face huge investments, both their authorities and the actors that will perform the reception, storage and bunkering of the new fuels. Port authorities will have to adapt their infrastructures to enable the operations with alternative fuels, will have to develop regulations and will need to allocate spaces within their premises for such activities. Energy companies will have to install or retrofit fuel tanks, pipelines and barges, besides the training of their staff to handle these fuels.

Finally, cargo owners will also have to address uncertainty. Consumers are starting to ask for more sustainable products and services, but their willingness to pay a premium for reduced emissions varies depending on the sectors, countries etc... 

Besides the important investments bearing high levels of risk, there are other barriers to the deployment of a zero-emission fleet. The majority of the maritime transport is intercontinental where neither train nor road can compete. This implies huge distances to be traveled by large ships, thus needing titanic quantities of fuel. Besides, the international nature of this trade prompts regulatory complexities to be tackled.

How can GSC help?

GSC can take a lot of shapes, but their main benefit remains the same; to create a cooperation framework where the different stakeholders necessary for the implementation of the green corridor can coordinate. 

• Coordination enables the constitution of common projects that can de-risk their investments. By aligning different projects, synergies can be reaped to achieve a better outcome.
• Offers a safe space of data sharing to explore options of sustainable demand aggregation, to build a critical mass that makes the business cases for a green ship viable. 
• Guarantee enough off-takers for the fuel producers by matching them with shipping companies bypassing the chicken and egg problem.
• Some demonstrations that would be otherwise unachievable can be made possible by defining a common goal across the value chain.

It can also help ports establish themselves as energy hubs, as the implementation of a GSC will require for at least one of the partner ports to accommodate bunkering of the chosen low emission fuel. By doing so, ports can position themselves as energy suppliers of the new renewable shipping economy, strengthening thus their energy offer, which may also be of service to land transport and hinterland economy.

As seen before a major obstacle for the adoption of renewable fuels is the price difference with fossil fuels. GSC can play an important role pushing administrations and governments to further their efforts in reducing this gap by establishing measures such as carbon taxes, contracts for difference, auctions etc.. To lobby from a project encompassing stakeholders across the value chain can bear a stronger impact and facilitate a better tuned measure.

Finally, the establishment of GSC can help raise customers' awareness of the product transport emissions, seeding the urge for clean logistic chains. GSC could enable the establishment of labels of green transport for the products in order to make them more attractive to environmentally sensitized customers. A methodology for the emission reduction calculation can be agreed within the GSC partners facilitating the deployment of such labels.

As the number of customers demanding sustainability from their products increases, GSC will help retailers, cargo owners, ports and shipping companies remain attractive business partners.