November 23 ------ Shipowners worldwide see uncertainty as a major barrier to shipping’s energy transition, with tightening regulations forcing decisions despite unclear policy pathways, a survey done by the UK’s design and engineering consultancy Houlder showed.
As disclosed, two years after its previous interviews, Houlder ‘checked in’ with senior executives from ship-owning companies on ‘crucial’ environmentally friendly shipping topics including verified clean technology performance data, how the environmental regulatory landscape has changed, and barriers to the scaling of green alternative fuels. What materialized as a recurring theme and a ‘red thread’ to combine them all was uncertainty on numerous levels.
Rocky waters across the board
As per Houlder, from Great Britain to the United States and beyond, the year 2024 was peppered with elections and the uncertainty they had dragged along with them as voters headed to the polls to cast their votes in at least 64 countries. Some of the ship owners who participated in Houlder’s survey reportedly mentioned keeping a close eye on how the 47th U.S. president would influence their sustainability strategies prior to making novel decarbonization decisions. According to the British consultancy, there were others who alluded to a “lack of clarity”, too, from the transport departments they partner up with as delaying progress.
One passenger ship owner, specifically, supposedly brought into question the very definition of domestic shipping, particularly in the context of exclusions and inclusions and the matter of whether or not the U.S. will, too, take a phased-in approach like the European Union (EU). Over the past years, the U.S. shipping industry has undergone tumultuous times, marked with both ‘setbacks’ and leaps forward.
In late January 2024, President Joe Biden announced an LNG permitting pause to clear out climate and environmental assessments, as the existing ones had dated five years back. The contentious decision provoked a backlash from the oil and gas lobby—with the American Petroleum Institute calling it “arbitrary and capricious”—but was welcomed with open arms by environmental groups.
Calming the decarbonization storm
The other side of the American coin showed some ‘promising’ efforts in July this year when the U.S. Congress stepped up to call for the Biden-Harris administration to issue an executive order (EO) to support the maritime industry’s overarching decarbonization goals.
As disclosed, the letter—signed by 15 Congress members, led by Congresswoman Nanette Barragán—made several recommendations to the President:
• Use the existing Clean Air Act authority to set up a goal-based fuel standard for ships calling on U.S. ports;
• Use the existing authorities to eradicate in-port ship emissions by 2030;
• Establish a monitoring, reporting and verification mechanism to collect fuel consumption and emissions information from all ships that use U.S. ports and sail the country’s waters;
• Provide support for U.S. shipbuilders and maritime stakeholders to build low- and zero-emission marine vessels and support the creation of value chains of zero-emission alternative fuels and technologies;
• Phase out and, eventually, forbid the use of sulfur scrubbers on ships in U.S. waters.
Fast forward to October 2024, the current Administration approved nearly $125 million in funding set to go toward incentivizing and speeding up the upgrade or retirement of older diesel engines to cleaner and zero-emission solutions for marine vessels. The money was granted through the Diesel Emissions Reduction Act (DERA) National Grants Program.
At a regulatory level, Houlder’s survey interviewees did recognize the ‘significance’ of the endeavors that have so far been made. According to the consultancy, this is a ‘positive development’ since the previous conducted study and workshop with the same set of large and small shipowners from across the container, tanker, bulk, cruise, and ferry sectors two years ago.
More specifically, views on the EU’s Emissions Trading System (EU ETS) have varied from owner to owner, with smaller shipowners seeing it as ‘impactful’ while larger ones have tended to feel the EU ETS was “already priced in” to plans. Nonetheless, the former group also deems it useful as a referenceable price for carbon that can be put into day-to-day operations, Houlder explained.
On the other hand, Houlder has disclosed that, while a good number of shipowners were unable to delve deeper into their FuelEU Maritime strategies (or were more unwilling to overshare), the consensus was that they were taking it ‘more seriously than some other regulators at the moment’.
As understood, the reason behind this is the fact that, as Houlder highlights, non-compliance with FuelEU Maritime could mean much higher fines than those incurred from the EU ETS, with a penalty of €2,400 (approximately $2,537) per ton of very low sulfur fuel oil (VLFSO) energy equivalent.
“ETS is not a particularly big deal. It’s small penalties compared to FuelEU. What it [FuelEU] has done is shocked businesses into realizing the penalties they are going to have to pay if they don’t act on energy efficiency…and then eventually future fuels,” one respondent shared.
“We can’t let uncertainty become an alibi for inaction on decarbonization, so we undertook this research to understand better how the wider industry can support shipowners in rising to the challenge,” Houlder CEO, Rupert Hare, revealed.
“With incoming regulations such as FuelEU Maritime, owners are running out of time. They need to accurately simulate scenarios on vessels with information available today to enable informed decision-making now – while you can’t be absolutely certain of what’s ahead, you can take useful action to alleviate the anxiety. Surrounded by fog, you’d slow to a crawl without aids to navigation,” he further emphasized.
Jonathan Strachan, Chief Technical Officer, added that certainty was neither possible nor necessary for shipowners to maneuver through the decarbonization labyrinth. “In fact, those who wait for a perfect route to reveal itself will be left behind. What the leading shipowners are already doing is starting the journey now with the help of partners, remaining agile to change tack if they need to, and keeping well-informed to understand all the possible technological pathways available to them.”
Source: offshore-energy.biz
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