Early movers essential in zero emissions shipping

THE NEED to transition towards sustainable and zero-emission shipping has become increasingly apparent. A recent report by maritime consultancy UMAS, unveiled during climate summit COP28 in Dubai last week, cast a spotlight on the role of early adopters in driving this enormous shift.

The report, titled ‘Cost of zero emission container freight shipping: A study on selected deep-sea and short-sea routes’, provides a comprehensive analysis of the annualised total costs of zero-emission container vessels and the consequential per-container cost differences for transpacific and coastal ships under various fuel pathways.

Released in London on December 6, the report reveals a considerable cost gap between conventional fossil fuels and scalable zero-emission fuels (SZEF). The differences are compounded by variations among the scalable zero-emission fuels considered. For instance, in 2030, on the transpacific route, the cost difference per twenty equivalent unit (TEU) could range from US$150 to US$450, depending on the fuel scenario. The report underscores the need for a robust and transparent conversation about the dimensions of the challenge, acknowledging that early adopters, including cargo owners, play an essential role in setting the stage for a thriving zero-emissions shipping market.

Camilo Perico, consultant at UMAS and the report’s author, emphasises the significance of putting “numbers on the table” and fostering visibility on how stakeholders can contribute to covering the cost gap. The report serves as a valuable resource by providing examples of baseline additional costs per container, considering only technological savings. It sheds light on the potential contributions that cargo owners, governments, and other stakeholders can make to bridge the cost gap.

The total cost of operation (TCO) approach, incorporating both vessel capital expenditure (capex) and operational expenditure (including fuel prices), offers insights into the financial landscape of zero-emission shipping. By 2030, in the best-case scenario, a single vessel running on SZEF on the transpacific route may require an additional US$20 million to US$30 million per annum, of which US$18 millin to US$27 million is attributed to fuel costs. On the coastal route, a similar vessel may demand an additional US$4.5 million to US$6.5 million per annum, with fuel costs ranging from US$3.6 million to US$5.2 million. These figures underscore the level of financial obligations required in the early stages of the emergence phase.

Dr Nishatabbas Rehmatulla, principal research fellow at University College London and co-author of the report, said fuel costs are a major component and the primary driver of the total cost of operation. The report outlines a trajectory where, by 2030, the TCO for vessels operating on green ammonia and methanol on a transpacific route is two to four times that of a reference vessel using low-sulphur heavy fuel oil. However, over time, the cost differential is expected to narrow as scalable zero-emission fuel costs decline. By 2050, most scenarios predict a TCO that is 1.5 to two times that of conventional fuel.

Early movers in the transition face tough choices, notably the decision between cheaper but non-scalable fuels, and higher capital expenditure fuels that stimulate long-term solutions.

The report underlines that early movers have the ability to shape the trajectory of zero-emission shipping. The choices made today by cargo owners, industry stakeholders, and governments will play a defining role in charting a sustainable, efficient, and environmentally responsible course for the future of maritime transportation.