According to marine manufacturing company Wärtsilä, investors are noticing how proactive the shipping industry is with regards to decarbonisation, despite a small number of companies still not prioritising sustainable initiatives.
In addition, major decisions within the market are becoming aligned with decarbonisation plans and some changes have already been made to support this.
It is becoming increasingly clear that the shipping industry can make a positive impact on reducing global emissions.
Jasleen Mann: Why is the shipping industry increasingly appealing to ESG investors?
Giulio Tirelli: The shipping industry has the potential to be a ‘big ticket item’ for ESG investors looking to reduce their carbon footprint. There is a pathway to decarbonisation and an opportunity for the industry – if it approaches the challenge in the right way – to drastically reduce its emissions relatively quickly and simply in comparison to other industries.
Other sectors that would potentially appeal to ESG investors, such as manufacturing, may have a more complex route towards meaningful climate action, particularly when viewed on a global level.
How is Wärtsilä helping firms navigate their decisions to futureproof?
This is new ground for shipping. The journey towards decarbonisation can be complex, but it doesn’t have to be.
Our approach is always collaborative. We know that future fuels, for example, can be tough to navigate due to the broad range of fleet compositions, so we’ll work in partnership with owners to find the way forward that works best for them.
There is a unique journey for everybody to take when it comes to decarbonisation, and we’ll look to find the right mix of fuel and technology that delivers positive operational benefits now, while futureproofing for the legislation ahead.
Fuel efficiency is one key component, allowing owners time to make those larger strategic decisions, while saving money now and reducing their immediate reliance on expensive future fuels.
What pressures do companies face from consumers?
What makes decarbonisation particularly urgent is that it’s not just end-consumers putting the industry under pressure. While consumers are acutely aware of the current landscape regarding the climate and decarbonisation, there are now eyes on the industry from everywhere. Decarbonisation plays a role in all aspects of the industry today both internally and externally.
From a consumer’s perspective, there is increased awareness around sustainability, and this is pushing the industry to decarbonise faster. This can be seen with companies like Amazon and IKEA offering greener operations.
However, pressure is also coming from national governments, regulatory bodies like the IMO and the EU, and the finance sector, which is increasingly tying credit to ESG goals.
How will approaches vary now compared to those in line with previous targets?
The industry must take a different approach than it did for the 2020 targets. Now, there is a greater sense of urgency. COP27 in November 2021, as well as recent IPCC reports, have underlined the urgency of climate change and have put decarbonisation higher on the industry’s agenda.
Approaches now are much more focused on tackling this process step-by-step, rather than waiting to enact sweeping large-scale changes. The proactive work of the ‘Getting to Zero Coalition’, is an example of how much more focussed the industry is now relative to 2020, in having set out bold net-zero targets that go beyond what the IMO has mandated.
How can a company find the right propulsion solution for each vessel?
Collaboration and flexibility are the two key components to finding the correct solution. We must be flexible in our approach, as the requirements for each vessel vary. Our unique understanding of each opportunity combined with our flexible and collaborative way of working ensures that we find the right propulsion solution for you, allowing you to de-risk your operations
One of the key factors driving the decisions with our customers is availability. We understand the fuel availability scenarios that individual vessel categories face and our propulsion system solutions are made with that in mind.
For instance, while the power needs of container, tanker, and other cargo vessels initially look quite different, the overriding factor for all these vessels will be the availability of fuel when it comes to determining a future fuel. Given the time that it will take for future fuel infrastructure to develop, for the foreseeable future, vessels in this category looking to reduce emissions will have to opt mainly for liquified natural gas (LNG) or methanol.
They reduce emissions now, ensuring compliance, whilst also leaving the door open to drop in bio or synthetic LNG. Other alternatives, such as ethanol, could play a marginal role, while ammonia has potential in the long term.
Offshore and specialist vessels often have a limited area of operations, and so global availability of a certain fuel is less of an issue – these vessels are well-placed to take advantage of and strike deals with dedicated zero-carbon fuel infrastructure that will be, initially, tied to one place.
Passenger vessels are generally designed to operate between two or more fixed points, and as such, are well placed to take advantage of zero-carbon fuels infrastructure. However, the perceived risks coming from toxicity of ammonia might delay its adoption in favour of LNG, methanol, or electrification, where we are already seeing some uptake.
There will be exceptions in each category. We work to find the right opportunities to invest in retrofits or newbuilds equipped with tools and technology that are already available so we can meet requirements. This isn’t a ‘one-size fits all’ approach; each vessel’s needs must be met, and all decisions now are to be made with the requirements of the IMO, customers and society in mind.
How does the company expect to reduce baseline emissions?
Aside from future fuels, there are a number of fuel-agnostic options for reducing baseload emissions, such as installing or upgrading to higher efficiency propulsion technologies and integrating third party technology, as the electrification market continues to offer further opportunities.
Taking these steps can radically change the business case for adding other new technologies or adopting new fuels in the future – taking shipowners further up the staircase.
Electric propulsion and power will also be essential. Hybridisation, shore power connections, and electrification are all developing quickly, and can play an essential role not just in lowering dependence on marine fuels, but in unlocking more flexible operations.
We must encourage people to take the necessary intermediate steps, this is a journey, that changes made today not only help you prepare for the future, but they also drive meaningful change now. For example, the ultimate aim may well be 100% use of alternative fuels, but LNG alongside other existing technologies gives the industry an opportunity to reduce baseline emissions sooner.
What are the challenges in implementing these approaches, and what do you think the trends in the future fuels market will be?
The complexity of the path to decarbonisation and the future fuels availability can be overwhelming to those in the industry who are also still managing the operational aspects of running a shipping business today. An investment in the future needs to be guided by the right expertise and the right technology as alternative fuels become available.
The future fuels market is continuing to evolve, and we know that the right answer depends on what each individual is trying to achieve and their respective timeframes. LNG remains a popular choice in certain markets, but away from the fuels specifically, the technological elements involved will also play a key role moving forward – particularly, the importance of greater adoption of hybrid power and electrification.
LNG is currently leading the pack in terms of scale and infrastructure as it was already being transported and used on land before being adopted as a marine fuel.
Ammonia will take longer to scale up for broader maritime use – but it’s a positive trend we’re excited about, and another step in the right direction – as demonstrated by our co-ordination of the Ammonia 2-4 project, for example, in which we’re participating with naval architects C-Job, classification society DNV, shipowner MSC and the National Research Council of Italy, aiming to advance viable concepts for ammonia fuel.