With COP27 on the horizon, shipping industry feeling increased pressure to reduce emissions

A test engine four storeyshigh,with four giant pistons,may hold the potential to transform the shipping industry and the global supply chains that rely on it.

"We are taking an internal combustion engine and we are changing it," said Brian stergaard Srensen,head of research and development at MAN Energy Solutions, while standing in a research lab outside Copenhagen, Denmark .

MAN Energy Solutions is one of the world's foremost designers of commercial ship engines.At the Copenhagen test site,Srensen's team is experimenting with different carbon-neutral and carbon-free fuels to see how effective they can be at generating the immense horsepower necessary to move container ships and bulk carriers across the world's oceans.

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The shipping industry is responsible for three per cent of all global greenhouse gas emissions an amount equivalent to what Germany emitsevery year. But across the globe, 99 per cent of shipping is currently powered by burningfossil fuels,such as bunker fuel and marine diesel.

"We actually need to look at ways to rebuild existing ships," said Srensen.

The upcoming COP27 gathering in SharmEl-Sheikh, Egypt, which runs Nov. 6to 18,is expected to zero in on the decarbonizing challenges facing the shipping industry far more prominently than in the past.It's expected the entire sector will be encouraged, pushed and even cajoled into setting a more ambitious timeline to decarbonize, and lay out targetsto hit along the way.

"We are looking at a difficult transition [to cleaner fuels], but there is a willingness to do this," said Srensen. "For us,the payoff is that our technology will be future-proof."

Investigating green fuels

In another part of MAN's lab,senior research engineerJulia Svenssonexaminesvials with clear liquids representing some of the green fuels that willjostlefor eventual industry supremacy.

Bio-methanolwhich can be synthesized from any large biomass,such as crops is a leading contender.

"Bio-methanol is up and coming, and I think it's where we should go if we really want to go green,"said Svensson.

Ammonia,which may be somewhat cheaper to produce than methanol, is another contender.

The shipping industry's regulator,the International Maritime Organization (IMO),has set a rather underwhelming target of cutting greenhouse emissions in half by 2050. To meetthe Paris Agreement's 1.5 C global heating target, shipping emissions would need to be completely eliminated by 2080.

Knowing this, many within the industry are urginggreater ambition,prodded by suppliers and customers who want to see greener practices throughout supply chains.

Copenhagen-based Maersk, untilrecently the world's No. 1 container shipper over the past 25 years,has set one of the industry's most ambitious targets for decarbonization.It's aiming for net-zero emissions by 2040 across its entire business. To get there,it has ordered19 newlarge ships powered by carbon-neutral, methanol-fuelled engines.

"I think what we need to see now is the IMO revise that target to full decarbonization[by 2050],"said Ingrid SidenvallJegou,with the Global Maritime Forum, a non-profit group that's attempting to steer industry players and international regulations toward hitting zero.

In September,her group supported a progress report on efforts to scale up new fuels,ships and facilities.The forum's goal is to have five per cent of all shipping fuel be zero-emission by 2030.

That date is seen as a "tipping point" after which the industry passes a critical threshold and the adoption of clean technologies becomes easier.

"There will be economies of scale and production costs will go down,similar to what we've seen in renewable energy more broadly," Jegou said.

The report's somewhat pessimistic conclusion,however, was that progress toward that five per centtarget was only "partially on track."

The trillion-dollar question

While there are now more than 200 pilot projects around the world dedicated to carbon neutrality in shipping,major capital investments in facilities such as fuel production and storage are badly needed.

The totaleye-popping price tag of the transformation,industry-wide, is estimated to be between $1 trillion and $1.4 trillion US.

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Along with uncertainty about targets,and which fuel will eventually become the standard,the shipping industry has failed to find a common vision on how to pay for the transition specifically,how much of a price to put on carbon.

Two small Pacific nations,the Marshall Islands and Solomon Islands, which are both affected by rising ocean levels, have proposed a carbon tax of $100 USa tonne for burning polluting fuels.

The International Chamber of Shipping, an association representing shipping lines, has said it supports putting a price on carbon but hasn't said what the amount should be.

Aproposal by Japan would see a global carbon tax being collected starting in 2025.It would begin at $56 a tonne, with the money being ploughed back into the shipping industry to help build infrastructure for the zero-carbon future.

Alan McKinnon, professor of logistics at Kuehne Logistics University in Hamburg,Germany, says resistance has come from smaller nations, such as Panama, with an outsized dependence on shipping and concerns about the economic consequences of a carbon tax.

"They obviously fear that this is going to work against their interests,"said McKinnon.

The European Union has decided not to wait for the IMO to make a decision and has announced that starting next year,ships calling at European ports will have to begin paying into the bloc's emissions trading scheme, which serves the same function as a carbon tax.

"When I was at the COP [Conference of the Parties] last year in Glasgow, a lot of people were saying we really need to get to net-zero by 2050," said McKinnon. "And to drive that, you price incentives you need carbon pricing."

Creating 'green corridors'

To try to get past the disagreements and generate momentum, 22 nations came together at the Glasgow conference to sign the Clydebank Declaration.The intent is to create "green corridors"to spur ports and shipping companies to build or retrofit their facilities along specific routes where new, greener fuels will be produced and stored.

In Canada, the Port of Vancouver has said it is exploring options with U.S. ports in Seattle and Juneau,Alaska, to create a maritime route for the cruise ship industry where "zero greenhouse gas emission ships could succeed,"according to a statement released by the port.

But while the United States and many European nations have signed onto the declaration, key shipping nations such as South Korea,China and South Africa have not.

Costand thelength of time required for the expensive investments to pay for themselvesremainmajor obstacles for many developing nations although some experts believe thatthe expected bill of $1 trillion is manageable.

"We think the premium [for consumers] will be small," said Bo Cerup-Simonsen with the Mrsk Mc-Kinney Mller Centre for Zero Carbon Shipping in Copenhagen.The non-profit research and development centre has been heavily involved in promoting new green technologies.

"We are typically looking at an additional cost of less than one per cent [on goods that are shipped],"he said. The challenge, he says,is having proper regulations to allow the costs to be spread throughout the supply chain.

Environmental activists have targeted shipping industry practices intensely in the past,especially for using high-sulphur fuel and for poor safety practices leading to oilspills.Some advocates have little faith now that the industry will perform any better when it comes to mitigating climate change.

"It's like herding cats to get all the nations of the world to agree on something but we have to agree," said Roc Sandfordwith the U.K.-based climate activism group Ocean Rebellion.He emphasized that to reach a net-zero target,demand for all shipped goods must simply go down.

"A lot of stuff is shipped all over the world,and then shipped back," said Sanford, suggesting global supply chains need to be simplified.

Reducing global tanker fleet

He also said drastically reducing the production of fossil fuels will remove much of the world's tanker fleet from the equation.

"We need to [eliminate fossil fuel production] really quickly and that would knock out 40 per cent of shipping," said Sandford.

Alan McKinnon,the logistics expert,agrees that improving the energy efficiency of shipping operations from slowing down vessels so they burn less fuel to loading them more efficiently are all essential to lowering the industry's carbon footprint.

"Post-COVID, many companies [aiming] to improve the resilience of their supply chains are thinking about shortening their supply chains, and maybe in the future using deep-sea container shipping less than they currently do," he said.

The shipping industry's efforts to become greener have come far later than other parts of the transportation sector for example,electric vehicles are becoming commonplace and many jurisdictions have deadlines to end sales of fossil fuel-burning cars.

While there has been some promising progress on the high seas,McKinnon says the task for the industry remains daunting.

"[Ships] can have a working life of 30 or 40 years and the replacement rate for vessels is relatively slow.So this transition to low-carbon vessels is going to take a while."