“Biofuels stands out as the best option, considering the overall environmental, safety and security impacts.”
Volatile costs for fossil fuels and rising concerns over emissions. “A doubling of present CO2 emissions by 2050 if we do nothing.” A share of “for at least 10% of global emissions in 2050, as compared to 3% today, if measures are not taken.”
Sounds a lot like aviation, right?
Well, in this case, it is the marine shipping industry. Shipping risk management giant DNV has identified those factors in an update of its landmark (2009) Pathways study, noting that “with rising fuel prices and impending environmental regulations, the pressure is on for more efficient and environmentally friendly ships.”
Back in 2009, the task was daunting enough: reducing CO2 emissions by 15 % on the existing
world shipping fleet and by 30 % on of the predicted global fleet in 2030. Now, DNV has taken its analysis out to 2050, and determined that a 60% reduction in emissions is required by that time.
“If shipping should be required to reach emission levels in 2050 consistent with a global 2oC stabilisation target, we need to do more than stabilizing emissions at present level. To achieve the 2oC target, the shipping sector must reduce CO2 emissions by 60 % from today’s emission level”, says Magnus Strandmyr Eide, Senior Researcher at DNV Research & Innovation and main author of DNVs pathways study.
Here’s the upside
From DNV: “History has shown that the maritime sector can be quick to adopt new fuels, should the right incentives be in place; in the age of the steamships, in the short decade between 1914 and 1922, the percentage of vessels using oil rather than coal in their boilers increased from 3% to 24%.”
Here’s the downside
Again, from DNV. ˇAs in the 1920s the main driver for such a shift today is fuel price and energy efficiency.”
In short, though the driver is carbon concern, the mechanism will be price, and there is continuing questions as to the extent to which the cost carbon will be internalized within the fuel. Right now it is almost fully externalized, and shipping companies do not pay directly for the global weather impact of their carbon emissions.
Here’s demand, for better or worse depending on your outlook
Overall demand is growing. According to Purvin & Gertz, bunker fuel demand has been growing at an average rate of 4% since 1995. It’s expected to reach 275 million tons by 2015 and more than 300 million tons by 2020.
The options are limited because of the nature of shipping and the need for stored energy. The technologies are, in general, three in number. Liquefied natural gas, which offers a 20 percent reduction in emissions; biofuels, which offer a 50%+ reduction, and nuclear, which offers a 100% reduction.
The 60 percent target makes clear the promise and limitations of, say, liquefied natural gas — it just doesn’t get the industry anywhere near its mid-range, much less long range targets.
“It is realised that other pathways are possible,” the study says, “e.g. by including technologies currently very costly or immature, or through technological breakthroughs which are not identified, but which should be expected. From the existing alternatives, the introduction and use of biofuels stands out as the best option, considering the overall environmental, safety and security impacts.”
Interesting in this study — the dramatic impact of biofuels, based on current technologies, when carbon prices reach $100 per metric ton.
Here are the limitations the study indicates on known technologies:
One challenge for shipping is that LNG tanks typically require 2 to 3 times more space than a fuel oil tank. Since natural gas must be stored either liquefied or compressed, these storage tanks are also more expensive. Based on recent experience, the new-build cost of LNG-fuelled ships is between 10 and 15 % higher than for equivalent diesel-fuelled ships.
Widespread use of biofuel in shipping will depend on price, other incentives, and availability in sufficient volumes. Breakthroughs in production methods, enabling use of previously untapped feedstock and avoiding competition with food production, are expected.
The main barriers to nuclear shipping are related to uncontrolled proliferation of nuclear material, decommissioning and storage of radioactive waste, the significant investment costs, and societal acceptance. Although several hundred nuclear-powered navy vessels exist, few nuclear-powered merchant ships have been built.
The bottom line for biofuels
One aspect we note – residual heavy fuel oils are less costly to produce – requiring less upgrading than, say, aviation biofuels. But given the price and performance requirements of the shipping industry — and the likely competitive response of traditional fuel suppliers — there are two requirements.
1. Expansion of this market will clearly require a carbon element in pricing (or a low-carbon standard), to eliminate the advantage that fuel suppliers have in producing high-emission fuels.
2. Feedstock costs lower than $50 per ton, at current prices, are likely to be required to stay competitive with fossil fuels on price.
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