January 17, 2021

A recent report from Channoil Consulting, in partnership with Gibson Shipbrokers, suggests that the near-term outlook for shipping could be one of “lower carbon” rather than full decarbonisation.

The report notes that fleet operators will have to meet the 2050 targets and the intermediate targets for 2030 through a portfolio of incremental improvements, without having a definitive alternative.

The study reviews current alternative fuel options: those that are already commercially available, such as LNG, and those that are in the offing, including ammonia and hydrogen. The introduction of market-based measures for the shipping sector, such as the European Union Emissions Trading System (ETS), is also discussed.

According to Channoil: "The consensus for an effective carbon price for the maritime sector appears to be in the range of $100 to $150 per ton of CO2e. We believe that a carbon price in the EU ETS is unlikely to move as much as high enough to support the introduction of HVO or FAME at any level significant for marine use.

This sector would require its own separate approach, as advocated by Trafigura. What this analysis shows us most clearly is that hydrotreated vegetable oil (HVO) and fatty acid methyl ester (FAME) are among the most expensive green fuels, which in the long term should restrict their use to sectors where they do not There is a viable alternative. Shipping is not one of these long-term sectors.”

He also raises that: "Investors in an LNG bunkering facility or dual-fuel vessel will likely consider a 20-year time horizon. An important consideration will be how these assets can be recycled for use with future fuels such as ammonia and hydrogen once they are available at scale and at a cost-effective price.

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