In this episode, David Wooley and Ed Carr, lead authors of recent papers outlining policy and technology options for reducing emissions in the shipping industry, discuss the fuels (and batteries?) that could power ships of the future, the policies needed to move forward, and California's pivotal role.
Text transcript:
David Roberts
Over the years, I have covered just about every industry that turns up on the list of “difficult to abate” sectors — steel, concrete, aviation — with one big exception: shipping!
Maritime transportation is responsible for something like 3 percent of global greenhouse gas emissions, and that number is only growing, both in absolute terms, as global trade increases, and in relative terms, as other sources of transportation emissions are controlled. And that’s to say nothing of its substantial air and water pollution.
So what are we going to do about shipping? Happily, scholars at UC Berkeley recently published two papers on this very subject: one about policy options for shipping decarbonization, focusing especially on the crucial role California plays; another on technological options for shipping decarbonization and their relative states of readiness.
These papers struck me as a great opportunity to finally grapple with this subject, so I contacted the two lead authors — David Wooley, director of the Environmental Center at UC Berkeley’s Goldman School of Public Policy, and Ed Carr, an analyst at Energy and Environmental Research Associates — to dig into the fuels (and maybe batteries?) that will power the ships of the future and the policies that could make them a reality.
All right then, with no further ado, Ed Carr and David Wooley, welcome to Volts. Thank you so much for coming.
Ed Carr
Thanks for having me.
David Wooley
Thanks, David.
David Roberts
I'm excited to get into this. I've been meaning to do an episode on shipping forever. So, these reports that you guys just issued were quite welcome, quite compact, and readable overview of this situation. This is, you know, anybody who reads the reports is going to sense that you could easily do ten episodes on this subject. But we're going to try to do the 101 overview here, just give people a kind of a global sense of what's going on. So maybe, David, we can start with you, and you could just tell us a little bit about what is the shipping problem climate-wise, what is the shipping problem, and also what are the sort of non-climate problems that come along with it in terms of pollution and stuff like that?
David Wooley
So, shipping is a huge source of greenhouse gas emissions and also health-damaging conventional air pollutants, something like almost a billion tons of greenhouse gas emissions annually emitted from ships. That's more than all of the emissions coming from the country of Brazil. And it's almost as many emissions as come from aviation globally. This is a big piece of the inventory, and those greenhouse gas emissions are co-emitted with a whole range of air pollutants that cause damage to health, particularly for people living in port communities and coastal areas. So, there's an opportunity here, both at the front end, to help reduce the equity issues associated with those air pollutants, but also to address the even bigger long-term equity issue about climate change and its effect on developing countries and coastal communities.
So, this is a big one, and the opportunity is very ripe right now. There is huge momentum going forward to control these emissions. The International Maritime Organization last year set a goal to reduce emissions globally by about a half billion tons a year by 2040, and is now entering negotiations on how to actually implement that goal. So, it isn't done yet, and there is some risk that it won't be completed or that it will get hung up. But, there's a huge policy opportunity now. And the other thing is that there's massive momentum towards solving this problem.
David Roberts
So, Ed, your report was just kind of a survey of who's doing what now and sort of what solutions are coming to the fore and kind of where they all stand. So I guess I'd start with saying, is there anything like consensus? In some sectors now in light transportation, cars, more or less, everybody agrees where we're going, how we're going to decarbonize that. Same for heating and cooling, I think there's sort of a pathway to decarbonization that most people are kind of on board with. Is there something like that for shipping? Is there a consensus for how ultimately we're going to get rid of these emissions?
Ed Carr
I would not say that there's necessarily a consensus. I think people view it as a kind of suite of potential options that are out there. Shipping for a long time has operated using bunker fuels, which until IMO2020 came in, had a fairly high sulfur content, and then that was lowered down to 0.5% sulfur by mass. Keeping in mind that on the road, you know, that's 500 ppm for ships and on the road is 15 ppm. So there's still a big difference in terms of where they are on the sulfur piece. And with these bunker fuels, these are residual fuels from crude oil that have these high carbon emission profiles associated with them.
And I think right now we're at a point of the transition where there is a significant deal of uncertainty in terms of what's coming for the future. Nobody necessarily wants to be first, but nobody wants to be last either. And so, you've got this kind of curious situation where there's a lot of decisions that are being made and some are in better positions than others to make those decisions, depending on their fleets, their experiences with different cargoes and commodities that they move, and their financial situations, too. Shipping typically has pretty thin margins, and so the ability for folks to take on extra costs at what is potentially high risk for what may become stranded asset fuels in the future is a difficult decision for what are typically pretty conservative business operators.
Now, with all of that said, in terms of looking at what's being invested in currently, there's been a swell. But keep in mind that this swell is from numbers that are pretty small to begin with, towards two different fuels in particular, in terms of the readiness, or the potential readiness of the vessels to use them. And those two fuels are ammonia and methanol.
David Roberts
Right. When you're thinking about substituting new liquid fuels for old liquid fuels, people always think hydrogen first. But one of the points you make is that cryogenic hydrogen, which is the sort of most energy-dense form of hydrogen, is impractical for ships, basically. You have to have a bunch of other equipment on the ship to keep it cold, to keep it under pressure. So, methanol and ammonia, ideally in our decarbonized future, are both derived from hydrogen, basically more stable fuels that you get out of hydrogen. Is that fair to say?
Ed Carr
Yeah, ammonia and methanol are — they would be derived from green hydrogen, ideally for the deepest decarbonization benefits, and they can be carried in more stable forms. Obviously, ammonia has some significant toxicity issues that can be associated with environmental spills and releases of that. But at the same time, it's also been moved extensively in trucks, trains, and ships for a very long time. So there's deep expertise in the industry in terms of moving and handling both ammonia and methanol as a commodity.
David Roberts
Well, maybe you could just say a little bit about the relative merits of methanol versus ammonia, because those do seem to be kind of like the lead candidates here. Is one obviously preferable over the other, or do they have sort of, like, strengths and weaknesses?
Ed Carr
They each have strengths and weaknesses. There's not necessarily one that's preferable over the other. I think it's really dependent upon the use cases of individuals. I've had conversations with shipping companies that are very experienced in handling ammonia, and it's in their day-to-day operations, and they feel comfortable and confident that they'll be able to use that as a fuel going forward. On the ocean-going side of things, much of the early movement in terms of the uptake of these fuels is towards methanol. And part of that is because of the safety issues that can be associated with ammonia in terms of putting people near large volumes of ammonia, in particular when you're combusting it.
So, you know, there's not necessarily one better than the other. They've got strengths and weaknesses that are different.
David Roberts
Is one more energy-dense than the other?
Ed Carr
So, obviously, ammonia needs to be cooled to some degree. It can also be pressurized to some degree. It's typically, you know, -30, -35 centigrade as its cooling temperature. Methanol is just slightly more energy-dense than liquid ammonia as it's stored at -35. So in that regard, you know, methanol per unit volume carried holds a slight edge over that. Methanol can also be incorporated more easily into the hull designs of vessels in a format that is closer to traditional hull design systems. Whereas with ammonia, you would need to design separate systems in order to keep greater separation between the people and the fuel.
There are things that you need to do with methanol, like cofferdams and safety systems. And it burns clear, so you'd need different fire detection and suppression systems. But these are issues that, at IMO at least, have been discussed at great length on the methanol side.
David Roberts
And neither of these are drop-in, right? Like, you have to build ships around — these have to be new ships, basically. Is that right?
Ed Carr
The engines, in most cases, would need to be new-build engines that were built to be dual-fired on ammonia or methanol and a pilot fuel, which is something like a conventional bunker fuel. Yeah, for drop-in fuels. At that point, you're really mostly talking about biofuels and renewable diesel and things like that.
David Roberts
Yeah, the other obvious liquid fuel candidate here is biofuels. Like the aviation people, seem to be sort of going to biofuels first. Is there momentum behind biofuels in shipping, or are the sort of supply issues too thorny?
Ed Carr
Yeah, no, absolutely. There's momentum in that direction. And in the near term, biofuels may well comprise a significant portion of the initial decarbonization of the industry. The main challenge with them is twofold, one being the availability of the fuel that you've touched on. Both fuel, biofuels, and then renewable diesel, biodiesel, and renewable diesel. And then the other piece of it is, from IMO's perspective, blends of biofuels up to B30 — that is a 30% biofuel — don't require additional regulations, do not fall subject to additional regulations under IMO. So a lot of people are starting to blend biofuels or renewable diesels in varying quantities into their fuel mixes that are out there. From a renewable diesel standpoint, folks that I've talked to essentially report no major differences or operations. The engineers aren't identifying differences in how and how those fuels are behaving or issues with the engine system that do show up with biofuels, biodiesels such as fouling of the tanks, additional residue buildups that can occur in the engines as well, that require additional liquids to treat the fuels, to keep the fuel stable, prevent them from stratifying, and then also to prevent kind of the residue formations that can diminish engine efficiency as well.
David Roberts
In light transportation, I think the consensus is that biofuels could reduce emissions somewhat on the margins, but we're not on a pathway to zero. Basically, we're not going to be the way to get to zero. Is that more or less the same for shipping?
Ed Carr
Yeah, I think there's the potential there. The big issue with shipping is its ability to compete with other sectors for the fuels. You know, as I indicated earlier, the ability to take up additional cost relative to your competitors is in many cases limited for shipping because it doesn't have the same margins that you might see in other industries. And so, in that sense, somebody who's deciding to take up biofuels that come at a cost premium compared to conventional fuels that form the baseline, they would need to have a business case that would support that, whether that be from an environmental perspective or they're offering kind of environmentally differentiated transportation services, those sorts of things that would lead to that. But from a pure economic standpoint, shipping is at risk of being outcompeted by industries that are able to absorb the additional costs more easily.
David Roberts
Oh, yeah, that's a good point. And of the methanol and ammonia that are out there now, available to shippers, how much of them are derived from green hydrogen? Like, methanol can come, like, they can both come from a variety of sources, can they not?
Ed Carr
Yes, they can both come from a variety of sources. Green hydrogen can underpin that. The fact of the matter is that right now, the vast, vast, vast majority of ammonia and methanol that is available on the market is produced from fossil fuel feedstocks.
David Roberts
Right.
Ed Carr
In some cases, they may use carbon capture and sequestration technologies to capture some of the exhaust gases during production.
David Roberts
That's the blue, right?
Ed Carr
That's your so-called blue blend. Exactly. But, you know, there are some questions about the efficacy of carbon capture, and at scale, it is not yet a proven technology.
David Roberts
Right, right. So, those are liquid fuels. And I guess going into this, my sort of assumption was that shipping is too big and power intensive for anything other than liquid fuels. But there are other ideas floating around about how to do these things. So, I wonder if you could say a little bit about hybrid systems that involve solar and wind, things like that. I know that wind on big ships has been, at least in my world, subject to quite a bit of hype, quite a bit of cool renderings floating around. But is that a meaningful presence in the industry?
Is that a real thing, that wind can either reduce the amount of fuel need or even eliminate it someday?
Ed Carr
Yeah, it's a good question. And there's a certain irony in this idea of returning to the age of sail. No, I would say there is a place for these technologies. Wind is an area that's been discussed kind of more and more frequently. There are three primary kinds of wind technologies that are either discussed or implemented. One being a kite sail that you fly off the front of the bow, and you can optimize where it sits in the wind window in order to optimize the amount of power that you're assisting the vessel with. And then there are fixed wing sails that operate more like what we might think of on a sailboat, with some increased efficiencies.
And then there are Flettner rotors, which are essentially upright turbines that, for want of a better term, do not care which way the wind is blowing because of their design as a vertical turbine. Wind direction in any direction, not just the direction the vessel is traveling, can provide power to that turbine, which can then spin and then transfer it down into the electrical system of the vessel. To incorporate power from a Flettner rotor, you would need a hybrid system where you have an electric drive on the vessel, or that power could just be used to supplement the vessel auxiliaries. Whereas a kite sail off the front of the bow could really be retrofitted onto any kind of vessel and provide additional energy that would offset the need to burn or combust or run your prime mover essentially. From an efficacy standpoint, to get to zero with these, it depends on what kind of vessels we're talking about and the sizes of the vessels that we're talking about. Because, you know, physics being physics, there's only so much energy that can be extracted from the wind and, you know, under optimal conditions and all of these kind of caveats that can show up in the desktop studies that often accompany these technologies, when they're announced.
It can be fairly limited. What you end up with as a power savings in general from a kite system, you may get somewhere between, you know, on average, over the year, 2% to maybe 10% of a reduction if you're able to optimize that significantly and your vessel is small. On a large vessel, energy from a kite system is going to be fairly limited. And then we end up in something more theoretical when we're talking about Flettner rotors.
David Roberts
Right. And so, well, you mentioned electric drivetrain, which brings me to my next question. Because once you have an electric drivetrain, there are lots of ways to generate electricity. Right? So, how common are electric drivetrains for these big haulers?
Ed Carr
Yeah. Becoming more so. There's certainly non-zero. And the diesel-electric hybrid model is certainly one that is proven in the maritime industry. It comes with additional cost, but it also, if we're thinking about this transition and the ability to not be quite as locked in 10, 20, 30 years down the road, then maybe some folks might start thinking about, "Okay, we'll build a hybrid electric system right now, and we'll think about what types of different fuels may be able to be used to propel that system with greater flexibility." This is not to say that doing so would be a trivial task.
To switch from an ammonia system to a methanol system to a liquid hydrogen system is a very, very significant undertaking.
David Roberts
And so are there any of these big haulers that have purely electric drivetrains? In other words, not hybrid, just all electric, is that even a thing?
Ed Carr
For a large ocean-going vessel, no. You just can't get the energy density and the battery storage on board the vessel or within a fuel cell type system in order to propel that. We are seeing battery systems on some smaller vessels. There are some ferries that are out there. There's a smaller vessel operating in Norway, the name of which escapes me right now — Birkeland. Yara Birkeland — that is going towards full electric. But we're talking about limited cargo tonnages that can be moved by these vessels. Once you're talking about a 20,000 to 24,000 TEU container ship that may need 40 or maybe 50 MW under load, you start to run into some significant issues with the ability of battery storage to provide the electricity or on the fuel cell side of things, kind of being able to scale those up in order to meet commercial operations. We can't just replace the entire ship with a fuel system and a fuel, you still need to maintain the ability to carry and move cargo economically.
David Roberts
Right.
David Wooley
The one thing that I'd add about this is that a significant amount of shipping is kind of intercoastal, relatively short-haul movement between Asian ports, between European ports, for example. So, electrification, I think, for those kinds of duty cycles is definitely a potential, particularly as the battery chemistries of batteries continue to evolve in the direction of higher density, higher energy density, and lower weight. But I agree with Ed about the very large transoceanic ships being a different story.
Ed Carr
Now, when we're talking about electrification, you end up in a situation where we require additional shore power. Shore power is the ability to provide power to the vessel from shore-based systems. This is something that there's a lot of experience with in Europe, California, and Asia, but it is not as simple as running an extension cord from the dock to the vessel when we consider that these could be multiple megawatt draws that these vessels would require in order to power them. So, you end up in this situation where if we're thinking battery electric and we're thinking about the transition to that, you almost have to rethink the local grid utility scale and the power generation side in order to meet those demands.
David Roberts
I know ports themselves are incredibly power-intensive. They've got cranes and drayage, this and that, and lots of big vehicles moving around. Is electrifying ports — I'm trying to get a sense of scale here. How big of a part of the answer is electrifying ports versus finding new fuels for ships? Are ports a big part of the problem?
Ed Carr
It's a really big part of the solution. And there has been a huge amount of effort in the US, at least, to electrify ports. The EPA has provided a lot of grant funding through their DERA and the Clean Ports program to electrify ports. And so, moving forklifts and rubber tower gantries, and the gantry cranes, and the drayage trucks, and all of these things that were running on diesel for a very, very long time, to be electrified. And so, there is a significant shift on the ports towards electrification on that front. And the government is providing funding and, depending on who you talk to, more funding might be beneficial to help speed up that transition.
But for shore power for ships, it started off with cruise ships from a large scale. There's been low voltage shore power for things like fishing vessels, ferries, and other things for a very long time in order to keep their systems running and the tanks operating and all of that. But when a cruise ship comes into port, they have to keep what's called their hotel loads on.
David Roberts
Right, right.
Ed Carr
And that is on the order of 11 or 12 MW in some cases. So, you can think about a local grid system in a community where cruise ships might visit. All of a sudden, having to flip the switch for that is a very, very significant shift from what is typically their baseload. It requires extensive utility coordination to build out the substation systems and then also the ability of the local grid to scale up and meet that demand when it comes online. At the same time, they also have significant other demands locally to keep the lights on and the air conditioning running and all of those other things that we take for granted.
David Roberts
Yeah, that's tricky. Final technical question, David sort of brought this up. But one of the things, when you talk to the aviation people about decarbonizing, one of the solutions is not just keeping the existing system as is and just switching out fuels, but changing operations in such a way as you're doing more shorter flights and fewer longer ones, basically, like moving around the operations of things to make the flights themselves more amenable to electric planes, which have their limitations. I mean, I guess if you're shipping between continents, there's no shortcut. But is there talk in shipping of changing shipping operations in such a way as to assist decarbonization?
Ed Carr
Yeah, I mean, this is a change that's already underway and has been really since the recession, and maybe even before the 2008 recession, that is. First of all, you end up with significant economies of scale for moving cargoes on larger vessels. And we've seen that shift. Although a large vessel cannot accomplish the needs of the entire industry, there is a need for feeder vessels and transshipment and other things like that. You know, we've seen this shift, particularly in containers, towards bigger vessels. You know, the carbon intensity per unit cargo goes down. We've seen significant shifts in the speeds at which these vessels are traveling.
The power required to move a vessel through the water follows a law that is called the propeller law or the Admiralty formula. That's essentially cubic. And so, just a small reduction in speed can yield significant reductions in the amount of energy required to move the vessel. And so, this is so-called "slow steaming." The industry has largely shifted to slow steaming when it can.
David Roberts
Oh, interesting. I would have thought all the pressure would be for faster, faster, faster. With all the, you know, with just commerce being so fast and competition from planes, cargo planes, I mean, I would have thought the pressure would be in the other direction.
Ed Carr
Well, you know, they've shifted their supply chains and they've shifted how they think about those supply chains in order to accommodate the slow steaming. It's aligned with this kind of just-in-time type approach. So rather than stockpiling at warehouses, essentially the ship becomes the storage as it takes a little bit longer to move across the oceans. So, you know, the slow steaming has been a big shift in terms of the power draw there. And along the lines of slow steaming, the International Maritime Organization (IMO) has been exploring and promoting opportunities to increase the efficiency of arrival times.
And so, this is called just-in-time arrivals. There is a tendency within many sectors of the shipping industry — and we talk about shipping as this one homogenous thing, but it's really a dozen plus different sectors, maybe it's even two dozen, that operate under slightly different conditions — to kind of hurry up and wait in many cases, because they want to be placed for when the berth becomes available, so that they can immediately move in and unload their cargo. By implementing a just-in-time arrivals approach, the vessel is able to optimize its speed to arrive just in time. It's able to travel slower to arrive at the berth just as the berth comes available, optimize its fuel consumption and therefore its emissions, and kind of limit this stepping on the gas and then kind of sitting at the anchorage for a long period of time.
And so, within that, you know, vessels have an eco-speed. That's their optimal speed at which they travel from a fuel consumption per nautical mile distance traveled, and they're able to travel closer to those eco-speeds. And if we were to optimize the entire voyage, the study that we did for IMO indicates that you may be able to reduce the energy demands by something on the order of 14% to 15% across the industry. And if you just did the last, you know, 12 to 24 hours, you can end up in the, you know, 6% to 10% range just from being a little bit more efficient in how vessels are calling to ports.
David Roberts
All right, well, David, let's talk some policy here. I want to get to what's in place now, but actually, just kind of as a preface, you know, it occurred to me, reading about this, that shipping is, as it decarbonizes, in the position a lot of industries are in, which is it is sort of increasingly dependent on electricity. Increasingly dependent on clean electricity. I mean, never mind just the battery and electric drivetrains. Even if you want clean methanol or clean ammonia, you have to start with clean hydrogen, which is electricity, basically, which is clean electricity.
So, everything decarbonizing ends up coming back to clean electricity. So, it occurs to me that part of what shipping needs, just as a preface, is good electricity policy. You know, like, you have to care about the grid. You have to care about, you know, interconnection queues and all the other things that everybody who's worried about electricity cares about. I don't know, like, how much time you spend thinking about that stuff. But it occurs to me that, like, electricity is becoming a bigger part of policy in shipping, as it is for many industries. Do you think that's fair?
David Wooley
I think that is definitely the case. And one of the points that we make in this paper is that moving effectively to decarbonize shipping has benefits in terms of enabling you to decarbonize other industries. So, for example, if you put together a supply chain of renewable hydrogen, production can be used to produce shipping fuels that can be used to help decarbonize cement, steel, refinery operations. But, I want to agree with you on your initial point, which is that you got to get the electricity supply clean in order to make the transition for methanol in particular.
And so, here in California, we're pretty far along on that. Still, some work to do, but it would be a good place to begin this transition.
David Roberts
Yeah, I just wanted to get that on record because it ends up being a theme of practically every episode I do. No matter what industry I'm talking to, we end up back with, "Yes, we need a lot of clean electricity." You mentioned early on that there's a lot of momentum in this industry. That's definitely the sense I've gotten versus aviation, where things seem much more nascent. It seems like in shipping there's a lot going on, and there's something like consensus in the industry about how to do this, or at least to do this. So maybe you could start by talking about just what pieces are already in place, what laws and regulations are in place pushing for this.
David Wooley
Let me start just by saying that one of the things that's striking about this moment is that you've got an industry that actually supports action to move towards this transition. So, the industry supported the establishment of the International Maritime Organization's very strict "getting to zero" targets.
David Roberts
And those are new as of last year?
David Wooley
Last year was when they set that steeper target with interim steps, too. So, they're talking about a 70% reduction in emissions by 2040. Something like a half billion tons a year of greenhouse gas production. So, that's a big prize to go after. And unlike other transitions, coal industry, for example, you don't have this massive opposition from the industry itself. But at the same time, the industry needs a clear policy signal in order to be able to continue to raise capital for these changes in order to de-risk some of the very large investments. Now, the other thing I'll say about this industry is that it has huge revenues.
And so, this shift is, some estimates point, say it's like it has the effect of increasing the cost of shipping by 1% to 2%. So, it's doable from the standpoint of the industry. But like I say, the policy drivers are important to the industry in order to be able to continue to move in this direction.
David Roberts
Well, I'm sure they can accept some higher costs as long as they are all accepting it at the same time. Right? I mean, that's the —
David Wooley
Yeah, you have some leaders out there going ahead and making the initial investments without the policy drivers. When I say without the policy drivers, the other thing to add about this is that the European Union has adopted regulations reducing greenhouse gases for ships, calling at its ports. So, that driver is already out there. And so, that's part of what's happening with ship owners like Maersk to pay for the construction of methanol-ready ships to begin to build the supply chain for renewable or green methanol.
David Roberts
Is that part of the EU carbon trading system or is it just a freestanding, separate policy?
David Wooley
Well, in Europe, they did two things. They included shipping emissions within the emission trading system, basically the cap and trade system for the economy, and that's an economy-wide decarbonization effort. But in addition to that, they established a thing called FuelEU Maritime, which creates essentially, although they don't call it this, a carbon tax on emissions, but allows some flexibility of compliance that's typical in these systems. So there is already a cost of using high carbon fuels for ships calling at European ports, but it's just the European ports so far. So what's next here is the action by the International Maritime Organization to adopt implementation measures, and that's what's in play right now in negotiations that are underway.
David Roberts
What authority do they have, like the IMO? Like, what can it do to you if you don't obey its rules?
What authority do they have like the IMO? Like, what can it do to you if you don't obey its rules?
David Wooley
The implementation measures that they're considering now have enforcement mechanisms, and so it's not like you can ignore it. If you want to, it would limit your access to ports and have a number of other adverse effects on your businesses if you basically snubbed it. So, these are not voluntary measures. These would be mandatory.
Ed Carr
If I may jump in quickly, FuelEU Maritime is a standard as well as this economic mechanism with the EU ETS as well. IMO is also considering an economic measure to accompany the standard that they're talking about. And I think that economic measure, you know, the standard is important and it's powerful, but that economic measure helps to facilitate the economic signal towards deeper decarbonization. There will be folks who are willing to use the fuels that they're currently using and pay the additional fee or tax or however you want to characterize that. But there will definitely be those who will look to limit their exposure to fees or if there are instances under which they may receive an allocation for emissions abatement in order to take those up as well.
So, IMO is debating what that economic measure looks like, and that's something that's going to be happening later this year to accompany that. And it's a really important component on top of the hard standard to help drive that economic signal towards what are likely to be significant investment costs that are going to be borne by the industry.
David Roberts
Yeah, and when we talk about investment costs, we're just talking about new ships, right? I mean, I have no sense of context here, but imagining that a ship is a very large investment, much less a fleet of ships. And it does seem to me very perilous at this point for a shipper with the technology in not quite settled stage to be making these huge forward-looking investments, basically making a bet on one technology or the other. It seems like they would need quite a bit of inducement to do that.
Ed Carr
Yeah, a ship in itself is on the order of hundreds of millions of dollars and multiple years in order to go from the design through to the launch phase of things. Now, you know, with a fuel like methanol, we can be fairly confident that there will be methanol available for the vessel to consume should it so wish, just because of the way that our economy works right now. So, you know, the risk of there being no fuel for a vessel like that is pretty limited. But, you know, once you factor in the additional cost to, you know, have that vessel be methanol ready or methanol powered or whatever the fuel may be, it does come at a potential disadvantage compared to the investment with a conventionally fueled vessel. So, you know, there's some economic activity that's looking at, "Okay, let's get a sense for kind of using these technologies and incorporating them into our fleets in the best ways that we can with some degree of certainty for what the fuel availability might be, even if it's not green, deep decarbonized molecules."
David Roberts
David, you mentioned the IMO, which I guess is probably the big player here. You mentioned the EU has pretty strong regulations on its ports. You also mentioned some policy stuff going on in China, Japan, and India. So, it does seem like there's nowhere to hide here. Like everybody, like shipping companies, basically have to be getting serious about this now. There's not like they can go find places in the world where they can still run dirty routes for no penalty at all. But what about the US? Where is the US on this? The US does feature some very large ports, a very popular shipping destination.
Where are we, like, rank the US on policy on this relative to these other countries? Are we behind or ahead or what?
David Wooley
Well, the US is ahead in some regards, and California is part of that. So, California established pretty comprehensive shore power requirements for operation for the ships in port. And that's increasingly being adopted in other parts of the US and in European and Asian ports as a way of, you know, addressing this conventional air pollution exposure problem. The US, in regard to the IMO, has a somewhat narrower influence because most of the ships that are owned and operated by US companies just run between US ports. The US has less leverage to influence where the IMO goes on this next round of regulations.
But on the other hand, it has potential, very big potential, to influence it in the right direction if it chooses to do so. And my sense is that so far, the US has been relatively quiet on this, so there's an opportunity to get more active in the next phase.
David Roberts
Well, yeah, you're not going to have the problem like you have with, say, oil, which is that the US is home to some very large and very influential oil companies. It doesn't sound like we have any big, dirty, backward-looking shipping companies influencing our politics in particular. So, it seems like we ought to be able to do this.
David Wooley
Yeah, there are about nine very, very large ship owner operators in the world, and if you take a look at them, most, if not all of them, are supportive of this transition and are beginning to make investments. So this momentum is really growing; it's getting stronger. But like I say, to really move full force into the transition, we need a solid decision out of the IMO in these next set of negotiations. Now, of course, there are countries involved in this who are not supportive.
David Roberts
Is it financial? What motivates opposition to this?
David Wooley
Well, the United Arab Emirates produce a lot of fossil fuels. Big fossil fuel producers are not supportive. Not surprising. But, you have a lot of entities that really do support it. The EU, for example, needs to get off these fossil fuels for a whole bunch of reasons. Countries like Korea, Japan don't have a lot of fossil fuels. They have to import almost all of it. There are domestic economic benefits for this, particularly. And what you're seeing in Asian countries, and this is true in the East Coast of the US and Europe as well, is growing investment in offshore wind technology as a way to augment supply, electricity supply.
My prediction is we'll see that in California as well, although it'll be a little later.
David Roberts
Yeah, isn't there this idea? This is one of the intriguing ideas that really grabs people's imagination. Isn't there this notion that you could sort of put a turbine out in the ocean and just have it generate these liquid fuels, not even hook it up to the grid, just have it sitting there basically generating electricity that is then converted into green hydrogen, which is then converted into methanol, and basically the offshore wind turbine becomes a gas station for ships to stop and get green methanol. Is that real at all? Is that on the horizon at all? Is anybody really doing that? Or is that just a fun idea?
David Wooley
Well, my colleagues at the Lawrence Berkeley Laboratory think that there's no technical reason why you can't do that. The turbines can be put in a floating configuration. I haven't actually seen anybody design this, but theoretically, you could store liquid and hydrogen fuels that way too, waiting for the ship to come along. Now, the economics of that, I think, I'm going to test it, especially since we've got near-term options to get reductions in emissions. So that may be a long-term future, but I would say that's probably very long term because if you're trying to get to a deep reduction in shipping, you've got some very practical early options with efficiency and slow steaming and vessel hull designs and some wind assist, and then you can begin to co-fire some of these renewable fuels in increasing percentages and gradually you're on your way to getting to zero.
So there are probably a lot more of those options than there are of the mid Pacific gas station idea.
Ed Carr
And keep in mind, from an operational perspective, shipping, one of the most critical things for mariners and operators alike, is safety.
David Roberts
Yeah, right.
Ed Carr
And so, typically, bunkering happens in controlled locations where they're able to manage the environment to the extent that they can. And I realize a wind turbine in the middle of the Pacific is an extreme example here. But if there are ways to limit the exposure to potential risk, then I think the industry is going to want to take those on as much as possible.
David Roberts
David, you have a bunch of policy recommendations in the report. We don't have time to go through all of them. They're pretty granular. But, if you were to pick the top two or three for the US and for California specifically, are there two or three top-line items that you would recommend in the near term?
David Wooley
Yeah, let me start with California, because California has this important potential catalytic role here. It goes something like this: There is some risk that the IMO won't be able to reach agreement on these implementation actions. And so, anything that can be done to increase the likelihood that that'll happen, and it'll happen in a timely way, is very valuable. So, imagine if California were to decide under its own existing authority to limit greenhouse gas emissions from ships in its economic zones and or to stimulate production of low carbon shipping fuels. And so, a statement like that could essentially, I'm simplifying this quite a bit, but it could essentially extend the geographic scope of what the EU has done to a fairly sizable chunk of the cargo traffic in the Pacific.
That probably very strongly increases the sense of inevitability, and I think, increases the chance of a good result at the IMO. So, we've looked at what authority California has to do this, and there is a historic precedent. California was the first one to limit sulfur in fuel for ships, and that basically led to the IMO action to do that at an international level and the US EPA at the national level. So, it could do the same kind of thing again. It could also use its low carbon fuel standard to create incentives to produce these fuels.
Right now, fuel producers are pretty busy producing fuel for road transport. And so, if you're a fuel producer, you don't have an incentive on the shipping fuel side. Well, you're not going to do it, at least for a while. But there's a way to create an opt-in to the LC (Low Carbon) fuel standard for shipping fuels, which would be a relatively simple but important step because Ed's talked about these zero carbon shipping corridors that are being negotiated right now, you know, with Asian countries and with California ports. But you need fueling at both sides of the Pacific.
These won't really happen until you start gaining some fuel production of these fuels on the West Coast. And so, that's probably one of the most important things I think we can do is to begin to stimulate the development of that supply chain for these fuels on the West Coast. The US government can help with that. And certainly, California can move in that direction, too. In terms of the United States, the United States has a bunch of options. It could do what the FuelEU Maritime has done. It could use more of its funding in the form of incentives and grants to gradually decarbonize the US Jones Act fleet as a way of demonstrating these technologies and beginning the transition in that way.
And of course, that would have valuable impacts on air quality in poor communities. So, there's a lot that both can do. California probably is in a position to move faster, to create that sense of inevitability and to help increase the potential that the IMO does the right thing here. And as I mentioned earlier, this is worth something like a half billion tons a year by 2040. So, it's a big prize. And if California increases the likelihood of that even by a little bit, it seems worth it to me.
David Roberts
Interesting. One of the things you hear from a lot of people and areas these days is that liquid natural gas is clean, or is a version of clean, or is a step toward clean, an interim clean step. You know what I mean? Like, there's a lot of push towards LNG. This is not just true in shipping, but it is true in shipping. So, I wonder if either or both of you have any assessment of LNG as a tool of reducing carbon.
David Wooley
Well, let me take the first crack at that. And I think that it doesn't really have a role. If you take an honest look at all the losses of methane at the place where oil and gas are produced, the gathering lines, and the transmission lines, and then when you look at the greenhouse gases associated with liquefying this stuff, then you have losses on the ship.
David Roberts
Yeah, leaking.
David Wooley
You've got leaks all the way through. You have what they call boil-off while the ship is operating. And it's just not true that you get any reduction in greenhouse gases with LNG. Now, there are some people talking about, "Well, we'll substitute green methanol," but it's unlikely that that would be a better result. And in the meantime, in some places, like California, you can't do that right now because we don't have import and export terminals for LNG and we shouldn't build them. It would be a terrible step backwards. So, you do get a reduction in conventional air pollution from LNG ships.
And I think that was part of the initial impulse to go that way. But from a greenhouse gas standpoint, it's not a benefit at all. And maybe worse. Worse than conventional bunkering fuels.
David Roberts
Well, that seems clear enough.
Ed Carr
Yeah, David hit the nail on the head with that. The term that the IMO is talking more and more about is "Well-to-Wake."
David Roberts
"Well-to-Wake" is like the equivalent of "Mine-to-Wheels" on cars, or whatever.
Ed Carr
Exactly, exactly. And, you know, with LNG, there's a slew of different emission sources from the production site all the way down to a slip from the engine, from uncombusted methane. There are different types of engines on vessels that slip, more or less. But there are LNG vessels operating on the world seas right now, and there are some being built as well. And so there is a question about, you know, what are the pathways forward for those ships? Whether they consider alternative fuel, whether they continue to use LNG, or if they start to shift into an eLNG, an eMethane, or a biomethane feedstock on the decarbonization pathway for them. But, you know, David described the GHG impacts.
David Roberts
Right, right. Excellent. You know, it's kind of become bigger news in the climate world. In the last couple of years, I think people have really started to kind of quantify this and wrap their heads around it, which is the sort of weird phenomenon where ships emitting particulate pollution out there in the ocean have been serving the function — I mean, that particulate pollution shields the earth from some of the heat that otherwise would be happening because of climate change. And so, there's this worry that if you eliminate all these particulate pollution from shipping, that you're going to have this weird rush, basically, this rush of warming as warming catches up to where it otherwise would have been.
Is that on your all's radar at all? Do you think about that at all? Is the shipping industry thinking about that at all, or is that just too big and abstract to deal with?
Ed Carr
David, that's a great question. We had a paper that came out in 2018 that looked at exactly this, and the title of that paper was "Clean Fuel for Ships Have Health Benefits and Climate Trade-offs". This is not necessarily something that is novel or not previously known. The function for this reduction is due to the reduced sulfur in the fuel of the vessels. When you get the emissions and the sulfur oxides, those provide a cooling layer for the earth. And so, by lowering the sulfur, we have reduced the cooling layer. We've taken off the cooling blanket.
I'm not necessarily of the opinion that we should be kind of making those sorts of trade-offs. There are significant health benefits to reducing the amount of sulfur. We're talking about hundreds of thousands of lives a year that we avoid in mortality around the world because of that. And so, I do not believe that the solution is to put the sulfur back. I think there are other options. And frankly, just by reducing this, what in some senses is an artificial cooling layer that has simply been dampening the signal that has been driven by all of the other greenhouse gases that have been emitted, I don't think is really at the crux of the argument. It's a factor, but I don't think it's the crux of the argument.
David Roberts
David, anything to add to that?
David Wooley
I've seen some stuff that really suggests that there's significant uncertainty as to whether or not the net impact of that is negative on climate. And I'm not a climate scientist, so I don't know how to judge that. It's just that, just to remind you, we already have these emission reductions on sulfur and fuel that are in effect globally. So the idea of going back seems to have significant costs. I would think of going back because you would then disrupt and change fuel supply chains in maybe some fairly unpredictable and costly ways. So, yeah, I think Ed's right, is that, "Hey, let's focus on the health benefits of getting sulfur out of the air and the massive health benefits associated with addressing climate change."
David Roberts
I think we can agree that polluting more should not be our climate mitigation strategy. Okay, final question, which is just something that I've been wondering about shipping in general. A new study came out recently that tried to put numbers on this, and it claimed that something like 30% of international shipping is carrying fossil fuels around. And so, I've been sort of thinking, as we globally start reducing the use of fossil fuels, as we phase out fossil fuels, aren't we sort of, by doing that implicitly, going to be phasing out a bunch of shipping and sort of reducing the shipping problem, as it were?
And I wonder whether you think about that and whether also, again, the shipping industry is thinking at all about kind of the loss of the business of carrying fossil fuels around, or is that just like too far away to be on their radar?
David Wooley
Well, one thing to note is that some of these renewable liquid fuels will likely be produced in places where it has the lowest cost and lowest rates associated with it. And I suspect you're going to see very large amounts of international trade in those fuels. And so, that will offset some, at least, of the loss of cargoes for oil and gas. But now, let me turn it to Ed, because I think he wanted to add something.
Ed Carr
No, I was going to make that exact same point, David. You know, first we moved coal around for a really long time, and then it was oil. You know, these are transitions that have to some extent occurred previously in this sector. And I suspect a lot of those, what are essentially energy carriers, you know, it may not be that exact vessel, but that activity will probably need to proliferate in order to, you know, where we can most economically produce the fuels and then move them to where we can most economically sell and bunker them.
David Wooley
Yeah, the other thing to say is that almost every projection I've seen is that international trade in goods and cargo is projected to increase. And so, you're going to see an increase. If that's true, that's another thing that's going to be offsetting the reduction in shipping for fossil fuels. So, that may not happen. It depends on a lot of things that are happening in the global economy, but most people are planning on that happening. And so, that suggests a lot of infrastructure changes and ports to accommodate that. And I think the other thing, I think Ed was saying this, that some of those ships that carry coal in particular, and oil can be repurposed for other kinds of cargo.
So, it isn't necessarily a loss to the ship owner and operators, although I haven't seen a good quantification of it.
David Roberts
So, you guys are both very mired in the current details, the current sort of like, what's currently happening, current policy, et cetera. By way of wrapping up, I'd ask you both to sort of lift your eyes to the horizon and think, like, just in your personal opinion, obviously, like, this is an enormous amount of uncertainty in this. But just in your sort of personal opinion, 20, 30, 40 years from now, when we have decarbonized shipping, how do you think we did it? Like, what do you think is going to win? Is it going to be a green hydrogen derived liquid fuel? Do you think in the end that's going to win? Or is, like, batteries going to win? Do you have any personal vision of, like, what's going to triumph in the long term?
Ed Carr
I think to get to success, in all likelihood, it'll be a green hydrogen-derived liquid fuel. I don't know that it'll necessarily be any one particular fuel. We're probably looking at a landscape of fuels that may start to coalesce deep into the future, but at least in the short term, it'll be a suite of different fuels. There will need to be a strong economic signal that helps that transition move. And all of this has to occur, as we discussed extensively, with a decarbonized grid, a deeply decarbonized source of electricity for this, and ideally will happen with significant international cooperation and coordination.
David Wooley
That's right. And in the case of shipping, let's break down the policy barriers at the beginning of the transition, as opposed to waiting until the end, as we've done in other sectors where the policy barriers are always the last ones to fall. So here we have an opportunity to build it in early and optimize it from an economic, political perspective. And especially, the very exciting thing is to see an industry that supports this transition and just wants a clear signal. There's a lot of diversity in the types of ships out there, and I think Ed's right that there are a lot of options here.
Smaller ships, intercoastal ships, have decarbonization options that are different from ocean-going vessels. So, it'll be really exciting to watch this, and I'm confident that this could happen.
David Roberts
Yeah, as you say, a large industry on board for doing this and policymakers on board for doing this is kind of a new thing in the world. Like most of these, decarbonization to date has been a vicious battle for inches. So, it's interesting to watch and see what will happen when we actually have some consistency and cooperation about doing this. It'll be a new thing.
David Wooley
And the last thing I would say is, we have to do this. We really have to do this. And I sense that around the world there's an increasing amount of people pulling together to help solve the climate problem. And it's not just environmental groups, it's industries, big industries, it's corporations, it's governments who haven't been involved to date. And, you know, we're in this moment where maritime could be, you know, one of the leaders in this effort and really show how it can be done in a way that is politically and economically sound.
David Roberts
Yeah, well, that would be something. Thanks you two . This is enormously illuminating. Really interesting. It'll be, sounds like, super interesting to watch over the next five to ten years. So, maybe we'll reconvene, see what's happened. Thank you both for coming on.
Ed Carr
Thanks for having me, David.
David Wooley
Thanks, David.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially to my super producer, Kyle McDonald, who makes my guests and I sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, or leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much and I'll see you next time.
Share this post