Maersk CEO demands end date for fossil fuel use in shipping

Søren Skou, CEO of the world’s biggest container shipping company Maersk, has called on the UN maritime body to determine the end date for the use of fossil fuels in the shipping industry.

In July 2021, the European Commission published its proposal for a regulation that aims to end the production of combustion engine cars in 2035. The regulation would support the EU’s transition to zero-emission mobility and support the uptake of electric vehicles.

Skou believes that the International Maritime Organization (IMO) should follow suit and set a phase-out date for fossil-fuelled ships with similar ambitious targets and measures to decarbonise the shipping sector.

“Combined, a global carbon tax and an end date for fossil-fuelled ships would be a strong signal to the shipping ecosystem — including yards and fuel producers — about which way the wind is blowing,” Maersk CEO pointed out.

“We need to accelerate efforts to meet global emission reduction targets.”

According to Skou, a global “drop dead date” would address future newbuilt vessels, complementing the impact on existing ships from the carbon tax.

Earlier this year, Maersk proposed a carbon tax on ship fuel of at least $450 per ton of fuel as a way for the maritime sector to bridge the gap between fossil fuels and more expensive green fuels. The container shipping giant stressed that governments and regulators are those who need to secure production and availability of carbon-neutral fuels for the shipping sector.

Without imposing the global carbon pricing measure, the UN maritime agency would have a hard time pushing alternative, zero-carbon fuels into the market.

“With a phase-in ending at 450USD/t fuel, this tax would address the price gap between the fossil fuels of today and the carbon neutral fuels of tomorrow,” Maersk head explained.

“As the price gap narrows, the IMO’s Energy Efficiency Design Index in its coming phases could be the instrument to make the end date for fossil fuelled ships a global reality.”

In a study released in April this year, German engine manufacturer MAN Energy Solutions also said that the use of fossil fuels in the shipping industry will need to be banned by 2030 in order for the industry to meet its decarbonization efforts. According to MAN ES, a complete ban on fossil fuels in the second half of the decade could significantly promote the industry’s 2050 decarbonization goals.

Back in 2018, the IMO set a target for the international shipping sector to reduce its greenhouse gas emissions (GHG) by at least 50% by 2050 compared to 2008 levels.

Although fuel efficiency improvements will contribute to achieving this target, further reductions will need to be achieved through the widespread use of fuels that emit zero carbon dioxide over their lifecycles. Considering that the typical vessel life is 20 to 30 years, the first zero-carbon ships need to be commercialized by 2030, Ocean Conservancy highlighted in its “Zero-Carbon for Shipping” report.

However, technologies needed to operate large transoceanic vessels powered by zero-emission fuels are not fully developed and current R&D efforts are considered to be insufficient.

In order to achieve the above goals, the shipping industry proposed a $5 billion R&D fund for shipping. Fully funded by the industry itself, the fund is designed to accelerate the development and introduction of zero-emission technologies and fuels for maritime transport, which are vital for allowing the industry to decarbonize.

It would be financed by a mandatory levy of $2 per ton on marine fuel, generating a core $5 billion over a 10-year period. The IMO is still evaluating the proposal to give the green light for the creation of such a fund.

Another study published in 2020 estimates that the total decarbonization of the shipping industry by 2050 will cost between $1 trillion and $1.9 trillion.

This transition requires significant infrastructure investments in new fuel production, supply chains, and a new or retrofitted fleet, the study by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition outlined.

Specifically, depending on the production method, the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions amounts to approximately $1-1.4 trillion, or an average of $50-70 billion annually for 20 years. If shipping is to fully decarbonize by 2050, this will require further investments of some $400 billion over 20 years, bringing the total to $1.4-1.9 trillion.

Following the newest request by Maersk, the question remains: will the global regulators finally move forward and introduce urgently required measures to support the shipping industry’s shift to alternative fuels and help it achieve net-zero by 2050 — the target set by the regulators themselves?