Urgent action needed to reach 5% zero-emission fuel target by 2030, says new report

In the race to achieve the 5% target for scalable zero-emission fuel (SZEF) goal by 2030, the global shipping industry has made significant progress over the past year, as revealed in a recent report from UMAS, Getting to Zero Coalition, and Race to Zero.

Courtesy of Angelicoussis Shipping Group

The developments are promising, but as the 2030 deadline looms closer, the need for essential advancements becomes increasingly urgent.

The report highlights the outcome of MEPC 80, which has removed major uncertainty and opened up significant opportunities for the industry to align with the 5% SZEF target and potentially go beyond it.

It emphasizes that the risk of not aligning with this goal should serve as a catalyst for the industry to commit to SZEF orders and incorporate future legislation into their plans. This clarity in the regulatory landscape has also made it more apparent that tapping into opportunities for freight decarbonization is essential. Simultaneously, stakeholders need to consider the risks associated with inaction on future revenue, all while maintaining a rapid growth in the dual-fuel (methanol/ammonia) vessel sector.

Zero-emission fuel production currently in the pipeline could end up covering just a quarter of the fuel needed to deliver the breakthrough. However, if more projects are successful, zero-emission fuel production could be up to twice as much as is needed, even when accounting for other sectors’ fuel needs. On vessels, the picture is less rosy. Despite headline-grabbing orders for methanol-fuelled ships, continuing the current trajectory of orders might only deliver one-fifth of the needed vessels to achieve the breakthrough target.

In addition to industry efforts, policymakers must play a crucial role in promoting green hydrogen scaling. This entails adopting national production subsidies, implementing safety regulations, and further policies to encourage the adoption of SZEF, such as national and regional e-fuel mandates. Furthermore, policymakers should consider utilizing any revenue generated from greenhouse gas pricing to stimulate research, development, and deployment efforts in SZEF technologies, the report said.

“The last 12 months have seen a positive shift in maritime decarbonization efforts. Now is the time to see strong progress in terms of commitment for zero carbon fuels and freight from the industry so that the needed rapid scale-up of these fuels in the energy mix is achieved,” says Dr Domagoj Baresic, Research Associate at UCL and Consultant at UMAS, and lead author of the report.

The report underscores that achieving the 5% SZEF goal by 2030 is not only possible but is making progress on various fronts. With a clearer path outlined by the International Maritime Organization (IMO), now is the time for a substantial and ambitious push to create the necessary conditions for a rapid scale-up in SZEF demand. It’s crucial to recognize that the lead times for developing new supply-side production are long, leaving a small window for credible announcements before 2030.

“The IMO has led with ambition and now the maritime sector is ready to cut emissions and boost green growth, particularly for developing nations. Dominant trading nations have a monumental opportunity to regain our stalled climate momentum by scaling the efforts that leading vessel owners, operators and shipping manufacturers have already begun. These urgent actions are also very important to protect nature and our oceans, unlocking a myriad of benefits for coastal communities across the globe,” says H.E. Razan Al Mubarak, UN Climate High-Level Champion for COP28.

The report indicates that financing for achieving the breakthrough is partially on track, with the amount of shipping finance covered by the Poseidon Principles surpassing $200 billion and the climate alignment of these investments improving from 4% to 6% on a weighted average basis. The ability of the industry to continue to improve alignment as requirements tighten remains to be seen.

“Now that we know the international direction of travel for the maritime sector, the 175 member states need to create incentives for businesses and investors to implement zero-emission ships and freight services. Although there is progress towards its 2030 breakthrough target – for zero-emission fuels to make up 5% of international shipping’s energy demand by 2030 – we need to see policy makers create incentives for scaling up, for example, green hydrogen,” says Dr. Mahmoud Mohieldin, UN Climate Change High-Level Champion for COP27.

The alignment of advances in technological innovation, supportive policies, and collaboration across the value chain, while recognising the differing challenges that developing countries face and the need for means of implementation, will be key for successfully moving towards a healthier, more resilient, zero-carbon world.”

This window is expected to close within the next two to four years. Failure to prepare on the demand side could lead to many ships facing more expensive compliance pathways than necessary, risking fleet-supply shocks, according to the report.

Therefore, the time for action is now. The shipping industry, in collaboration with policymakers and other stakeholders, must intensify their efforts to ensure a cleaner, more sustainable future. The 5% SZEF goal is not only a target; it’s a mandate for collective action in the fight against emissions in the maritime sector.