On March 9^th, Environmental Defense Fund partnered with Ricardo Energy and Environment to present a webinar on the study Electrofuels for Shipping, and to discuss the current policy options to decarbonise international shipping. One of the sessions was simultaneously translated into Spanish. You can watch and listen to the presentations below.

Both sessions were followed by Q&A. Given the level of interest and the limited time in the session, we have taken the time to develop answers for the main questions below:

Question: You spoke about the North African desert as ideal for renewable energy production. Are North African countries involved in the clean energy transition? What can be done to motivate those countries to be part of this development?

Answer: Morocco and Tunisia are both involved in the clean energy transition. Morocco’s goal is to produce at least 50% of its energy from renewable sources by 2050[1]. As our report Sailing on Solar shows, the country has a huge capacity to produce renewable energy, which could be directed to the production of alternative fuels for shipping. Tunisia’s Solar Plan sets a goal of a 30% renewable share in their energy mix by 2030.

Similar to Morocco, Tunisia has huge potential for wind and solar production, which could help the country meet growing energy demand, improve its energy security, and in a best-case scenario, become an energy exporter. Wind plants and solar photovoltaic plants would bolster Tunisia’s economic transition while supporting the country’s contributions to climate change mitigation^[2].

North African countries have a huge renewable capacity[3]. The transition to zero-carbon alternative fuels is a huge investment opportunity, which can bring massive benefits to the region, including jobs and energy security. Moreover, shipping could help trigger the transition to clean energy in other sectors and make new technologies and infrastructure significantly cheaper. These countries are motivated to be part of the decarbonisation story. They just need the right policy to jumpstart the transition.

Q.: What do you think will trigger investment in green shipping?

A.: We need a comprehensive and robust policy package to drive the transition and uptake of zero-carbon technologies at scale. The shipping sector is much like the power sector – there are high capital costs for long-lived assets (a ship’s lifetime is 20-30 years) with much lower operating costs. Large-scale wind and solar only got off the ground because of start-up investment for the first projects, which de-risked the technology for investors.

Once the first few large-scale projects were built, the costs started falling so that wind and solar are now cost competitive with fossil fuels. The first few ships that run on truly sustainable alternative fuels (and the supply chains for those alternative fuels) will be much more expensive than the current fossil fuel system. Therefore, the same level of investment for sustainable shipping projects will be necessary. Placing a charge (that rises every year in line with emissions reductions goals) on the lifecycle carbon content of shipping fuel would create a fund that could be used to subsidise those first projects. As more and more of them get deployed, the costs will come down.

Q.: Is it worth investing in LNG as a transition fuel? Doesn't seem like that'll make sense in 20-30 years, potentially not even in 10 years...

A.: We fully agree that it is not worth it. A recent study by the International Council on Clean Transportation showed that liquefied natural gas, or LNG, can be more damaging to the climate than conventional fuel, even though it emits less CO₂. This is due to the methane slip (when the gas leaks unburned) that occurs during production, supply and combustion of LNG. Methane is a “potent greenhouse gas that traps 86 times more heat in the atmosphere than the same amount of CO₂ over a 20-year time period”.

If countries invest now in LNG, especially in terms of infrastructure, we think they will be reluctant to undergo another technology transition down the road to switch to truly zero-carbon fuels such as green hydrogen or ammonia. Only a limited share of the infrastructure built for LNG can be used for the supply of hydrogen and ammonia, and ships built with an LNG-burning engine will not be compatible. Investing in LNG now is not a transition, but rather spending money on another fossil fuel. It is not the path that will achieve decarbonisation of the sector.  

Q.: How do you overcome the split-incentive problem of benefits not being directly allocated to the person who invests? For example, ship owners may pay for more efficient ships, but the ship operator will derive the benefit from the reduced port dues. In your opinion, how can regulation or other measures work towards reducing this allocation problem?”

A.: Split incentives occur between the shipowner and the charterer, when a shipowner pays for a more expensive and efficient ship, but the charterer is the one reaping the benefits such as fuel saving or lower port dues. It will only be resolved by an incentive scheme which ensures it is worthwhile for shipowners to invest in efficient ships while also ensuring that alternative fuels become cost competitive with fossil fuels.

Q.: What are your recommendations for handling developing countries and small island states? How do you determine what's fair in terms of contribution?

A.: We recognise the issue small island developing states (SIDS) and least developed countries (LDCs) face. It is important that any carbon pricing measures put in place have specific provisions for those countries to ensure their economic development is not negatively affected. At the same time, it is important to note that mechanisms can be designed to require ships to pay, not states. Therefore, the process can be independent from national treasuries.

Q.: Given that the additional cost of decarbonising the last half of shipping (0.5tn) is less than decarbonising the first half (1.5tn) - is there appetite for upgrading the 2050 decarbonisation target for shipping?

A.: We must remember the 2050 decarbonisation target is “at least” 50%, so there is significant room to move beyond “just” 50%. We have seen a number of pledges by different parts of the shipping industry that are planning to decarbonise faster than the IMO requires. Can the IMO and Member States keep up with their ambition? We hope so. We would also like to highlight the role of regional institutions and national governments, which can advance their maritime climate policy without waiting for global action. We already see that at the EU level, and with the UK’s Clean Maritime Plan, which includes an ambitious plan to introduce sustainable alternative shipping fuels throughout the country.

[1] https://www.euractiv.com/section/global-europe/interview/morocco-energy-boss-we-need-to-build-electricity-bridges-between-europe-and-africa/

[2] https://www.undp.org/content/dam/undp/library/Environment%20and%20Energy/Climate%20Strategies/DREI%20Tunisia%202018%20Full%20Results%20(English)%20(Aug%202018)%20(FINAL).pdf

[3] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2015/IRENA_Africa_2030_REmap_2015_low-res.pdf