Japan’s NYK bets on carbon removal credits to meet long-term emissions goals

Japan's NYK Group becomes the latest shipping conglomerate to bet on carbon removal credits from the financial year 2025-26 onwards to meet its long-term decarbonization goals, the company said in a position paper published Jan. 27.

The move by NYK, one of the world's largest shipping companies by fleet size, comes shortly after another Japanese shipping conglomerate Mitsui O.S.K. Lines, or MOL, recently entered into a joint venture with Marubeni in the nature-based CDR credit business.

The shipping companies' decision to rely on CDR credits is likely to impact demand significantly due to the size of their respective businesses and underscores difficulties in decarbonizing sectors like transportation.

"From FY 2025-26 (April 1- March 31), or earlier if practical, the NYK Group will commence the procurement and retirement of qualified CDR (carbon dioxide removal) credits at a reasonable pace and scale to build up the capacity of neutralization of residual emissions toward 2050," NYK said.

It said it will demonstrate how an emission-balancing mechanism can be used to achieve ambitious targets in a hard-to-abate sector, not only from the point of registration of corporate GHG inventory but also the accounting and financial arrangements needed.

Under its CDR implementation plan, NYK expects to start the trial phase for procurement and retirement of removal credits in 2025-26, and aim for the retirement of 100,000 mt of credits by 2030. It said its original plan was retirement of 200,000 mt/year in 2030, but due to the immaturity of CDR technology and market, It revised the goal down to 100,000 mt/year, which is still subject to further change.

"In global shipping, which is a hard-to-abate sector, a GHG emissions reduction close to 100% is expected to be challenging to achieve from both a technical readiness and maturity and economics standpoint," NYK said.

Carbon removals

NYK said it expects to make CDR competency a core part of management responsibilities by 2050 but does not anticipate overnight change in capacity available for carbon removal to match the scale of residual emissions from all relevant industries, especially hard-to-abate sectors such as aviation and maritime transportation, which operate worldwide and rely heavily on energy-dense fossil fuels.

It said some CDR concepts with low technology maturity are still in the early stages, MRV (measurement, reporting, and verification) has not been well established, and commercial markets are still under development.

"Nevertheless, CDRs are slowly but steadily moving from research laboratories to practical applications. A global framework to promote the use of CDR is important to break through the circumstances and accelerate CDR capacity," NYK said.

"We aim to neutralize residual emissions, which is the balance after making all efforts to mitigate the scope 1 emissions, by means of maximizing energy efficiency, emission avoidance by carbon capture and storage technology, and the use of alternative fuels such as low carbon (LNG, LPG, methanol), zero carbon (hydrogen, ammonia), and carbon neutral fuels (biofuels)," according to the paper.