INTERVIEW: IMO's net-zero 2050 needs more green fuels at acceptable price

Shipping companies need to have sustainable fuels of sufficient volumes at "a price" that wouldn't hit the global economy to reach industry-wide decarbonization targets, International Maritime Organization Secretary-General Arsenio Dominguez said, highlighting the challenges in eliminating maritime greenhouse gas emissions.

The IMO, a UN agency tasked with regulating maritime transportation, has set targets to reduce life-cycle GHG from international shipping by 20%-30% by 2030 and by 70%-80% by 2040 against 2008 levels before transitioning to net-zero shipping close to 2050.

"Until we have the amount of fuel and also a price that is not going to have a negative effect on the world economy, we [would] still [be] going through this transition," Dominguez told S&P Global Commodity Insights in an interview.

Conventional, oil-based marine fuels dominate the current bunker mix, and many shipping professionals said limited availability and high prices of "green" fuels produced via sustainable means could delay maritime decarbonization.

In their latest forecast, Commodity Insights analysts expect the world's marine energy consumption to reach 7.98 exajoules, of which just 33% are low-carbon energy. This would be insufficient to achieve net-zero emissions.

The shipping industry has been "very supportive" of IMO goals but some issues "are beyond the control of the IMO or the shipping industry," said Dominguez, adding that: "We're ... relying on others to do their part and start producing these fuels."

GHG tax

Green fuels currently could be at least two to three times more expensive than fossil fuels due to small availability, according to Commodity Insights data, and analysts said a GHG tax would be required to narrow the price cap.

IMO member states are preparing a report on the assessment of how their proposed technical and economic measures would affect less developed countries, which is expected to serve as the main reference for them to shortlist the measures in the 82nd Marine Environment Protection Committee meeting this autumn, before finalizing them as new regulations in 2025 for implementation from 2027.

Lloyd's List reported initial findings suggested a GHG levy of $100/mtCO2e on bunker consumption could be most effective in reaching IMO goals, but also most expensive as it would push up the global shipping costs by 28% by 2030.

When asked about the report, Dominguez said the assessment is not yet finalized and he remains confident that the IMO would find the "right tools" that can help hit the net-zero target and not "detrimental" to member states' economies.

"But the fact that [sustainable] fuels are not readily be available creates an additional challenge for us," said Dominguez, adding that IMO is also developing safety guidelines for new fuels like ammonia.

Ammonia is highly toxic and corrosive and ships burning this fuel are only expected to start operations in the latter part of this decade, but many analysts believe it has a strong potential as a future fuel with expanding renewable energy aiding its scalability.

Commodity Insights data shows ammonia bunker demand would reach 2.5 million b/d in 2050 versus zero currently, making it potentially the largest low-carbon energy source.

"We are carrying out the analysis on the safety because the last thing that we want is to introduce a fuel" that is "detrimental to the environment" and "harmful" to seafarers and onshore personnel handling bunker facilities, according to Dominguez.

Geopolitics

Separately, Iran-backed Houthi militants have reportedly launched more than 100 attacks on merchant ships around the Bab al-Mandab Strait since the Israel-Hamas war broke out on Oct. 7, claiming to support the Palestinians.

This has driven most ships to take the longer routes around Africa from the Red Sea and led to seafarer casualties, and the sinking of two ships. The IMO has condemned the attacks and provided guidance on safe transits.

Other UN institutions, such as the Security Council, would be better positioned to deal with the "root cause" of Red Sea crisis that is related to geopolitics, but "we focus on what actions we can take," Dominguez said.

Also, Russia has turned to the "shadow" fleet to maintain its oil exports outside of the G7 price cap regime. Industry participants said such ships, which accounted for 10% of global fleet based on a joint study of Commodity Insights and S&P Global Market Intelligence, tend to be older, less maintained and insured, and adopt dubious practices like falsifying flag registry and automatic identification system signals to disguise trade patterns.

While the IMO has passed a resolution calling on port, coastal and flag states to implement its regulations to counter fraudulent behaviors, Dominguez suggested the action was aimed to maintain safe operations and protect the environment rather than enforce Western sanctions.

"When it comes to sanctions, we only follow the sanctions of the UN," Dominguez said. "Measures introduced by countries by regions ... those are not something that guides our work or our decision."