The deadline is looming. Global shipping has just less than three decades to get to the ambitious targets set by the International Maritime Organization (IMO) for carbon emissions to be halved from 2008 levels and eliminated within the century. Yet, there is still no clear direction in sight. The question is: can we actually do it?
speaks to Bo Cerup-Simonsen, Chief Executive Officer of the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, who shared why getting to zero is possibly the biggest challenge the industry is facing in all its history – though not insurmountable – and his vision for its future.
Maritime players have agreed in recent years that decarbonisation is a priority – this has been a key focus at this year’s Singapore Maritime Week (SMW) as well – but change appears to be slow. What is the hold-up?
Shipping is a well-established, well-functioning industry and business which involves planning for the long-term. It’s very robust. It’s resilient. We’ve seen that during the pandemic – that it can really provide global infrastructure in extremely difficult times.
I believe the industry has also shown over and over again that it is willing to change, and it can change. It's just that the change this time around is deeper and wider than we have seen for decades, maybe ever. The amount of change that we’re talking about and the shortness of the timeline makes it a very challenging task.
So what is holding us back? You need to look at the key decision-makers in the public and private sectors. In the private sector, most companies – big or small – have not set a zero-carbon target. They don’t have a decarbonisation strategy and apparently do not see the immediate business case of going beyond energy efficiency, that is, they are uncertain if their customer will pay the additional bill – the so-called green premium – of switching to green fuel. Likewise, in public sector, if countries could just agree on further regulation in the IMO, that could also accelerate the transition. But it is extremely hard to reach consensus in the IMO because countries have different perspectives of how and when decarbonisation should be implemented.
So with the current urgency of solving the challenge and the ambiguity of the pathways ahead, this is where you need strong leaders to show the way. And fortunately, there are such strong leaders in public and private sectors acting now. We are seeing some cargo owners demanding green transportation, ship owners investing in ships that can run on green fuels, equipment manufacturers developing engines and cleaning systems, and energy companies investing to produce the green fuels. This leadership will show the way – inspiring and informing others in the industry to move, and accelerating implementation of standards and regulation.
And I believe that it is possible for many more companies in the maritime industry to get going on a decarbonisation pathway without risking the company. You don’t have to ‘put it all on green’ but can develop a transition strategy, limiting the risk with a gradual change towards decarbonisation. In fact, to not do anything would be to pose a risk to the company, when we are facing a future where you can expect regulators, customers, employees, financiers, insurance, and other stakeholders to demand decarbonised shipping.
The timeline, as you said, is such a short one. Yet, tens of thousands of ships will continue to sail on conventional fuels even in the next 15 to 20 years. So can we do it?
Mr Cerup-Simonsen: Yes, we can. From a social, technical, and economic perspective, it is the right thing to do, and it's possible to do it. Once the sector decides to do it, we're down to implementation. How do we do it? It is a chicken-and-egg problem. If we don’t do it in symphony, or if no one in the value chain takes the first step without a proven business case, it will not happen.
It becomes more tricky because there are many players in this and there are many ways of doing it. The sector is not really in a crisis state-of-mind, where you just need to find a solution immediately or face unbearable consequences. So stakeholders are now looking for a new robust system where everybody can see a benefit, and that has not crystallised yet. For example, how will the developed and less developed countries participate? That’s important because if it is not an equitable transition, we will not get everyone on board to agree to global regulations. We will be missing an opportunity to act for the greater good, and it will probably not be a robust transition.
We also need to find a way to drive energy efficiency to the next level. Some developments at the IMO include the CII (Carbon Intensity Indicator), which is one attempt to do that by regulation. Digitalisation can also play a huge role, where you use data and analytics to move thousands of ships in a more energy-efficient manner. Some of the segmentation that has historically been in shipping, where you have an owner and an operator and a charter, can be changed by the use of digital tools.
But my point is that it’s not only just a piece of technology. It's really about the way we do the business. I would say that if we're smart at this, we could probably reduce 20 per cent of the emissions from shipping just by being smarter at how we use the ships. Of course, it doesn't take shipping to zero. We need also to get going with the uptake of green fuels. We need to find opportunities where it’s possible to get going, where customers are willing to pay a small green premium for transport of their goods, shipowners are willing to retrofit and prepare the ships, and energy companies are willing to invest in fuel production plants. We need to get going. This doesn’t have to be big-scale initially. The objective is to demonstrate that it’s possible and we can use those learnings to see how we can scale this, either through the technologies or the standards and regulations.
We are going to work on green corridors
based on the fuels and the technologies that we have today. We don’t need any scientific breakthroughs to do this. It’s really about initiating and getting going with what we have currently. So that, I think, is extremely exciting.
Collaboration is another thing that speakers at SMW stressed will be key to making decarbonisation happen. For an industry that is used to opacity, how realistic is this?
The Center I’m leading is a very good example of that. I was concerned about (collaboration) when we started the Center because it was a key part of our vision – and also one of the main risks. Now, two years down the line, we have 25 partners that are sharing data.
Of course, you cannot be naive about collaboration, because competitors can't share legal or commercial data and they don’t want to share proprietary data that gives them a competitive edge. You can’t just think, we'll share everything and get together and have a good time. That's not how it works.
So at our Center, we have very professional setup around data management, and we’re well aware of the need for both data security and confidentiality. All our partners need to feel safe. But even within those boundaries, there’s huge opportunity to do work together, share data, develop new concepts, work on new standards, demonstrate new ways of doing business – energy companies, ports, shipowners, and technology providers are all coming together to do this. You need processes, you need a culture, you need to have like-minded partners, and you need the leadership of all partners to really want this.
As CEO of the Center, what’s the biggest challenge you’re facing in your current mission?
Many people acknowledge that we have a climate crisis today – but most are not at the point where they will do anything to solve it. Many have a business where they feel they don’t really have the freedom to start moving on this.
Because there’s a lot of ambiguity in front of us, you have to be humble towards the people who have stretched balance sheets and long-term investments. They have pension money, for example, tied up in certain investments with certain promises. But it is also a risk to continue as if we don’t need to change – financial institutions are increasingly demanding investments to be oriented towards decarbonisation.
I think the biggest challenge lies in identifying stakeholders that can and will make a change, working with them to create a robust transition pathway, and creating confidence around how we can do this. Change will happen at a different pace; some can move rather fast, some move slow, but everybody can contribute.
Fortunately, there are leaders who are leaning in and starting to invest to make the change. That's the really encouraging part here – that you see very visible and very strong leadership leaning in. That is a big change from say 10 years ago, where the priorities were more about improving efficiencies.
What does the future of shipping look like to you?
So my kids are now 12, 19, and 22. They have realised that we have a climate crisis and they are looking to us to solve it. For me, the ideal situation is being able to tell them 10 years down the line that we now know what the solution looks like, we have visibly initiated the transition, and it’s now a matter of scaling it up and continuing on this path.
Then 20 years from now, when I'm retiring, my dream is to see shipping not only decarbonising on its own but as a part of global systems that are far into the transition. We are not yet at zero at that point, but emissions have peaked. We are well on the way to achieving the net zero emissions pledges that have been made – they’re actually coming alive.