Opportunities for Brazil in the Sector of Maritime Transport
New round of discussions for the reduction of greenhouse gas emissions at the International Maritime Organization (IMO)
By Lavinia Hollanda
The International Maritime Organization (IMO), in London, had a new round of discussions of specific measures for the reduction of greenhouse gas emissions in maritime transport. These discussions took place within the ambit of the commitment entered into in April 2018 by the international maritime industry, which undertook to reduce greenhouse gas emissions by half by 2050, in comparison with the 2008 levels. This commitment – called the Initial Strategy – establishes the definition by the IMO member countries of measures to be adopted for the decarbonization of maritime transport. Today, the sector is responsible for about 3% of global greenhouse gas emissions – which is equivalent to more than the total emissions of some developed countries, such as Germany, for example.
The most immediate concern, however, is aimed at the compliance with the reduction targets for sulfur emissions, from January 1, 2020. This is because, according to another commitment made by the IMO members (IMO 2020), ships will be obliged to reduce their sulfur emissions by over 80%. In this scenario, the type of crude oil that produces Brazil, with a low sulfur content, will be valued more in the international market.
Despite being indicated as a possible alternative for the reduction of sulfur emissions in the short and medium term, the use of LNG in maritime navigation is not compatible with the achievement of the decarbonization targets established in the IMO Initial Strategy. LNG provides limited reductions of greenhouse gases, after accounting for the methane emissions in its production process. In other words, the methane emissions in the production chain of LNG - and in the engine - are high and neutralize the potential gains in the reduction of CO2 emissions by switching to LNG
The economic aspect is also important. The conversion of the engines of existing ships to LNG would require significant investment. A study by the Oxford Institute for Energy Studies, published in early 2019, estimates that these costs would be between US$ 6 and 22 million, depending on the size of the ship. For new ships, the argument is similar: vessels usually have a long life - about 25 years, sometimes more, which makes them long-term investments. In a context of the evolution of engine technology and clean fuels, combined with the definition of targets for the reduction of emissions becoming increasingly bold by the IMO, LNG may be short lived as a transition fuel for the reduction of emissions of maritime transport. Therefore, it makes no economic sense to invest in new LNG ships, especially for long-range international navigation.
In fact, decarbonizing the sector of maritime transport will not be an easy task. Maritime transport is the basis of international trade, and over 80% of the transport of goods is performed by ships. Any changes in the sector can have an impact on global trade, affecting the balance between countries. There are still technological challenges, which involve the development of new propulsion technologies and new designs, besides the research of new clean fuels that are suitable for navigation and that can be commercially viable, on a global scale.
However, recent studies and experiences have brought significant optimism to the industry regarding the challenges of the reduction of greenhouse gas emissions in ships. One of these initiatives was the launch, in September this year, during Climate Week in New York, of an alliance between the companies from the maritime sector, energy and finance, with the support of international governments and organizations – the Getting to Zero Coalition. The coalition announced a voluntary commitment of putting into operation, by 2030, long-haul vessels with zero emissions, supplied with clean alternative fuels.
On another front, a recently published study by the navigation company Maersk has shown that, based on market projections, the best positioned alternatives for the research and development of new fuels for the maritime sector are alcohol, bio-methane and ammonia. According to the study, these three fuels are the most promising, with projections of relatively similar costs, but different challenges and opportunities.
The results disclosed by the study indicate good news for Brazil. Due to our experience with biofuels – and also because of our renewable matrix –, Brazil has the potential to provide sustainable technological solutions for the decarbonization of the maritime transport sector. Two of the main sectors of agricultural products could benefit from the current global trend towards cleaner standards of maritime transport: biodiesel, produced mainly from soybeans, and ethanol, produced mainly from sugarcane. In order to contribute in this way to the decarbonization of the sector, however, this production must be sustainable. These possible comparative advantages of Brazil in the production of fuels with zero emissions for navigation are the object of analysis of a study comissioned by the Institute for Climate and Society together with the Institute of Research in Engineering of UFRJ (Coppe).
According to the International Energy Agency - IEA, the market of fuels for navigation today is 300 million metric tons per year, 100% in fossil fuels – or 5% of the global oil demand. This represents an amount of over US$ 150 billion per year. This market is set to have a standard of much cleaner fuel from next year, due to the limits adopted by the IMO for the sulfur emissions. In the light of the decarbonization targets agreed in 2018, new possibilities of the substitution of fuels for maritime transport should arise.
In order to enable the achievement of this goal by 2050 or earlier, it is important that the short-term targets for the decarbonization of the maritime sector are sufficiently ambitious to encourage research and to accelerate the development of new maritime fuels.
One thing is certain: the ships and the fuels will change significantly over the next few years. The navigation industry and the maritime transport sector around the world will have to adapt, and the agents from the sector have already begun to think about which fuels are suitable for decarbonizing. It remains to be seen how Brazil will take advantage of these opportunities.
Lavinia Hollanda is the executive director of Escopo Energia and consultant of maritime emissions of the Institute for Climate and Society (iCS). This article was originally published in Portos e Navios.