Regulations of the reduction of carbon emissions from international shipping are increasingly stringent, with the International Maritime Organization (IMO) targeting net-zero emissions for the global shipping sector by 2050. In a proactive move to accelerate green transition in the shipbuilding industry, China has for the first time set a target for vessels powered by green energy sources, such as LNG and methanol, to capture a share of more than 50% in the international market by 2025.
Key Highlights:
- By 2030, the shipping industry will need about 17 million tonnes of oil equivalent in carbon-neutral fuels. China will focus on the promotion of LNG, methanol, and ammonia as clean fuels for ships.
- In 2023, worldwide orders for vessels powered by methanol have quadrupled compared to 2022. Post-2025, it is projected that dual-fuel engines will be adopted in half of new ship orders.
- The IMO mandates a minimum reduction of 40% in carbon emission intensity across the shipping industry, with the potential for more stringent regulations in the foreseeable future.
Carbon-neutral fuel demand estimated at 17m mt of oil equivalent by 2030
The shipping industry's demand for carbon-neutral fuels is expected to reach 17 million tonnes of oil equivalent by 2030, accounting for 30%-40% of the anticipated global supply, according to DNV, a Norway-based classification society and advisor for the maritime industry. Therefore, it is vital to promote the mass production of green synthetic fuels in the next 10-20 years.
Currently, taking into account factors such as the upstream supply capacity, technological maturity and cost efficiency of different fuels, the preferred options for marine fuels are, in order, LNG, methanol, biodiesel, hydrogen and ammonia.
In China's effort to promote the clean fuels for ships, LNG is the top priority, followed by methanol and ammonia, with ongoing exploration of LPG, biodiesel, ethanol, hydrogen, etc.
Tasks for Developing Clean Marine Fuels
Methanol-powered ship orders in 2023 quadruple compared to 2022
The relatively mature technology for methanol production and the easy process for refueling and storage infrastructure retrofit offer a cost advantage to the adoption of methanol in the short to medium term. In 2023, a total of 298 new ships powered by alternative fuels were commissioned globally, with methanol-powered vessels comprising 138, surpassing the 130 ships running on LNG. This represents a fourfold increase in methanol-fueled ship orders compared to 2022.
Dual-fuel vessels are gaining increasing favor due to uncertain approaches for adopting alternative fuels. Global maritime consultancy Drewry forecasted that half of newly ordered vessels after 2025 will adopt dual-fuel engines, many opting for methanol as fuel.
IMO mandates at least 40% drop in carbon emission intensity
In July 2023, the IMO revised its strategy for reducing greenhouse gas (GHG) emissions from ships. Future emission reduction targets may still be subject to adjustments, with the likelihood for more stringent regulations.
Previously, the IMO included the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) in the "International Convention for the Prevention of Pollution from Ships", and put them into effect on 1 January 2023. Ships consistently rated as D or E for three years must submit an optimization action plan. Before January 1, 2026, revisions to EEXI and CII will take place, and punitive measures may be introduced by then.
As of November 2023, 96.1% of vessels, including those on order, utilize heavy fuel oil. With the average fleet age at 13.64 years, the need to replace aging ships is approaching.
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Edited by Navy Liu: liuchuanjun@mysteel.com