Up to four floors high, more than 80,000 hp – the engines of large container ships are real giants. They power the ships with which smartphones and T-shirts from China and Vietnam arrive in Hamburg and Rotterdam. Ten years ago, the giant freighters were still attracting fascinated glances, but today shipowners are increasingly faced with the question of what impact freighters’ emissions have on the climate.
This is also increasingly becoming a problem for ship insurers, who are under pressure to only do climate-friendly business. The insurance of floating dirt throwers hardly fits this. At the annual meeting of the International Transport Insurance Association (IUMI), Association President Richard Turner therefore urged the industry to make more efforts in terms of climate protection. Otherwise, investors could soon demand that ships with a poor climate footprint no longer be insured.
Shipping is clearly lagging behind other industries in turning away from fossil fuels. It was excluded from the 2015 Paris Climate Agreement. The International Maritime Organization (IMO), a UN sub-organization, is to find the way to climate neutrality for shipping.
Little has happened so far, the resistance of some states is too great. “In the IMO there is currently a contradiction between what is feasible and enforceable and what is necessary,” said IUMI General Secretary Lars Lange. But the pressure is increasing. The EU has announced that it will include shipping in emissions trading. That would make the fuel more expensive. The US under Joe Biden has also taken a look at the industry: by 2050 it should be completely emission-free, demands climate officer John Kerry.
The heavy oil in the tank contributed to the bad reputation
The shipowners like to argue that the CO₂ footprint of shipping is relatively small – in view of the fact that 90 percent of goods worldwide are transported by sea. The European Maritime Safety Agency and the European Environment Agency have done the math: According to them, ships were responsible for 13.5 percent of all greenhouse gas emissions from means of transport within the EU in 2018 – almost on par with air traffic with 14.4 percent.
The main fuel contributed to the bad reputation of shipping. Until recently, heavy fuel oil was mostly burned in the two-stroke engines of large cargo ships. The tough, black mass is left over from oil processing and is full of pollutants. In addition to gases that are harmful to the climate, the emissions also contain a lot of sulfur. After a long struggle, the IMO was able to decide on measures here. Since the beginning of 2020, ships have only been allowed to run on low-sulfur fuel instead of heavy fuel oil or have to use filter systems.
Decarbonising shipping is difficult. It is still unclear which climate-friendly fuel will prevail. This is not an easy situation for shipowners, because ships have a lifespan of around 30 years. If you bet on the wrong horse now, you will regret it later. Recently, some shipping companies have opted for liquefied natural gas (LNG). Hamburg-based Hapag-Lloyd, for example, has just ordered several ships that can run on both natural gas and diesel. However, this fuel has now also fallen into disrepute: environmental organizations criticize that the climate balance is as bad as that of conventional fuel. The Danish shipping company giant Maersk is currently experimenting with biodiesel, methanol, ammonia and lignin, which is obtained from wood chips. Ammonia and methanol in particular are considered to be very promising in the industry. Hydrogen drives are also being discussed.
New technologies also mean new risks for insurers
The insurers are faced with a dilemma here. On the one hand, they want and have to promote change. On the other hand, the use of new technologies also means new risks for them. IUMI President Turner therefore emphasized that new drive methods must be tested. Security must be guaranteed. Some of the new fuels, like the toxic ammonia, are not without their risks. In addition, there is still no empirical data on the durability of engines that run on alternative fuels. For example, there are signs that low-sulfur diesel causes more engine damage.
Maersk has now rushed ahead to solve the dilemma. The world’s largest shipping company has ordered eight container ships in Korea that can run on both conventional fuel and methanol. “This is a very big step forward for us,” said Maersk expert Simon Bergulf. But it has not yet been clarified how Maersk intends to secure the supply of green methanol. The company relies on its market power. “We believe that by ordering the ships we can break the chicken-and-egg problem,” said Bergolf. For operators who prefer to wait, he had warnings: “Some shipping companies will disappear from the market, either because they made the wrong decisions or because they did nothing,” he says. The Maersk man is hoping for pressure from outside the industry. “Hopefully that will also come from the insurers.”