This means that we only have the rest of this decade to develop and scale solutions that are both climate neutral and profitable in the market.
The government can help increase the pace and scope of the fuel revolution. The industry lists high investment costs, lack of technology and availability of alternative fuels as the biggest barriers today.
Over 90 percent of shipping companies say that they believe they will be climate neutral by 2050, in line with the Norwegian Shipowners’ Association’s climate strategy.
82 percent believe they will cut climate emissions by 50 percent per unit by 2030 compared to 2008, in line with the Norwegian Shipowners’ Association’s climate strategy.
International climate requirements affect Norway
In order to reduce emissions while maintaining the industry’s international competitiveness, the Norwegian Shipowners’ Association believes that shipping should be subject to a global CO2 tax on fossil fuels through the IMO. Fees paid should go to the establishment of a CO2 fund for green initiatives in the industry, and to reduce the price difference between fossil fuels and alternative climate-neutral energy carriers. In order to drive the green shift in shipping, we are completely dependent on coordinated international climate measures.
EU climate ambitions reaching reality
A global tax applied equally to all contributes to a level playing field and predictability for the industry. A global CO2 fund for restructuring in the industry would also contribute to increased demand for climate technology, a field in which Norway is already well advanced. This also opens up new export opportunities. The industry has proposed this in the IMO through the International Chamber of Shipping (ICS) and is working to gain support from IMO member countries. Unfortunately, the Norwegian authorities have so far not supported the industry’s proactive proposals for measures for a green shift.
In Europe, the Norwegian Shipowners’ Association supports the goals of the EU’s Green Deal and has participated in the design of measures now under review in the Fit for 55 package. When shipping is included in the EU’s quota trading system, it is important that fees collected go toward green initiatives in the maritime sector.
Alternative fuels must be as profitable as fossil fuels
Today, traditional fuels are significantly cheaper than more climate-friendly alternatives. In an industry facing fierce competition, it is crucial that the price difference between fossil and climate-friendly fuel be reduced if the green shift is to be accelerated. Therefore, there is a need for a CO2 fund that can accelerate the development of new technology and alternative forms of energy in the maritime industry.
More than six out of ten shipping companies reply that they are willing to pay more for climate-friendly fuel, and among short sea shipping companies the number is eight out of ten.
Assets from the fund should, among other things, be used to finance contracts for differences, a scheme where, in a transitional phase, companies receive grants covering the price difference between traditional fuel and fuels such as hydrogen or ammonia.
This will help more companies to use alternative fuels, which in turn will lead to more rapid development of infrastructure and production of alternative fuels
Contracts for differences can make all the difference
The industry has highly positive experience in reducing NOx emissions through technology development supported by the NOx Fund. The Norwegian Shipowners’ Association believes that a supplementary agreement should be prepared for the NOx fund so that this fund structure can also be used to finance CO2-reducing measures.
The fund should be financed by part of the income from the increased CO2 tax. In addition, money that Norwegian shipping companies will pay into the EU Emissions Trading Scheme (ETS) and which revert to the Norwegian authorities, should be used as financing. Using funds that the industry pays through these fees will indirectly mean that the industry finances its own green shift.
CO2 fund the next step on the road to a green shift in shipping
Cooperation between the government and industry is key
The government has stated that they will make Norway a driving force for a more ambitious international climate policy, among other things by establishing mutually binding climate partnerships between the industry and the government, and by launching a green restructuring package for climate-friendly ships.
Sigrun G. Aasland: All ships to zero
The Norwegian Shipowners’ Association welcomes these efforts. There is a great need to review the toolbox and the policy instruments in order to intensify climate work in the Norwegian maritime sector. We aim to contribute constructively to the work on the restructuring package.
Enova must be equipped to enable scaling of technology
Developing new climate solutions is very capital intensive. Enova has been an important source of funding for pilot projects in the hybridization of maritime transport and the offshore fleet. However, Enova lacks effective and targeted schemes for scaling up solutions that are reaching market maturity.
It is a challenge today that technologies are considered mature for the market before they actually are. In reality, loss of support slows down the green shift because cargo owners, operators and customers are not willing to pay the additional cost for new technology and alternative fuels.
Ammonia is the preferred energy carrier when shipping companies are asked which solutions they would use to achieve emissions targets by 2050. Almost 60 percent reply that they will consider ammonia, compared with last year’s 47 percent. By comparison, hydrogen has fallen from last year’s 54 percent to 45 percent this year.
This means that new technologies are not being scaled up, and that fossil energy outperforms greener solutions. This can be resolved by the authorities requiring operators and product owners to use low or zero-emission solutions for shipping, as well as by introducing contracts for differences to even out the price gap between conventional and alternative fuels.
In addition, Enova’s mission and mandate must be revised to allow support for new technologies to be extended beyond today’s scheme, until the technologies are in reality mature for market and able to outcompete less climate-friendly solutions.
Call to action:
- A mutually binding climate partnership must be entered into between the maritime industry and the state
- There is a need for a CO2 fund to develop new climate solutions for shipping
- Contracts for differences must be introduced to reduce the price difference between alternative and fossil fuels
- The IMO must establish a global CO2 tax for shipping, where funds are channelled back to green initiatives in the industry
- The terms of risk and top up financing loans granted for ship financing should be extended, and the risk and top up loan schemes should be lifted out of the policy instruments and placed in the banking system through government guarantee schemes