Swiss commodity trading house Trafigura has released groundbreaking research highlighting the vital role that hydrogen-based fuels can play in decarbonizing the shipping sector.
The study emphasizes the potential of countries in the ‘Global South’ to produce competitively priced green ammonia and green methanol, meeting the growing demand for low-emission fuels worldwide.
Trafigura states that while technologies like onboard carbon capture and biofuels have their place, true deep decarbonization of shipping can only be achieved by transitioning to low-emission fuels. The utilization of LNG as a marine fuel, coupled with innovative approaches such as decarbonizing liquefaction, can reduce greenhouse gas emissions by approximately 20% to 25%. However, this falls short of the comprehensive and rapid decarbonization required by society.
The research reveals that the ‘Global South’ has the capacity to produce nearly 4,000 exajoules per year of competitively priced green hydrogen, surpassing the projected annual shipping demand of 20 to 40 exajoules. Regions in Africa, Asia, and South America show significant potential for producing large volumes of electrofuels like methanol and ammonia to meet future shipping industry demand. This presents an opportunity for these countries to develop new export industries and create numerous skilled jobs.
The study draws on the work of IRENA and identifies nations well-positioned to produce green hydrogen, including Argentina, Brazil, Chile, Colombia, Egypt, India, and Morocco. These countries possess abundant renewable energy sources that can be harnessed for green hydrogen production, a crucial feedstock for electrofuels.
Margaux Moore, co-author and Head of Energy Transition Research and Venture Investments at Trafigura, emphasizes that developing these opportunities depends on the shipping industry’s ability to agree on ambitious decarbonization targets and establish a global price on carbon for marine fuels.
The whitepaper also highlights the cost competitiveness of electrofuels produced in the Global South. Production costs for electrofuels using green hydrogen in this region are estimated at around USD 750 per tonne, which is significantly lower than the USD 1,200 to USD 1,500 per tonne in Europe. Even at USD 4.00 per kilogramme of green hydrogen, electrofuels produced in the Global South remain 20% cheaper than those in Europe. However, a price on carbon is crucial to level the playing field and ensure fair competition.
To realize this potential, it is essential for the International Maritime Organization (IMO) to set ambitious decarbonization targets and implement a global price on carbon for marine fuels. The IMO’s revision of its GHG strategy in 2023 presents a crucial opportunity to establish a zero or minimum net zero greenhouse gas emissions target by 2050, along with ambitious goals for 2030 and 2040.
Experts argue that scalable zero-emission fuels should make up at least 5% of the bunker market by 2030, rising to 27% by 2036, aligning the industry with the Paris Agreement. The paper’s authors believe that achieving 5% zero-emission fuels in the shipping industry by 2030 is realistic, but immediate action and the introduction of a mandatory carbon levy by 2025 are necessary to bridge the price gap between current fuels and hydrogen-derived alternatives.
The trajectory of the shipping industry’s decarbonization relies on decisive action from the IMO and the adoption of science-based decarbonization targets. By accelerating the development of low- and zero-emission fuels and establishing global fuel standards, the industry can attract the investment needed to transform its infrastructure, facilitating large-scale retrofits and the construction of new ships.
The time to act is now. Delaying action will only increase the eventual cost of decarbonization and hinder the industry’s journey towards a sustainable and resilient future.
