Lloyd’s Register Maritime Decarbonisation Hub deploys a green corridor cluster’ concept to accelerate the decarbonisation of shipping and bring together stakeholders across the shipping and clean fuels supply chains to kickstart the development of regional hubs.
Shipping is a relatively efficient mode of transport, consuming far less energy per kilo of goods transported than trains, lorries or planes. However, it is still responsible for 3% of the world's greenhouse gas (GHG) emissions. As shipping is considered one of the ‘harder to abate’ sectors, its share of emissions is expected to increase relative to the other sectors, putting significant pressure on the industry to decarbonise in line with the Paris Agreement.
A study by Lloyd’s Register (LR) has shown that zero-emissions vessels will need to enter the global fleet by 2030 for the industry to have a chance of achieving its decarbonisation ambitions by 2050. The International Maritime Organization (IMO) greenhouse gas (GHG) emissions reduction strategy has set new and more stringent goals to reach a net-zero by or around 2050. Among those goals, there is the target to have 5%, striving for 10%, of zero or near-zero carbon emissions fuel usage in international shipping by 2030.
As regulations are being discussed and agreed in the coming period, pressure is increasing on key stakeholders to demonstrate that these targets can be achieved and that now is the moment for first movers to act. This includes the private and public sectors. For example, a number of states have signed the Clydebank Declaration to kick off green shipping corridors which are a key example of first movers in shipping decarbonisation.
The Need for Collaboration to Bridge Fuel Cost Gaps
However, first movers face a significant cost gap. A recent report by UNCTAD (United Nations Conference on Trade and Development) indicates that scaling up fuel production, distribution and marine bunkering infrastructure to supply 100% carbon-neutral fuels by 2050 would require an estimated annual investment of between $28 billion to $90 billion.
Zero emission ships, therefore, will be more costly to operate than fossil fuel powered ships because zero carbon fuels are going to be more expensive. This means we need to ensure that the cost gap is closed with supporting policies, incentive mechanisms and risk sharing across the value chain.
To bring down costs, the industry must work together in partnership. A concerted effort between private and public partners will reduce the cost gap for zero-carbon fuel deployment and de-risk investments through joint ventures and alliances. But the scale of the challenge means that decarbonisation must involve the entire supply chain of shipping - from fuel suppliers scaling up production of zero-carbon fuels and manufacturers designing new engines, to port operators investing in new facilities and bunkering services for zero-emission vessels.
The Silk Alliance – a Regional Green Corridor Cluster in Action
The Lloyd’s Register (LR) Maritime Decarbonisation Hub, a joint initiative between Lloyd’s Register and Lloyd’s Register Foundation, an independent charity that promotes safety and education, has created the Green Corridor Cluster – the Silk Alliance, -- which highlights what can be achieved through stakeholder partnerships. The Silk Alliance brings together members representing key roles in shipping’s value chain, with a fleet of containerships trading across the Indian and Pacific Oceans that predominantly bunker in Singapore today – the world’s biggest bunkering port.
The crucial factor of a Green Corridor Cluster lies in its capacity to consolidate enough demand for new fuels in a captive area so that the fuel supply infrastructure can be tailored to meet this demand. More than 3 million tonnes of clean methanol and a minimum of 280,000 tonnes of clean ammonia will be required by 2030, to meet the demands of 137 ships in this Green Corridor Cluster, aligned to the Alliance’s implementation plan with potential for ammonia to scale ten-fold from 2030 to 2035. The Alliance continues to explore how it can aggregate demand further and to include other ship types, fuel producers and governments.
The term ‘green corridor cluster’ highlights the regional scope of the Silk Alliance initiative, currently centred in Singapore, with the potential to expand to several ports through collaboration amongst members to expand and scale up the demand signal for new fuels further. The 19 current members of the Silk Alliance encompass a wide spectrum of activities and responsibilities including ship ownership, construction and management, fuel production, distribution and bunkering, engine manufacturing and finance.
Creating an Implementation Plan
The member organisations of the Silk Alliance have now published an implementation plan and shared vision for the multi-year programme with a timeline of milestones through to 2030. This is a major part of the consensus-building process for this Green Corridor Cluster that will help to steer the Alliance’s focus.
As part of the programme, the workstream on the fleet and fuel demand has focused on estimating the aggregated demand for the Silk Alliance fleet based on the endorsement of the implementation plan and continues to explore how this scales further. This is in turn linked to the fuel supply workstream with an overall objective to secure consensus on fuel carbon intensity levels and fuel cost gap estimations. Both workstreams fed into the third workstream on finance, which aims to identify the scale of the cost gap as well as the mechanisms that could bridge this cost gap across both the fleet and fuel supply.
Fostering an Inclusive Transition
The Silk Alliance has continued expanding its regional partnerships throughout 2023 as the initiative proceeds onto its implementation phase, with the Singapore Maritime and Port Authority (MPA) coming on board, marking a significant step forward towards deeper public-private sector collaboration between maritime industry players and Singapore’s port regulator, in addition to new members from the fuel supply side to better understand the fuel infrastructure considerations.
In order to activate sharing of knowledge, capability and investment into zero emissions shipping in the wider region, the MPA and the IMO are partnering with the LR Maritime Decarbonisation Hub as part of the IMO’s NextGEN-GreenVoyage2050 initiative, which looks closely at the role of routes-based action plans specifically for the Asia Pacific context and the inclusion of Least Developed Countries (LDC) and Small Island Developing States (SIDS), which are often at the frontline of the impact of climate change, despite carrying little historic responsibility for causing it.
“The development of these routes-based action plans requires the engagement of a broader stakeholder community across the region and coordination among regional governments to establish energy clusters – both as demand centres and as energy producing hubs”, said Ahila Karan, Senior Decarbonisation Analyst at LR Maritime Decarbonisation Hub.
To foster collaboration and partnership among different actors and sectors, the LR Maritime Decarbonisation Hub has developed a tool to rank ports with potential to unlock high impact investments that meet not only climate goals but also improve other environmental indicators together with well-being of local communities. “Using the Indo-Pacific region as a case study, this port ranking system developed in partnership with the Environmental Defense Fund and Arup, will help identify suitable locations to kickstart coordinated efforts to establish sustainable first movers initiatives and accelerate the implementation of zero emissions shipping including regions of the Global South”, said Charlie McKinlay Decarbonisation Analyst at LR Maritime Decarbonisation Hub.
From Green Shipping Corridors to Cluster and Regionalisation
“The LR Maritime Decarbonisation Hub has been working on first movers and green corridor initiatives for a while and we believe that the concept of green corridors has since broadened to become an all-encompassing phrase capturing different routes that are not limited to a single port-to-port routes,” commented Dr Carlo Raucci, Programme Lead at the LR Maritime Decarbonisation Hub. “Within green corridor clusters are highly dense shipping routes as well as routes required to connect bunkering hubs to energy hubs, in both the domestic and international shipping context.”
The aim of a green corridor cluster is to ultimately facilitate co-ordination between shipping vessels and their refuelling infrastructure within the value chain of specific trade routes between major ports in a specific region where zero-emission solutions can be well supported by regulators and policymakers. Within a green corridor cluster, the ultimate goal remains to kickstart the adoption of long-term solutions that will be vital in transforming the maritime sector.
Creating the Clean Fuel Supply and Demand of the Future
“While the task ahead for shipping’s decarbonisation is daunting, the best approach is 'one bite at a time' - the inter-connected shipping value chain requires that all components gradually develop to support each other,”
- Charles Haskell, Director at LR Maritime Decarbonisation Hub.
Based on the experience of the Silk Alliance, we believe that development of “clusters” for zero emissions shipping and regionalisation of these clusters is an appropriate approach. Once well-coordinated regional green corridor clusters are established at scale, the regional spillover demand and supply of zero to near-zero fuels will generate the momentum needed for shipping to fulfil its 2050 zero emissions goal, on time and on target. Through other projects that we are developing, such as the port ranking initiative with the Environmental Defense Fund and Arup, the LR Maritime Decarbonisation Hub continues to explore new ways to support the inclusion of regions in the Global South in ‘first movers’ initiatives to ensure a more equitable and just transition throughout the maritime sector.
About the Lloyd’s Register (LR) Maritime Decarbonisation Hub
The LR Maritime Decarbonisation Hub is a joint initiative between Lloyd’s Register Group and Lloyd’s Register Foundation. Our mission is to accelerate the sustainable decarbonisation of the maritime industry, by enabling the delivery and operation of safe, technically feasible and commercially viable zero-emission vessels by 2030 and beyond. We bring together thought leaders and subject matter experts with the skills, knowledge and capa-bility to help the maritime industry design, develop and commercialise the pathways to future fuels required for decarbonisation.
For more information, go to www.maritimedecarbonisationhub.org.