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Charting fuel choices as the shipping industry sails toward net zero

Shipping companies—encouraged by regulation, customer demand, investor pressure, and internal goals—are searching for ways to decarbonize their fleets. Greener-fuel possibilities abound in the maritime world, and the industry is in a period of experimentation and exploration to understand the implications of adopting such fuels. To find out how industry leaders are thinking about future fuels, the Global Centre for Maritime Decarbonisation, the Global Maritime Forum, and the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping recently conducted a survey (with analytical support provided by McKinsey) of shipping companies. Collectively, these companies own and operate fleets—including container ships, tankers, dry bulkers, gas carriers, car carriers, cruise ships, tugs, and offshore vessels—comprising roughly 20 percent of the world’s total capacity.

The snapshot that emerges from respondents’ answers portrays a world with a wide range of fuels in the mix through 2050. Many respondents expect their fleets to run on multiple types of fuel well into the future. This suggests that shipping’s route to decarbonization could be complex. But companies that are currently plotting investment strategies might consider viewing this inchoate moment as an opportunity for bold decision making. Multiple fuel pathways continue to be viable, and advantages for first movers are there for the taking.

Among findings from the survey:

  • Presently, 46 percent of surveyed companies (12 respondents) say that they have already run pilot programs involving one or more low-carbon fuels (for instance, operating ship engines on biodiesel instead of traditional fuel oil) and have established plans for further implementation, whereas 35 percent (nine respondents) have taken no action regarding greener fuels.
  • One-third of respondents say that they “don’t know” which types of fuel they expect their fleets to run on in 2030 and 2050. The remaining two-thirds of respondents express diverging expectations about what their fuel usage will look like. Respondents’ projections for their fleets’ fuel consumption in 2050 are split evenly among a wide variety of options: green ammonia, biodiesel, and fuel oil lead the way with 16 to 17 percent of the fuel mix each, followed by blue ammonia, liquefied natural gas (LNG), e-methanol, biomethanol, biomethane, and e-methane, each representing a 6 to 10 percent share.
  • Respondents also indicate that they expect to spread their own consumption across multiple fuel “families.” (The fuel families consist of fuels that ship engines can use interchangeably: for instance, one category comprises heavy fuel oil, marine gas oil, marine diesel oil, and biodiesel, while another category comprises LNG, biomethane/bio-LNG, and synthetic/e-methane/e-LNG.) By 2050, 49 percent of respondents (weighted by fleet size) expect to adopt four or more fuel families within their own fleets, while another 43 percent expect to adopt three families.
  • Making the leap to a greener-fuel future will require decades of work, but our respondents are clear on what they will need to accelerate the transition. More than 80 percent of respondents indicate that the following four developments would be most transformative: greater availability of alternative fuels, cost reductions for alternative fuels, customer willingness to pay a “green premium,” and regulatory change.

The full report, The shipping industry’s fuel choices on the path to net zero, presents further survey results along with potential takeaways for various stakeholders.

In the world suggested by these survey answers, the role of first movers—and of entities that can galvanize entire value chains, from fuel production to a vessel’s consumption—will be vital. Organizations that lead the way might provoke and shape others’ actions, catalyzing investments that create their own momentum and, over time, perhaps result in the inevitability of a specific fuel scenario.
Source: McKinsey

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