We have written in previous articles about the “greening” of the shipping and aviation industries, including Future of Shipping Ports and the Environment, and Cleaning Up Global Cargo Shipping. Several new reports out this week indicate that there are still headwinds to be encountered on the voyage ahead to a greener future – on the sea and in the sky.
Sustainable Aviation Fuel (SAF)
The News Corp dailies this week carried stories under the banner ‘Fears of fuel shortage’ relating to the aviation biofuel industry. Sustainable Aviation Fuel (SAF) is an emissions reducing jet fuel additive made from products such as cooking oil and waste left over from sugar cane harvest.
Agricultural produce creates the feedstock needed to make the fuel and yet, while other countries are already locking in long-term contracts to buy Australian feedstock for this purpose, we have yet to set up a single domestic refinery in our own country. Our international airlines will be able to purchase SAF while they are overseas, but of course our domestic airlines will not have this option.
All major airlines have signed up to net zero emissions by 2050. A spokeswoman for Bioenergy Australia has said the industry would create 8,000 jobs here, if properly set up. The government is committed to establishing a Jet Zero Council, with its first meeting set to be hosted by the federal Transport Minister before July.
New Regulations for Ships
On 01 January 2023, the International Maritime Organization (IMO) introduced stricter regulations for energy efficiency and emissions reduction as part of its decarbonisation plan to reduce shipping emissions by 40% by 2030 and 70% by 2050.
These rules are measured using three indicators: the Energy Efficiency Design Index (EEDI), the Energy Efficiency Existing Ship Index (EEXI), and the Carbon Intensity Indicator (CII). The EEDI and EEXI ratings are assessed at the time of vessel construction or certification and are based on ship specifications, not operating performance. CII ranks and monitors the efficiency of individual vessels and becomes stricter over time. Vessels are graded from A to E (high to low ratings).
The operational impact of these rules remains uncertain, however vessels that fail to meet IMO requirements will need significant downtime for costly upgrades or face being removed from service entirely.
The ‘Scrubber’ Alternative for Container Lines
The regulations above are in addition to the existing IMO 2020 fuel regulations which limit sulphur levels in bunker fuels to 0.5% from the previous typical level of 3.5%. The intention is to ditch cheaper high-sulphur HSFO fuel in favour higher-cost low-sulphur LSFO fuel. Another option is the installation of EGCS (exhaust gas cleaning systems) or gas ‘scrubbers.’ A scrubber installation allows a vessel operator to continue to buy HSFO fuel and separate out the excess sulphur onboard the vessel in what is effectively a mini refinery.
Taiwanese container line Yang Ming, for example, announced last Friday its plans to install scrubbers on all its owned ships. Currently, five of its 8,626 TEU ships are scrubber-fitted. Yang Ming is the eighth-biggest user of scrubbers among liner operators, (well behind the top three, MSC, Evergreen and Maersk). Yang Ming is also pressing ahead with plans to build five 15,000 TEU LNG-powered containerships – it is the first Taiwanese line to invest in LNG-fuelled ships in line with the global move to achieve decarbonisation by 2050.
However, there are very long waiting lists for installation of scrubbers at some shipyards – particularly in China – they are made to order and the standard lead time is six months.
Insufficient Materials for Battery-Powered Ships
Meanwhile The Loadstar carries an article about the lack of necessary metals to build the batteries needed for the electrification of heavy transport – including ships. They say global reserves of copper, cobalt, manganese and nickel will not be enough to support the like-for-like electrification of transport, and ‘de-growth’ in capacity will be needed to meet zero-carbon commitments, based on a new study.
The Locomotion project, helmed by the Group of Energy, Economy and System Dynamics of the University of Valladolid, considered electrification scenarios based on transport demand, taking into account availability of materials, potential for recycling and other factors, including widespread adoption of electric cars and e-bikes. And the study found there would not be enough battery manufacturing materials to support either form of individualised transport, as well as mass transit and cargo. Even in the de-growth scenario, the study says known reserves of the necessary raw materials are likely to run out by 2050.
Australia’s Role in Exporting the Necessary Metals.
Australia’s exports of raw lithium (used to make batteries for electric vehicles) have gone from just A$1 billion in 2020 to A$16 billion now – with China buying roughly 95% of it. Lithium is a key ingredient in electric vehicle batteries, which Tesla CEO Elon Musk has called the “new oil.”
China has rapidly emerged as the global production hub for manufactured goods essential to the world’s net-zero emissions transition, such as electric vehicles. It is a major investor in Australia’s lithium industry, with stakes in its three largest mines, and Australia’s first fully-automated lithium hydroxide processing plant. Chinese companies have transferred their world-leading lithium processing technology to Australia via joint ventures, allowing Australia to move up the value chain beyond mining.
Australian Resources Minister Madeleine King recently stated that the supply of rare earths is as much a national security issue as one of energy and economic security, and highlighted the need to be cognizant of the role Australia’s critical minerals will play in the security of our trusted regional friends and allies. This prompted a strong response from China’s Ministry of Foreign Affairs, which said, “No one should use the economy as a political tool or weapon.”
We have only really just embarked on the “greening of the shipping industry” and more rough seas are bound to be coming at us over the next three decades.
As licensed Customs Brokers and International Freight Forwarders, Colless Young offers you professional advice on all your international trade and shipping requirements. We provide a complete range of import and export logistics services, both air and sea cargo, including warehousing and trucking, at all major Australian ports and airports. Call us for updated shipping schedules and freight rates.
