Alternative Fuels

BIMCO: Level playing field for ships must be assured while shipping industry decarbonises

BIMCO’s Deputy Secretary General argues what is missing are market-based measures for evening out operating expenses between old and new ships.

Published

4 years ago

June 14, 2021

Admin

The following article written by Lars Robert Pedersen, Deputy Secretary General at BIMCO, was published as part of the June edition of BIMCO’s Bulletin and shared with Singapore bunkering publication Manifold Times:

There are many initiatives within the shipping industry aiming to develop technology for zero-carbon ships. There are also several projects outside the sector looking to develop and scale-up production of zero-carbon fuels. But are they commercially viable and is regulation the answer? BIMCO’s Deputy Secretary General, Lars Robert Pedersen, argues that what is missing are market-based measures.

The Paris Agreement sets the ambition for the world in terms of climate-change mitigation. Collectively, action by all sectors of society worldwide should aim to keep global warming at a maximum 1.5 degrees Celsius above the pre-industrial level.

International shipping is not covered directly by the Paris Agreement as it is about Nationally Determined Contributions and ever since the emergence of the UN Framework Convention on Climate Change, international shipping (and aviation) has been considered the business of the International Maritime Organization (IMO) (and International Civil Aviation Organization) to deal with.

IMO member states agreed in 2018 to an Initial Strategy for the reduction of greenhouse gas emissions (GHG) from ships with a vision to de-carbonise ships as soon as possible within this century. An intermediate target was agreed to reduce total GHG emissions by 2050 to 50% of the total 2008 GHG emissions.

From a shipping industry perspective, the path is clear. Ships must de-carbonise and it must happen soon. It is about how and when – not if.

Is it commercially viable?

There are many initiatives within the shipping industry aiming to develop technology for zero-carbon ships. There are also several projects outside the shipping industry looking to develop and scale up production of zero-carbon fuels. We have an initiative under the auspices of the Global Maritime Forum called “Getting to Zero Coalition”; we have multiple developments spearheaded by various classification societies; we have the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping; and there are many more. What all have in common is the aim of getting a zero-carbon ship on the water as soon as possible – and before 2030.

Zero-carbon ships are likely to employ innovative technologies – for engines and ancillary equipment – and new fuel types that leave at least carbon-neutral footprints. We are talking expensive new equipment and costly new fuels.

Is this commercially viable? The answer is no – at least in the short to mid-term. It will cost more to build ships equipped to burn zero-carbon fuels, and the fuels themselves will add substantially to the operating expenses of such a new generation of ships.

It is one thing is to get a zero-carbon ship on the water, it is quite another launching a fleet of them and operating them in a commercially viable way. I believe this is unlikely to happen unless some sort of cost-equalising measure is introduced.

Is regulation the answer?

Could it be done by regulation? If the burning of fossil fuel was to be banned from a certain date in the future, only zero-carbon shipping would be available. This would be an extremely risky strategy that would likely create a major shortage of transportation supply and result in massive disruptions to economies across the globe. Not a recommended way forward.

It is more likely that transition of the industry will be organic, simply because of scale. Transition will probably take a generation of ships to complete – that is more than a decade, even if it is fast-tracked.

In such a scenario, ships using cheap fossil fuel would need to trade alongside a new generation of zero-carbon ships using vastly more expensive fuels competing in the same market for the same cargoes. Freight rates would not depend on the fuel technology of an individual ship, rather they would reflect a supply/demand balance and favour the cheapest operating ships in the market. As you can imagine, that would be the end of using native market forces to drive transition.

What is missing here is some kind of market-based measure (MBM); one that would even out the operating expense difference between the old and new generation of ships. It could be achieved by incentivising the new fuels and technologies to a level that puts them on a par with fossil fuel. It could be done by adding a penalty charge to fossil fuel to bring its price up to that the new fuels? Or it could be somewhere in-between.

The difficulty is of political nature. The world has agreed to tackle climate change with respect for national differences and respective capabilities. The phrase used in climate policy is “common but differentiated responsibilities and respective capabilities” (CBDR-RC). It means that each country should contribute in any way that it can, and those ways may differ from one country to another.

Shipping, on the contrary, thrives by a global set of rules developed by the IMO, which treats all ships equally, irrespective of the flag they fly. Ideally, an MBM for ships would be developed by the IMO and applied to all ships equally – that is, from a maritime industry point of view.

From an IMO member state’s perspective this may be different – or differentiated. That is why it is so difficult to tackle climate-change policy at the IMO. BIMCO has called for MBMs to be discussed by the IMO as soon as possible, and we look forward to seeing it happen.

Two things are certain: these will not be easy negotiations and the result will probably not be ideal from an industry viewpoint; and transition will not happen at large scale without an MBM.

Photo credit: Chris Pagan on Unsplash
Published: 14 June, 2021

LNG Bunkering

New MOL vessel to be supplied LNG bunker fuel in Japan before voyage to Australia

After departing from Saijo Shipyard, LNG fuel will be supplied directly to “Verde Heraldo” through shore-to-ship bunkering at Senboku Terminal of Osaka Gas, and is then scheduled to sail for Australia.

Published

4 hours ago

April 22, 2025

Admin

New MOL vessel to be supplied LNG bunker fuel in Japan before voyage to Australia

Mitsui OSK Lines (MOL) on Friday (18 April) said the naming and delivery ceremony for the LNG-fuelled Capesize bulker, which MOL ordered for JFE Steel Corporation, was held at the Saijo Shipyard of Imabari Shipbuilding.

The vessel was named the Verde Heraldo, which means “Green Pioneer” in Spanish, by JFE Steel President and CEO Masayuki Hirose. MOL executives including President & CEO Hashimoto were also on hand for the ceremony.

After departing from Saijo Shipyard, LNG fuel will be supplied directly to the vessel through shore-to-ship bunkering at the Senboku Terminal of Osaka Gas, and is then scheduled to sail for Australia.

The Verde Heraldo will sail under long-term transport contracts to supply raw materials for JFE Steel's mills, providing both reduced environmental impact and safe and reliable marine transport services.

About Verde Heraldo

LOA: 299.99 m
Breadth: 50.00 m
Draft: 18.436 m
Deadweight tonnage: 210,321 tonnes
Shipyards: Imabari Shipbuilding and Nihon Shipyard

Photo credit: Mitsui OSK Lines
Published: 22 April, 2025

Alternative Fuels

Indonesia and HDF Energy partner to study hydrogen solutions for maritime decarbonisation

Agreement between HDF Energy, Indonesia’s Ministry of Transportation, PLN and ASDP outlined a joint study to decarbonise Indonesia’s maritime sector using locally produced green hydrogen.

Published

4 hours ago

April 22, 2025

Admin

Indonesia and HDF Energy partner to study hydrogen solutions for maritime decarbonisation

PT HDF Energy Indonesia, a subsidiary of French hydrogen infrastructure developer HDF Energy, recently signed a Memorandum of Understanding (MoU) with Indonesia’s Ministry of Transportation (MoT), state-owned electric utility PT PLN (Persero) and ferry operator PT ASDP Indonesia Ferry (Persero).

The agreement outlined a joint study to decarbonise Indonesia's maritime sector using locally produced green hydrogen. The study will be conducted in collaboration with, and co-funded by, the International Maritime Organization (IMO).

The MoU was signed during the Global Hydrogen Ecosystem Summit on April 15, 2025 in Indonesia.

The study will focus on Eastern Indonesia, a region with plenty of sun and home to many of ASDP's strategic ferry routes. HDF Energy is currently developing 23 Renewstable® hydrogen power plants in the region. These facilities combine a solar park with substantial on-site energy storage in the form of green hydrogen to provide non-intermittent, stable and 100% clean electricity to the grid, day and night.

By generating surplus green hydrogen at a competitive marginal cost, Renewstable® plants also pave the way for the supply of green hydrogen to decarbonise maritime transport. The hydrogen produced will be used to power the high-power fuel cells developed and manufactured by HDF Energy in France, a modular, reliable solution tailored to the conversion of maritime fleets.

With this project, HDF Energy is deploying an integrated approach: producing competitive green hydrogen locally and offering a zero-emission maritime vessels' propulsion solution based on its fuel cells.

ASDP, which operates one of the world's largest ferry networks, plays a critical role in connecting Indonesia's remote islands. As a key player in the maritime sector's energy transition, the company will contribute to the study to identify opportunities for converting its fleet and port infrastructures. The aim is to replace traditional diesel engines with solutions based on green hydrogen and renewable electricity, in order to significantly reduce emissions.

PLN has already taken a proactive role in launching hydrogen pilot projects across the country. The company previously signed an MoU with HDF Energy to accelerate the deployment of Renewstable® hydrogen power plants as a green alternative to diesel-based power — a collaboration representing potential investments of up to USD 2.3 billion, supported by international development institutions including the U.S. International Development Finance Corporation (DFC).

On the same occasion, HDF also signed an MoU with PT Pelayaran Bahtera Adhiguna (PT BAg), a national shipping company specialising in sea transportation services for primary energy distribution across Indonesia. The partnership reflects a joint commitment to assessing hydrogen as a clean alternative to power auxiliary systems on large vessels.

Mathieu Geze, HDF Energy's Director for APAC and President Director of PT HDF Energy Indonesia, stated: “We are proud to reaffirm our commitment to a Net Zero emission future through this strategic collaboration. Working together with PLN, ASDP, the Ministry of Transportation, and with PT Bag, we aim to place Indonesia at the forefront of green hydrogen innovation in the Asia-Pacific. Our fuel cells represent a decisive step forward in the decarbonization of maritime transport in the Indonesian archipelago, as well as a formidable showcase for French innovation on the international stage.”

On a regional scale, this partnership in Indonesia is part of HDF Energy's development drive in Southeast Asia.

On 11 April, in the Philippines, HDF signed a MoU with the Department of Transportation to harness green hydrogen—produced by HDF's Renewstable® power plants currently under development—to power the next generation of hydrogen-fuelled maritime vessels.

The following day in Vietnam, HDF entered into a strategic partnership with ACST, an organisation affiliated with the Ministry of Construction, to advance green hydrogen solutions, including the retrofitting of diesel ferries with HDF's hydrogen fuel cells.

Photo credit: HDF Energy
Published: 22 April, 2025

Biofuel

Argus Media: IMO incentive to shape bio-bunker choices

IMO proposal for ship owners who exceed emissions reduction targets to earn surplus credits will play a key role in biofuel bunkering options going forward.

Published

4 hours ago

April 22, 2025

Admin

An International Maritime Organization (IMO) proposal for ship owners who exceed emissions reduction targets to earn surplus credits will play a key role in biofuel bunkering options going forward.

22 April 2025

The price of these credits will help determine whether B30 or B100 becomes the preferred bio-bunker fuel for vessels not powered by LNG or methanol. It will also influence whether biofuel adoption is accelerated or delayed beyond 2032.

At the conclusion of its meeting earlier this month the IMO proposed a dual-incentive mechanism to curb marine GHG emissions starting in 2028. The system combines penalties for non-compliance with financial incentives for over-compliance, aiming to shift ship owner behavior through both "stick" and "carrot" measures. As the "carrot", ship owners whose emissions fall below the IMO's stricter compliance target will receive surplus credits, which can be traded on the open market. The "stick" will introduce a two-tier penalty system. If emissions fall between the base and direct GHG emissions tiers, vessel operators will pay a fixed penalty of $100/t CO2-equivalent. Ship owners whose emissions exceed the looser, tier 2, base target will incur a penalty of $380/t CO2e. Both tiers tighten annually through 2035.

The overcompliance credits will be traded on the open market. It is unlikely that they will exceed the cost of the tier 2 penalty of $380/t CO2e. Argus modeled two surplus credit price scenarios — $70/t and $250/t CO2e — to assess their impact on bunker fuel economics. Assessments from 10-17 April showed Singapore very low-sulphur fuel oil (VLSFO) at $481/t, Singapore B30 at $740/t, and Chinese used cooking oil methyl ester (Ucome), or B100, at $1,143/t (see charts).

If the outright prices remain flat, in both scenarios, VLSFO would incur tier 1 and tier 2 penalties, raising its effective cost to around $563/t in 2028. B30 in both scenarios would receive credits putting its price at $653/t and $715/t respectively. In the high surplus credit scenario, B100 would earn roughly $580/t in credits, bringing its net cost to about $563/t, on par with VLSFO, and more competitive than B30. In the low surplus credit scenario, B100 would earn just $162/t in credits, lowering its cost to approximately $980/t, well above VLSFO.

At these spot prices, and $250/t CO2e surplus credit, B100 would remain the cheapest fuel option through 2035. At $70/t CO2e surplus credit, B30 becomes cost-competitive with VLSFO only after 2032. Ultimately, the market value of IMO over-compliance credits will be a major factor in determining the timing and extent of global biofuel adoption in the marine sector.

By Stefka Wechsler