The maritime shipping industry is, like others, seeking ways to significantly reduce its greenhouse gas emissions. As it strives to meet reduction targets set by the International Maritime Organization, the industry is examining the potential rewards of new sources of fuel – and the potential risks associated with the change. Sundeep Khera, Global CUO Marine Hull and Head of Marine, UK & Lloyd’s at 色多多视频 discusses how the drive to reduce emissions will change the marine risks and claims picture in the years to come.
Across all sectors of industry, the drive to reduce greenhouse emissions is gathering pace as businesses set their own Environmental, Social and Governance (ESG) goals and seek to find ways to achieve governmental targets for emission reduction.
This has been a notable challenge for the maritime shipping industry which plays a huge role in the global economy – supporting about 80% of all global trade – and which is thought to account for about 2% to 3% of global greenhouse emissions every year.
While the maritime sector was not included in the Paris Agreement, that aims to reduce global warming to below 2% compared with pre-industrial levels by 2050, it is subject to targets set by the International Maritime Organization (IMO), the specialised agency of the United Nations that is responsible for the safety and security of international shipping and the prevention of pollution events.
The IMO has set out a greenhouse gas strategy to steer the industry on its course to reduce greenhouse gas emissions and marine specialists, risk engineers and underwriters are working to understand the risk implications and opportunities posed by newer sources of fuel and the technological advancements that might help the industry to meet those goals.
Targets
The IMO’s strategy targets a 40% reduction in C02 emissions by 2030 and a 70% reduction by 2050. It has also pledged that the industry should reduce its total greenhouse gas emissions by 50% compared with 2008 levels by the year 2050.
Another recent IMO regulation, IMO 2020, sought to reduce the amount of sulphur in the fuel oil on board ships operating outside of designated emission control areas to 0.50% mass by mass.
There had been fears that this may result in an increase in hull claims, as low sulphur fuels typically contain a higher level of catalytic fines, known as cat fines, which can cause damage to engine cylinders and pistons if they become embedded in soft metal. Claims professionals have noted, however, that there has not, in fact, been a significant uptick in these claims since the introduction of IMO 2020, which suggests that many shipowners have taken risk mitigation steps when storing and receiving delivery of fuel.
To meet IMO targets, however, shipowners are now looking at new forms of fuel and new technology that will move away from heavy fuel oil and the use of fossil fuels altogether.
Future fuels, future tech
Reducing the amount of sulphur in fuel has been an important step towards these ambitious targets. And in addition to targets for reducing C02, the IMO also has goals for the industry to reduce its emissions of nitrogen oxide, for example. This reduction can be partially achieved by tweaks to engine manufacturing. But widespread adoption of new fuel sources and new technologies will be needed if the industry is to reach its goal.
While some shipbuilders and operators are already experimenting with new technology, in 2021 about 88% of the new ships on order were built to run on conventional fuel sources.
There are some short and longer-term steps that can be taken to help the industry to reach the IMO’s targets. For example, we have seen more efficient engine designs and techniques such as using propulsion ids – the likes of sails or kites – to increase the fuel efficiency of vessels. Increasing the deadweight tonnage of ships can also help to improve efficiency.
The use of alternative fuel sources, such as converting Liquefied natural gas (LNG) to methanol, can also reduce emissions, but it should be noted that both LNG and methanol contain carbon, so this is not a complete solution.
Over the longer-term, carbon-based fuels will need to be replaced altogether, and risk experts as well as shipbuilders and operators are exploring the various merits, opportunities and risks associated with a number of alternatives.
Some are considering the use of ammonia, which emits no carbon dioxide when burned. But although this is a promising source of fuel for running ships, ammonia is often derived from processes that are intensively C02-emitting. Hydrogen is another potential fuel source for ships but, as with ammonia, the gas is often produced today via fossil fuel sources. Another challenge with the use of hydrogen will be how to store it while ships are at sea since there are currently limited options for refuelling with hydrogen during a voyage.
Nuclear power is also a potential energy source for ships. Navy submarines and some icebreaker vessels have, in fact, used nuclear power for the past 50 years or longer. The use of molten salt reactor (MSR) technology, instead of traditional water-cooled reactors, means that reactors can be small enough to fit aboard ships. And once a reactor is fitted there is no need to refuel. MSRs also can be shut down within minutes should a problem occur, unlike large, water-cooled reactors which can take days to close off. But while there is a lot of discussion about the potential for nuclear fuel to power ships, the cost may currently be prohibitive and advances will be needed to make this viable over the longer term.
The maritime shipping industry will doubtless see some innovative changes in the coming years as shipbuilders and shipowners take steps to meet IMO targets and to fulfil their ESG goals. The insurance industry will monitor closely the new technologies being employed to gain an understanding of the risks, to help the industry avoid potential losses and to provide insight to enable the maritime shipping industry’s energy transition.
