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Examining responsibility shift, cost-effective alternatives, and innovative battery tech in shipping

The International Maritime Organization (IMO) has significantly changed its emissions reduction targets, shifting towards a more ambitious goal of achieving net-zero emissions as close to 2050 as possible. By 2030, member nations have committed to sourcing 5% to 10% of the energy used to power ships from zero to near-zero emission fuels and technologies. These changes vary based on each country’s development classification and economic impact of the maritime sector.

While these revised targets demonstrate a stronger commitment to emissions reduction, they also raise concerns about the availability and feasibility of alternative fuels. And as the responsibility for decarbonization shifts to member participants and shipowners, there is a growing realization that there are few cost-effective tools and practical solutions for reducing emissions in the shipping industry. To gain momentum in reducing shipping-sector emissions, a collaborative, multi-faceted approach is needed to prioritize research and development of low-cost and accessible technologies.

Reassigning the Burden

The shift of responsibility from the IMO to individual nations and shipowners has raised concerns regarding the effectiveness of global rules in achieving emissions reduction targets. While differentiated responsibilities based on development and the economic importance of shipping may provide flexibility, critics argue that this moves away from a stringent global rule and poses challenges to keeping global warming below the critical threshold of 1.5 degrees Celsius. It calls into question the level of commitment and consistency among associated participants in implementing robust measures to decarbonize their shipping sectors.

Improving hydrodynamics, enacting energy efficiency measures, and lowering cruising speeds can reduce fuel consumption, but cost-effective alternative fuels are essential to making real progress. The options currently under consideration, such as ammonia, methanol, and hydrogen, still face challenges regarding availability, safe implementation, and carbon-neutral production. These alternatives also require significant production capacity before they can be widely adopted as viable solutions for carbon reduction. Liquid natural gas has been proposed as an interim solution, but that still leaves the industry reliant on fossil fuels and requires shipowners to install emission scrubbing systems.

Inexpensive Tools for Decarbonization

One potential avenue for partial emissions reduction is battery storage, which offers a range of benefits. Battery systems can be used for peak shaving at sea, kicking in when more power is needed than can be provided by one engine, but less than generated by two. Battery power can be used for low-speed arrival and departure, reducing the need for ships to switch fuels when approaching port. And batteries can also be used for hotel loads, eliminating the need for diesel generators.

But what batteries are suitable? Lithium-ion batteries, despite their widespread use, have certain drawbacks related to cost, flammability, and toxicity. Recent high-profile battery fires on ro-ros and cargo ships are making shipowners and insurers reassess the risks posed by these batteries, highlighting the need for alternative technologies that offer improved safety, environmental sustainability, and performance. Safer options such as flow batteries are too bulky for use on ships, taking away from available cargo space. Fortunately, startups and researchers are working on options that combine safety with high energy densities, and with investment, commercializing these alternatives will allow the shipping industry to accelerate its transition toward net-zero emissions while mitigating the concerns associated with lithium-ion.

Striking the Balance

There’s an axiom that goes “don’t let the perfect be the enemy of the good,” meaning it’s better to do something useful now rather than wait for a perfect solution that may never arrive. With that in mind, the shipping industry should look to strike a balance between its 2050 aspirations and the availability of realistic solutions. While the urgency to combat climate change necessitates bold goals, waiting until a perfect solution is available could put decarbonization efforts further behind schedule. Implementing smaller, incremental changes as they become available will help reduce emissions sooner than later.

The shipping industry must allocate resources to support the simultaneous exploration of alternative fuels, advanced propulsion systems, and battery energy storage solutions to bridge the gap between 2023 and 2050. By investing in research and development, the industry can unlock new possibilities and pave the way for innovative technologies that can revolutionize the sector’s decarbonization efforts. These investments will contribute to meeting ambitious targets and foster economic growth and competitiveness in the evolving clean energy landscape.

Mukesh Chatter is the CEO of Alsym Energy, a technology company developing a low-cost, high-performance rechargeable battery chemistry that is free of lithium and cobalt.

A new year is right around the corner, which means IMO 2020 is finally here. Effective January 1, 2020, Annex VI of MARPOL, which is the international treaty governing pollution on the high seas, will mandate a significant decrease in sulfur emissions from vessels—reducing the current permitted level of 35,000 ppm to 5,000 ppm. Compliance with this new standard will primarily be achieved through the burning of low-sulfur fuel, although compliance choices include other methods like the use of scrubbers and liquid natural gas (“LNG”) as fuel. Under this regime, the primary responsible party in the freight market will be the vessel owner or operator.

It is estimated that 10-20 percent of vessels after January 1, 2020, simply will not comply with the new IMO 2020 sulfur standard. Furthermore, because there is no industry standard specification for bunker fuel, there is an increased risk of fuel quality issues that lead to suboptimal performance and engine damage, which may give rise to inadvertent non-compliance. As a result, the industry should expect significant enforcement efforts of this new standard.

The IMO does not have a global enforcement body. Instead, IMO member states pass laws implementing the provisions of Annex VI, which are enforced by bodies analogous to the US Coast Guard and US Environmental Protection Agency (“EPA”). In particular, port states can enforce compliance within their coastal waters while flag states may enforce the standard on vessels flagged in their countries. Both port states and flag states have the authority to arrest vessels, and issue fines, penalties and prison sentences.

Historically, the United States has been a lead enforcer of MARPOL, and the industry should expect robust enforcement in the United States regardless of whether the non-compliance occurs in US or non-US waters. It is likely that US authorities will seek to enforce IMO 2020 through whether the vessel is maintaining true and accurate records, specifically its bunker delivery notes (“BDNs”) and fuel changeover logbook. Any listing of noncompliant fuel or false or inaccurate statements in those records could result in the US Coast Guard detaining the vessel and prosecuting the vessel owner, operator, bunker fuel supplier or other responsible party. Although the likelihood of direct non-compliance in US waters is low, even indirect non-compliance can still be enforced if the vessel’s records are false or inaccurate.

Prior enforcement of IMO treaties—which includes multimillion-dollar fines and criminal penalties for captains and vessels—further demonstrates the likelihood of a robust US response to non-compliance. Similarly, whistleblower provisions will likely also bolster US enforcement of IMO 2020. Under US law, whistleblowers who report non-compliance can receive up to 50% of the monetary penalties levied against the owner, operator or vessel. With penalties in these cases exceeding tens of millions of dollars, the whistleblower provisions provide crew with a significant incentive to report non-compliance to US authorities.

While direct liability of the owner and operator of the vessel is a primary concern, there are also varieties of implications non-compliance may have on other parties involved in the freight industry. For example, the detention of vessels and its owners or operators for non-compliance can also lead to delays in the shipment of goods and present significant obstacles and other logistical issues in getting a vessel released from US authorities. Moreover, the reputational harm that comes with non-compliance may also have a lasting effect on a shipper’s business.

With IMO 2020 just around the corner, it is essential that all parties seek to implement robust compliance plans and due diligence of their counterparties—including charterparties, fellow shippers, vessel owners and operator and bunker fuel sale counterparties.

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David McCullough is a partner in the Energy & Infrastructure practice group at the New York office of Eversheds Sutherland (US) LLP. Nicholas Hillman, with Eversheds Sutherland (US) LLP in Washington DC, is not yet admitted to practice.

Balancing Ambitious IMO Targets with Available Solutions

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