SHIPPING will manage to meet the International Maritime Organization’s goal of net-zero emissions sometime around the mid-century, an industry audience was told in London this morning.

However, progress is likely to be uneven and developments in world politics are expected to make progress more complicated than otherwise, a heavyweight panel argued.

BIMCO president and Reederei F Laeisz chief executive Nikolaus Schües, Shell decarbonisation manager Alexandra Ebbinghaus, Cargill Ocean Transportation global operations director Eman Abdalla and Citi’s shipping and logistic chair Michael Parker, who also chairs the Poseidon Principles, were speaking at a Shipping Outlook Forum organised by Lloyd’s List Intelligence.

The first question the panel was asked was what was keeping them awake at night. Abdalla highlighted a continually accelerating situation in world politics, with tension seen particularly in the Middle East and the Russia/Ukraine conflict.

This will have implications for global trade, decarbonisation and safety, and it is undermining progress on various fronts, she said.

Ebbinghaus agreed from an environmental point of view, highlighting the possibility that COP28 in Dubai will end without meaningful agreement. In addition to climate change, the planet has boundaries for things such as pollution and water supply.

Schües professed himself reasonably optimistic, contending that the current regulatory framework offers a good chance of success.

There had been some progress at COP28, although he disagreed with German foreign minister Annalena Baerbock’s demand for a full phase-out of fossil fuels. Their use is acceptable so long as carbon capture mechanisms are in place.

Parker quipped that “shipping bankers are, by definition, optimistic if they last more than about six months”.

However, he said the world is living through the most unsafe time since the Cuban Missile Crisis of 1962.

Potential flare-ups seem to spring up out of nowhere, with Venezuela now threatening to invade Guyana. Incidents such as this undermine economic confidence.

Parker predicted recession in most Western economies next year, which will hopefully be shallow but will have an impact even so.

The Dubai COP saw the private sector dictate the terms of the debate. It will have to finance most of the transition. The energy sector will actually have to undertake the transition and will control its timing.

Shipping has, in past 12 months, emerged at the forefront of transition, with the industry setting the agenda for the IMO.

“It’s pragmatism that will drive us; idealism won’t get there… I remain optimistic that shipping will get there by 2050,” said Parker.

The panel was then asked what it saw as the greatest risk to the shipping business in the next two years.

Schües pointed to regulatory uncertainty, especially the EU Emissions Trading System. Regulators should be seen not as opponents, but as pragmatic and realistic partners.

Abdalla pointed to the continued fragmented nature of the shipping industry at a time when it is undergoing huge transformation. Consolidation is likely, she said. We will also see deglobalisation, making arbitrage less possible.

Shipping currently thrives on being a black box, with owners and charterers keeping much information to themselves. Transparency, standardisation and a certain level of data-sharing will become the new normal.

Parker said bank regulators and central banks have focused on financial stability and climate risk, with the European Central Bank recently criticising unnamed European banks for saying one thing and doing another on fossil fuels.

“From a financial position, the industry is in a very good place,” he went on.

Demand for borrowing is low, as owners are not sure what vessel types to order, but that is likely to change over the next 18-24 months.

With several segments having done extremely well in the last period, older ships are not getting refinanced, as owners do not need lending money and do not want to be subject to Poseidon Principles’ green lending criteria.

Ebbinghaus argued that a chicken and egg situation has arisen. Regulation is in place, but nobody is quite sure how it will be implemented.

The transition to new fuel will be costly. Demand is there, but it is difficult for oil majors such as Shell to know where to invest. Never in the past have oil majors had to build refineries dedicated to the needs of a single industry, as they will have to do for shipping.

Schües praised shipping’s efficiency, contending that an average tonne-mile releases just 40g of carbon equivalents, compared to the 80g released by a jogger over the same distance.

Price sensitivity in the fuel transition will be low, as higher prices can be billed to cargo owners.

Perhaps the biggest challenge will be recruitment, with the industry set to be 56,000 officers light by 2026. The decision to go to sea is less attractive than in the past and salaries will have to rise to attract talent.

Parker pointed out that the skills required to operate ships will be hugely different than previously, thanks to new fuels. Seafarers will need to know how to bunker safely in port areas.

On new fuel alternatives, Abdalla pointed out that liquefied natural gas was once seen as dangerous but is now commonplace. While there are undeniably concerns, shipping needs to give itself more credit as an industry.

Ebbinghaus said shipping had worked hard in recent years to improve safety. However, new fuels are a concern and much effort will be needed. 

“There are solutions for everything, but they need to be carefully evaluated,” she concluded.

Abdalla pointed to a fixation on new fuels. There has not been enough emphasis on how to use less fuel — perhaps through wind propulsion — and ultimately this is what the shipping industry needs to be able to do..

For Schües, methanol should be seen as a transitional fuel that only makes sense if the seed used to produce it is biogenetic. These seeds will become a scarce resource.

Methanol is technically there and Maersk is gunning for self-sufficiency. However, the Danish giants are in the business of selling what can be marketed as green sea transportation, at a suitable premium.

Parker said although shipping is a conservative industry that does not like change, lots of concurrent pressures are making things happen. The current restrictions in the Panama Canal are proof that climate change can hurt shipping too.

Ultimately, a combination of old wise people and younger people desperate for change will prevail.

“This industry can decarbonise — and it can decarbonise by 2050,” Parker declared.

Finally, the panel was asked for reasons to be cheerful.

Abdalla opined that the IMO will deliver what it says it will deliver. Industry rhetoric has changed and this is finally being reflected in action. Things are definitely on the right path — and if shipping does not meet 2030 targets in 2030, it will get there eventually.

Ebbinghaus saw more pragmatism and realism, especially about cost, and more people actively looking for solutions. There is more knowledge and greater forward momentum, she said.

Schües believed that emissions already are falling, if only thanks to slow-steaming in poor market conditions. Emissions will grow until 2030, but there will be technological and efficiency gains. Developments to 2040 will be a question of scale and, by 2050, “we’ll be fine”.

Parker pointed out that shipping now regularly features in major newspapers, even if the reporting is often poorly informed, and it is incumbent on all of the industry to keep this happening.

There is no food security or energy security without shipping security, he stressed.

Download our Key Takeaways document summarising the main topics of discussion from the Outlook Forum event here