SHIPPING’S green first-movers — who have collectively invested billions of dollars in decarbonisation projects, from zero-carbon fuel supply to wind propulsion and digital tech — will be unlikely to move further without a sufficiently robust regulatory framework, according to Jan Dieleman, president of commodities giant Cargill’s ocean transportation division.

While discussions at the International Maritime Organization to conclude the policy measures capable of delivering net-zero emissions across the industry by 2050 are progressing positively and “getting close”, the industry is now at a tipping point when it comes to green investment, Dieleman told Lloyd’s List.

And progress is already stalling.

“I think we’re already at the stage where there is a pushback from investors,” said Dieleman. 

“It’s hard to continue doing these investments on a voluntary basis, so you need the regulator to come in and really make this industry investable. Because otherwise we’re going to continue to be in this proof of concept phase and we’re not going to scale it,” he added.

Cargill has embraced its first-mover status, aiming to use its scale to catalyse new technology projects, including several high-profile wind propulsion projects, dual-fuelled green methanol orders, as well as backing initiatives like the Sea Cargo Charter on carbon reporting.

“We’ve done the wind investments, we’ve done the digital investments, we’ve done the methanol — and, to be honest, we’re finding it is hard,” admitted Dieleman.

“It’s hard to get the fuel, it’s hard to get the paying customer and it’s even harder to put it all together, because you might find the fuel on one side of the planet and maybe someone interested on the other side, but then those things don’t match up.

“So I think we are getting to that point where on voluntary commitments alone, it is getting more and more difficult, and the whole sustainability drive feels to be coming down a notch or two from where it was a year ago.”

Rising costs and complications have recently started to derail the final investment decisions for several major green fuel supply projects, while energy majors and corporates have added caveats and cuts to previously voiced targets. 

Energy major BP this month dropped a target to cut its oil output in the next five years, while Shell signalled earlier this year that it may slow the pace of its emissions reductions for this decade.

Car companies, including Volkswagen, have quietly pushed back voluntary targets and several corporates have started watering down ESG goals.

“It’s not just in shipping; this is across society,” said Dieleman.

While he remains optimistic that the IMO will deliver a global greenhouse gas framework next year, Dieleman argues that the difference between a good and bad outcome will matter hugely to shipping investment decisions.

Good, according to Cargill’s view, is that a fuel standard is agreed alongside a carbon pricing mechanism that can be used to bridge the gap with zero-carbon fuels.

“I think putting it all into a research fund or seeing it all go to the global south is not going to help, but I’m pragmatic enough to know that some of that will have to happen to get this over the line.”

The details, however, are less important, according to Dieleman, than seeing a framework that avoids further “messy” regional fragmentation of regulation and is “sufficiently meaningful over time” that it allows investment to start flowing.

“If we're not going to get some meaningful regulation, I think the risk is that it all stalls — and I think you’re already seeing it in the mix of orders being placed right now.”

“At the moment, it’s all around who’s taking the risk, because if I want to take a five- or 10-year contract on methanol, who’s going to underwrite the risk of the price of that?

“Everybody is still pointing to each other at the moment and that’s why a lot of these final investment decisions on hydrogen are not coming through. It’s not just the feasibility; that it is physically possible. This is about who is underwriting the risk.”

While Cargill has been promoting the big fuel savings that it has achieved from its first long-term trial of wind power on board the kamsarmax bulk carrier Pyxis Ocean (IMO: 9798856), Dieleman has been transparent about the fact that the overall economics of the project are currently still too high to warrant scaled expansion.

That, along with teething issues — including several ports not wanting to accept the ships — is preventing progress.

Scaled investment across the industry will ultimately help bring down costs, Dieleman says, but right now it remains a promising project rather than an immediate strategy.

Dieleman was speaking ahead of the latest edition of the Global Maritime Forum taking place in Tokyo this week, where collaboration and scaled action from the industry first-movers will once again be back under the spotlight.