Shipping giant Maersk is investing in a new generation of container ships.
With 19 methanol-fueled ships on order, it's full steam ahead for the firm’s transition
from oil.
We have a problem that needs to be solved.
Here is a good solution.
Let’s go with that.
But methanol is a controversial solution.
The fuel is already being produced in relative small quantities globally but scaling up production?
It's difficult to justify given how hard it will be to make methanol in a cost-effective
way in the future.
In this video, we'll explain more about the fuel and the technology behind it.
We’ll look at how Maersk is driven by its customers.
And how international shipping routes like the Panama Canal are adapting to this transformation.
Is the cargo shipping sector on the right course to becoming carbon neutral?
Or is Maersk's investment in 19 ships – out of the 707 it runs – just another case of
greenwashing?
Rotterdam – Europe's biggest seaport.
The Mary Maersk is transporting 18,000 containers to Tangier, Shanghai and then on to Ulsan
in South Korea.
It will be at sea for six weeks.
The ship is powered by fossil fuels, just like most of the global container shipping
fleet.
The industry emits around 3 percent of global greenhouse gas emissions – almost the same
as Japan's 2.9 percent in 2021.
Germany contributed just under 1.8 percent.
And emissions are set to rise.
Approximately, 11 billion tons of goods are shipped every year.
That figure is set to triple by 2050.
But Maersk has a plan – to use the synthetic fuel methanol as an alternative to traditional
oil.
We know it can work because the engine technology is actually proven.
There's an engine out there that we can order.
And also from an operational and safety perspective, it's a very manageable fuel.
Engineering firm M-A-N Energy Solutions is developing new dual-fuel motors for the shipping
industry.
The engines can transition between alternative fuels like methanol and fossil fuels at open
sea – if needed.
Only the top is different from a normal diesel engine.
That’s the injection system for synthetic fuels like methanol.
The motor weighs a few hundred tons and is about 19 meters tall.
M-A-N can produce up to 1000 engines per year.
But the company says it won't be enough.
Older ships will have to be retrofitted on a large scale.
And demand is increasing.
When Maersk decided to go for methanol then the entire industry is in methanol.
It seems interesting.
Let's look at this.
So there's a huge interest in methanol.
Maersk is in large part being driven by its customers including over 200 big brands like
Lenovo, Volvo, H&M, and Vestas.
Around 70% of them have set carbon goals and the pressure is increasing to decarbonize
supply chains as quickly as possible.
More and more companies are setting these targets, then they see a lot of value in actually
buying a product that abates their emissions.
And when they see value in the product, they are willing to pay a price.
This price will inevitably be passed on to consumers.
How much is not clear.
But for people in industrialized countries, goods like clothes and electronics are likely
to cost just a few dollars more.
In the Global South, on the other hand, it could have a bigger impact on the cost of
living, say critics.
So are Maersk and its competitors betting on the right fuel?
First of all, it must be green methanol that is climate neutral – made from CO2 and green
hydrogen.
There are around 80 plants worldwide that produce it – with more and more springing
up.
The pilot project Haru Oni in Chile, for example.
But it’s small and for now will only produce e-fuel for cars.
The first commercial-scale CO2-to-methanol plant started production in Anyang, China,
in late 2022.
It’s a novel technology, but the plant doesn’t produce green methanol.
The hydrogen is from coke oven gas, and the CO2 comes from waste gases produced through
industry.
Additionally, many plants use CO2 captured from biomass - which is also controversial.
Everyone who is investing massively in bio-methanol should consider to wait a little bit longer
...in alternative technologies that don’t have this sustainability risks
In short - extracting the CO2 is the main complication of methanol production.
It's difficult to justify given how hard it will be to make methanol in a cost-effective
way in the future.
So there are more promising pathways with lower costs such as ammonia, but there's more
work to do to get to the point where ships can be run on ammonia.
Politicians haven’t specified which alternative fuel shipping companies should use in the
future – although methanol and ammonia are considered the favorites.
In March 2023, the EU agreed on an e-fuel quota for ships over 5000 tons.
At least 2% of shipping fuel must come from e-fuels made with renewably-sourced electricity
by 2034.
5:45 Globally, it's the UN International Maritime Organization that is responsible for shipping
regulation.
But the IMO and EU have been criticized for being too lax in their goals.
We need stronger EU policy, and we need we need a global policy solution from the IMO
that's really effective at incentivizing uptake, not just for the early adopters, but signaling
the mass market transition that will need to rapidly scale up in the 2030s.
The less we have of that policy certainty, the greater the investment risk.
So it will mainly be large shipping companies that invest in these ships and fuels.
Four of the largest are headquartered in Europe.
They account for just over half of the global shipping market.
How do we make sure that we do this transition without really screwing over the global South?
Because we stimulate the transition primarily in our countries because we can't reach multilateral
agreements at the UN and the IMO.
And so we drive everything with EU and UK and US policy like the Inflation Reduction
Act, which means that technology will become centered in the developed world and we end
up selling it to the developing world in coming decades.
That would be deeply unhelpful.
Nevertheless - the world's most important shipping routes are also responding to this
transformation.
The Panama Canal in Latin America transports 6% of global goods.
The authority wants the canal to become carbon neutral by 2030 - a so-called "green corridor"
-these are routes designed to ensure emission-free shipping.
Providing e-fuel filling stations is one of the strategies.
A fee-paying system will see ships with low carbon emissions pay less to pass through
the canal.
There will also have to be other changes: Initially we will replace our vehicle fleet
using whatever technology is available to our operations.
We’ll also optimize and reduce the emissions from the power generation required for the
operation of the canal.
The transformation of the shipping sector will mean high investment costs.
While conventional ships cost around 200 million US dollars, the new generation of dual-fuel
engine ships cost approximately 20 million more.
And according to business consultancy McKinsey, the transition to e-fuels will increase the
cost of operating ships by around 40 to 60%.
We are also expecting that over the next couple of years that we will not be able to recoup
the entire additional cost for the green fuels because the first couple of years you know,
they're quite expensive.
We do actually expect that that we will also have to cover some of the costs ourselves.
And you know that you know that's also only fair.
Shipping company profits have exploded over the past few years.
In 2022 Maersk’s net profit was 29.7 billion US dollars – more than 60% on the year before.
Closed ports in China due to the Covid-19 pandemic have caused massive supply chain
problems.
Prices for container transports have skyrocketed.
And on top of that, the war in Ukraine has driven freight rates even higher.
But let’s get back to Maersk, and whether this is a serious investment in the future
– or greenwashing?
Are 19 new ships with dual-fuel engines – out of 707 running on oil – really enough?
It doesn't sound like much, but a recent report says that Maersk is sincere in its plans to
become net zero by 2040 - even if the shipping company is reacting primarily to pressure
from its customers to decarbonize supply chains.
There is much criticism of methanol as an alternative fuel.
The technology is the furthest developed.
But manufacturing is still expensive and complicated.
Maersk is a powerful player in the sector – with huge influence.
Other climate-friendly alternatives like ammonia could be left behind if big companies go all-in
on methanol.
But even if the transition is more than just greenwashing – there are doubts over whether
synthetic fuels can make a growing shipping industry completely climate neutral.
We also need to see a commitment to absolute emission reductions.
And we shouldn't get in a situation where we increase the share of alternative fuels,
but also increase share or total fuel use.
But the fact is that globally there is already investment being made in green infrastructure
and logistics.
So - is decarbonization of the shipping sector by 2050 realistic?
I'm wholly positive and optimistic, because of the rate of change we can see.
So we track the transition and we look at lots of indicators to see where the finance
community is, where the policy community is, where the technology is.
And all of those things are moving at an extraordinary pace.
So I do think it's going to happen.