How would the Shipping industry respond to climate change?

The Intergovernmental Panel on Climate Change (IPCC) has recently published its latest report that describes scientifically, the state of things related to our current climate, and how things are expected to evolve in the years that go by. Although it produced some jarring conclusions, I found the points put forward very telling, and out of curiosity I wondered what it meant for me in the space that I'm working in, the shipping industry. Hence I thought it would be of interest to you, my reader, to have access to some summarised points from this IPCC report, along with some assessments of the implications for us as maritime professionals.

TL;DR (Too Long; Didn't Read summary)

The IPCC report covers 3 major areas:

1. Current state of the climate: How much have we actually impacted the environment?

2. Possible climate futures: How much warmer would the world get?

3. Limiting future climate change: How much runway do we have to act?

My assessment on what this all means for shipping: 

I foresee an increased focus on decarbonization efforts, in reaching net zero with urgency, and this permeating across various supply chain nodes. This focus provides more opportunities for maritime talent, across various disciplines and backgrounds.        

First of all, some context: the IPCC (https://www.ipcc.ch/ ) was set up in 1988 by the World Meteorological Organization (WMO) and United Nations Environment Programme (UNEP), and it consists of 195 member states representing the WMO and UNEP. They exist to provide policymakers with facts relating to the scientific basis of climate change. In their 6th report, they have grouped their findings into 3 working groups: Working Group I: the Physical Science Basis; Working Group II: Impacts, Adaptation and Vulnerability; and Working Group III: Mitigation of Climate Change. The content that follows covers my findings and interpretations from the output by Working Group I that was released in August this year (https://www.ipcc.ch/report/ar6/wg1/ ).

The report covers a lot of content, so to summarise it in 3 key takeaways:

Firstly, the report asserts unequivocally the influence human activities have on the atmosphere (ref charts below, from the IPCC Summary for Policy Makers report) . Our actions have warmed the atmosphere, ocean and land, which have caused widespread and rapid changes in the environment. The world is now approximately 1.1oC (2oF) hotter than it was in the second half of the 19th century, when industralisation really scaled up. Human influence has contributed significantly to many observed changes in weather and climate extremes - from heatwaves, heavy precipitation, droughts, and tropical cyclones.

Secondly, the report argues possible pathways for the future, using a 5 illustrative scenarios, referred to as SSPx-y (where SSPx refers to Shared Socio-economic Pathway x, and where y refers to the approximate level of radiative forcing, in Wm^-2 by 2100). Here, "SSP5-8.5" relates to a scenario with intensive fossil fuel use, while "SSP1-1.9" relates to a future based on sustainability. Through analyses over Green House Gas (GHG) emissions, global surface temperatures, Arctic ice coverage, ocean acidity and sea levels over the 5 scenarios, it is quite clear that temperatures are very likely to be 1.5oC higher than they were in the 19th century by 2050 - if not before. And, even with the most optimistic surface temperature warming of 1.5oC, we are looking at sea levels rising of up to 3m (in the long term - by 2300). This unfortunately breaks the more ambitious of the goals for limiting climate change that the world signed up to in the Paris agreement of 2015 - the goal then was to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels (ref chart below, from the IPCC Summary for Policy Makers report).

And thirdly, the IPCC report describes what must be done to limit the extent of this climate change, again from a pure physical science perspective - limiting human-induced global warming requires 1) limiting cumulative CO2 emissions (reaching at least net zero emissions), along with 2) strong reductions in other GHG (methane, etc) emissions. Since an almost-linear relationship between cumulative CO2 emissions and global warming can be established, it is also conclusive that every tonne of CO2 emissions adds to global warming (ref chart below, from the IPCC Summary for Policy Makers report). A "carbon budget" is also calculated, to show the likelihood of keeping global warming below 1.5oC, and the associated carbon dioxide that can be emitted. Given that over 1850-2019, a total of ~ 2390 billion tonnes of anthropogenic CO2 was emitted, we only have a carbon budget of 500 billion tonnes remaining, if we are to keep global warming below 1.5oC - and this is based on a 50% chance of reaching that ambition. From what I've read (https://www.carbonbrief.org/in-depth-qa-the-ipccs-sixth-assessment-report-on-climate-science ), this is about 15 years of industrial emissions at current rates - which is not a lot of time for a huge task ahead of us. It would mean that the whole world, not just developed countries, to be at net-zero before 2050.

Although the IPCC report showed some very jarring numbers and outcomes, I thought of the silver lining behind these conclusions. And to me, this is the beauty of the physical sciences. That it is now more certain than ever about the role of GHGs on the environment, and this gives us even more assurance of what we need to do to combat climate change, and that net zero would indeed be instrumental in that endeavour. And this brings me to my industry - shipping.

We live in a VUCA (Volatile, Uncertain, Complex and Ambiguous) world so with the number of moving parts - even within just 1 industry, I'll attempt to decipher the topic, on how shipping addresses climate change in 2 key points, with a forward assessment of the situation.

Firstly, the scale and pathways to decarbonization are still extremely varied, however a number of bold initiatives have started to emerge. To get a handle on decarbonisation, it is clear that a shipping player would similarly have to look into different and alternative fuels for their transportation. While there are a number of solutions, some mid and some long term, these solutions also differ in their maturity levels - from experimental pilots such as hydrogen-fuel cells, to more mature solutions that are scaling, such as LNG. It is also clear that there are differing views in the industry on the "right" fuel of the future.

I fondly recall working on a project involving the use of LNG as a Marine Fuel (one of my first projects upon joining Shell), with the intent to address sulphur cap emission measures that were going to be implemented in 2020. Known as IMO 2020 (https://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx ), that provide a cap on the amount of sulphur that can be emitted by ships. On the back of these rules, there were a number of concerns in the industry, and different approaches were taken. Some shipowners decided to make early investments into low-sulphur technologies, such as scrubbers, while others took a "wait-and-see" approach to observe how the industry transitioned. When regarding LNG (which had lower sulphur emissions) as a marine fuel, the commonly heard phrase "chicken-and-egg conundrum" was used to describe the situation, since shipowners had to decide whether to invest in new ship designs and construction, while a global network of LNG provision was still being developed at that point. This created some uncertainty for ocean-going carriers that needed LNG at shipping hubs to match their operational profiles. Hence, some shipowners were undecided if making the investment towards LNG would be a prudent one. Times have changed since then, however, with LNG supply points and technologies improving, and a global network of LNG provision exists today (https://www.offshore-energy.biz/shell-boosts-lng-bunkering-network/ ).

Since before 2020, the concern towards overall emissions has intensified beyond the IMO 2020 sulphur cap, and shipowners today examine and weigh different approaches to determine their decarbonisation pathways. When I look some approaches in this marine ecosystem, there are players, such as Maersk, my previous employer, that have taken a bold step, in investing in carbon-neutral methanol-fueled vessels (https://www.cnbc.com/2021/08/24/maersk-spends-1point4-billion-on-ships-that-can-run-on-methanol.html ), and at the same time in the supply chain required to support these international moving ships (https://www.maritime-executive.com/article/maersk-invests-in-u-s-start-up-to-develop-methanol-supply ). I reflect on 2 key learnings emerging here, on business strategy and shipping: firstly that companies cannot necessarily address big problem statements alone, so partnerships is key. Collaborating with others that bring different capabilities and reach help create better solutions for customers. Secondly, that value chains are continuing to evolve. Value chains themselves cannot be defined by roles in a traditional supply chain - which themselves are also evolving, as seen in the example of Amazon moving from a pure technology player, towards being a supply chain provider, as it invests into deeper logistics capabilities via a global end-to-end network with its own vans, trucks and recently even planes (https://www.bbc.com/news/technology-55560414 ).

To support the shipping industry as it navigates decarbonisation pathways on the route to NetZero, via different fuels and increased operational efficiencies, in Singapore the Global center for marine decarbonisation (GCMD) was recently launched (https://lloydslist.maritimeintelligence.informa.com/LL1137731/Singapore-launches-global-centre-for-maritime-decarbonisation ). I believe this is a platform that would encourage more partnerships and innovations to address the industry's efforts to combat and mitigate climate change.

Secondly, the use of technology is emerging as a bigger role in shipping than ever before. A monumental technological shift in shipping that happened in 1950s-70s was the advent of standardised containerisation (https://en.wikipedia.org/wiki/Containerization ). Before, cargo was moved in "loose" parcels, also known as break bulk cargo. This involved cargo transportation via a mix of cargo holders: from barrels and cases to boxes and gunny sacks. With containers being introduced as a standard size for shipping, this came with efficiencies in the way sea and land logistics were run. Similarly in today's landscape, the increased use of data has changed the game for many incumbents and traditional industries, for example, e-commerce has evolved the brick-and-mortar retail sector, and online platforms have created new value propositions in the travel and hotel sectors, allowing user-empowered reviews and bookings to be made.

The use of data has hence provided for either more efficiencies in operations, or improved/new value propositions to the end customers. Data can also be used to solve wider problem statements in the shipping industry, such as how emission data can be identified and used as milestones for the shipping players who are on the decarbonisation journey. An practical example of this in practice is how Rightship provides GHG rating to players in the shipping industry, giving increased transparency to its customers and allowing these players to steer their decarbonisation efforts towards a more sustainable direction and outcome. As the famous saying goes, "if you can't measure it, you can't improve it", and hence this value proposition in increased supply chain transparency accelerates the industry's move to NetZero.

These advancements then lead me to my forward assessment, on the implications to me as a maritime professional. The pathways to maritime decarbonisation are complex, with multiple stakeholders and varied approaches - it could well be the case that the overall NetZero solution would comes from a combination of these solutions. At the same time, technology would continue to play an increasing role in our industry. My view is that the industry would continue to require a diverse mix of talent to resolve many of the complex problem statements we see, from addressing climate change to seafarer welfare and safety. And these problem statements are going to be become more stark that mandate action, through increased awareness from events like COP26 (where we have seen increased advocacy towards addressing climate concerns) and the current seafarer crisis (where a large number of seafarers are out at sea for longer than expected times). As such, the maritime industry would require talent that is diverse, resilient and yet flexible in a world of change.

From a skillset perspective, with the increased opportunities created by new solutions that the maritime industry is spearheading, a mix of technical, commercial and digital backgrounds would come together to fulfil challenges seen in both onshore and offshore roles. Furthermore, along with the increased demand for data-driven insights, evolving value propositions and push towards NetZero, the value proposition for maritime talent would extend to those curious and hungry to study and be part of a unique confluence between new technologies and a truly global industry that has stood the test of time.

In summary, as the shipping industry plays a pivotal role in the energy transition, evolving and riding the waves of change, so too should us maritime professionals in this VUCA world, approach our challenges with the same fortitude, and curiosity to keep learning - as I do hope to keep doing so with you too, my curious reader. Let's keep learning together.