Is Shipping the Easiest "Hard-to-Abate" Sector?

Transcript

Bryony Worthington

Hello, I'm Bryony Worthington and this is Cleaning Up. My guest this week is Johanna Christensen, co-founder and CEO of the Global Maritime Forum. The GMF brings together high level stakeholders across the value chain of shipping to discuss long term sustainability challenges. I first met Jo when I was working on international shipping for the Environmental Defense Fund, and benefited from her depth of knowledge and superb global network. I'm delighted to welcome Jo to Cleaning Up.

Michael Liebreich

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Jo, it's a delight to welcome you to Cleaning Up. I'm so excited to have this conversation with you. And I'm gonna kick off really by asking you to introduce yourself and tell us a bit about your background.

Johannah Christensen

Well, I'm so pleased to be here on this call with you Bryony, this podcast. It's, yeah, we've known each other for a while. So it's really delightful to be here. So my background is actually outside of shipping. So I consider myself a newcomer to the shipping sector, even though I've been working in this field for the better part of 10 years. And- but that's, you know, that's the way it goes - time flies. I spent the early part of my career working in particular in the interface between public and private sector, and looking at long term sustainability issues, and developing networks of companies that wanted to better understand future sustainability challenges and engaging with stakeholders such as governments, regulators, and a variety of other stakeholders around those sustainability issues, what they are, how to address them, etc. So I've done that for a think tank based in Copenhagen. And then I worked for a while at the World Economic Forum, where I helped develop the agenda for the annual Davos meeting, which has become sort of a stepping stone to the work that I'm doing now. But I also did some more work, for example, working with stakeholders, especially private sector in the run up to one of the international climate conferences, the one that took place in Copenhagen, and it was a huge fiasco. So that was- I think that lit a fire under me to do something successful subsequently.

I think a lot of people's careers were affected by that Copenhagen fiasco. And so tell us then, so the Global Maritime Forum, I've heard you describe it as the Davos of shipping, for obvious reasons, right? You came from Davos and you understand the value of bringing together stakeholders from across the value chain. So do you want to tell us a bit about the GMF?.

So the Global Maritime Forum has been around for about seven years. We set it up, in a way, as a platform for collaboration for stakeholders across the maritime ecosystem. And the background for that is really there are some characteristics of the sector that we felt needed addressing and some of those characteristics have to do with sort of a high degree of fragmentation. It's an industry with many, many, many small players. It's fragmented globally as well. It's also quite short term oriented. It has a big focus on assets. So the ships that trade goods internationally are almost like investment vehicles. And so it's got this quite cyclical you know, you order ships when the- you buy assets when the market is good, but then you get to this over-saturation and over-capacity that drives down the rates. And so there are some very sort of cyclical kind of assets, trading kind of effects. So there's very little long-term thinking really. And then it's also a bit of a bubble. And we can get back to why that is, but it's really this sort of- this maritime ecosystem really is a world unto itself, and perhaps hasn't been really- had a lot of "look at what's happening in the rest of society and how might that affect how the sector works." So that's really one of the- those are some of the characteristics that drove us to set up the Global Maritime Forum. We are an international not-for-profit organisation, we organise an annual gathering of senior leaders, which you have attended as well, when you were at EDF. And it's really the decision makers in the industry that we bring together. And that's sort of the relationship to the World Economic Forum in Davos. I really- I hesitate to compare it because that was really its own thing. But what I'd say is that it's a sort of a mini-version of that, a mini sort of example of this sort of bringing together high level decision makers to discuss long term issues and work together on developing solutions to address them. That's really the nub of- and then that sparks lots of ideas that probably become sort of a platform for facilitating sort of some of those collaborations as well. But that's really the nub of what we do.

And you mentioned the fact that you feel like an outsider, despite working in the sector for over 10 years. And that's because it's a- it is quite an ancient sector, right. I mean, that's one thing that really comes across when you dive into this world is that there are families and businesses that have been plying their trade for centuries, right. And it's a sector that's seen a lot of change. I don't know if you want to talk a little bit about how the sector sees itself and some of the things that, you know, it's been through revolutions before in terms of how it propels itself, hasn't it?

Yeah, yeah, very much so. Maybe there are two different elements of that. So the one is, yes, it does have this long storied tradition. You know, it's been a sector that grew alongside globalisation really, alongside global trade and has enabled globalisation in many ways. It, you know, it's also, I mean, that goes back to the cyclical nature of the industry, that it's, you know, it really grows along with trade as well. And that gives a lot of pride in a way that enables global trade, there's a lot of pride in the sector, about that key role that shipping plays, and in an enabling sort of growth in economies, growth, and prosperity, etc. And there are a lot of family owned, privately held companies that have been in family hands for generations and generations and generations. And I hesitate sometimes to think that the previous generations- what those companies might have looked like that. But you know, for example, on our board, we have an eighth-generation ship owner on our board of directors and that speaks a little bit to, again, to this long, storied history. But it has been through these big transitions. And, you know, that's true, in particular, when we look at how ships are propelled, right, so it's gone from, you know, from human power to wind power to coal, from coal to oil and gas or fossil fuels, and now it's embarking on another big transition. And those transitions are always quite difficult, right. So- but I suspect that there are some companies at least or there are some companies that have been at least through one of those transitions, and maybe several of them, which is quite interesting to consider.

That is one of the fascinating aspects of it, and it's often described as a hard-to-abate sector. But actually, I mean I think that might be something of a misnomer, because it is actually possible, right? I mean, ships, I think they're responsible for 90% of all traded goods that they move around the planet. And- but it's relatively highly concentrated and relatively- welt not easy, but there are solutions out there aren't there. But I think one of the things that makes the sector quite difficult is it's quite a hard space to regulate - the ocean is typically out-of-sight and out-of-mind. There's a sort of feeling that it could- it's sort of at the fringes of- there's lots of stories that come out of the ocean and out of shipping, that are kind of high-drama. I don't know if you want to say anything about the kind of- some of the challenges of this sector in terms of it being out-of-sight for large parts of the time.

Yeah, it's certainly one sector where I think transparency has come late. The kind of transparency that we know from other sectors has come fairly late in the game. And in thinking about that question, it really makes me think sort of that the sector only really becomes visible when something goes wrong. Piracy, we know about, you know, off in certain waters and, you know, the- in certain parts around the coast of Africa, along the Somalian coast, around the West African coast, there's a- it's quite well known and that there're- that there are security issues. And those are, you know, those are also well known in the popular mind. When ship drop containers in adverse weather, when accidents happen, there have been some really terrible, terrible accidents in the past with oil spills and the like. But then also some, which I think were quite illustrative of its role, its key role in global trade when the Evergreen got stuck in the Suez canal, right. And suddenly, everything that, you know, consumers in the US and in Europe had ordered for Christmas got delayed, because suddenly the ships couldn't flow, their normal trade and whatnot. So it really, it's- I think, what was interesting about that particular incident is that it really showed and demonstrated, there was so much visibility around the sector at that time, which it doesn't normally have. And I think what that also does, though, for the mentality in the sector is that there's a little bit of a- it's not being recognised for the benefits of shipping, which are also enormous, right? As I said before, it's what's enabled global trade and thus, globalisation of value chains and whatnot. And the fact that we, you know, we rely on on goods that are produced around the world with materials that are shipped around the world, all of that is possible due to shipping, and it's very efficient, both from a cost perspective and from an environmental perspective, nevertheless, but it also is under the radar. And so the unseen sector, it's also unseen emissions, because they're not, you know, they're not part of the national registries and the like. So it's a- yeah, it has some some adverse effects as well, that it remains quite unseen. And transparency is one of the big issues that we're looking to address at the Global Maritime Forum as well.

So, but it's got- but because it's such an ancient part of the global economy, and so important, it's actually got its own global organisation that creates a level playing field really, a rulebook, that's a global rulebook. And I guess that dates back to the foundation of the International Maritime Organisation headquartered in London, back set up in the 1950s. And that's sort of almost an asset, right, that we have this global regulator that looks after the sector. I don't if you want to say a bit about how important the IMO is in this sector?

I think there are a lot of sectors that actually envy the fact that that shipping has this global regulator, especially when we face such a big challenge as decarbonizing the sector, right, because it really can create this level playing field. And we've seen the IMO also act really decisively in situations where there was a crisis. I mentioned this idea of accidents before. So the Exxon Valdez oil spill, which some will recall, if nothing else, than in sort of the imagination, or will be aware of happened, led to regulations that were rolled out, actually really quickly. So new requirements on how ships are built, they had to have double hulls instead of single hulls, and that happened really quickly. So having a global regulator that can really go in, and step in, and set new requirements for the vessels and plough the sort of the seas, I think that's a really important role that the IMO plays. But you mentioned before this idea of shipping being a hard-to-abate sector and there are some reasons for that. So it's not one-sided. To some extent, you could say that, "why is it normally bucketted in with the hard-to-abate sectors?" Well there are some good reasons for that. The one is that there's really a fuel switch required. It's not a sector that can easily be- ships can't easily be electrified, except for really specific circumstances. Then it's also- it's quite hard to pass on the cost. There's a challenge that we see in other sectors as well around sort of this landlord-tenant dilemma where those that pay for the savings of new investments into more efficient technologies aren't the ones who necessarily reap the benefits. So the- yeah, so there are various diverse different mechanisms that mean that that's one of the reasons why it's considered hard-to-abate sector, nevertheless, even though it does have this global regulator, and which- a global regulator that really has stepped up recently, in terms of delivering a framework for change.

So yeah, we're gonna come back to, I think, the question of how do you decarbonize the shipping sector with technologies? But just sticking with the IMO for a second, it always struck me that what was quite fascinating about the IMO was that the power balances there are slightly different to normal UN negotiations. And it's because of this question of flags of convenience. And the fact that that gives prominence to countries which are sometimes not- they might be marginalised in other UN or Gx conversations, but in the IMO, tiny little nations that have got lots of vessels flagged in their nation, it gives them an outsized voice sometimes, doesn't it? I don't know if you want to say anything about that?

Yeah, absolutely. So it might be helpful to put a little bit of context around it like why? What is that? What's that about? Yeah, what is it all about? So basically, what it means is that, so some of the big ship owning countries, and they are still important, so let's not diminish their importance, but the big ship owning countries are China, Greece, Japan, the US, Norway, Singapore, Germany, Korea, like those big economies that were- most of them are big economies, where there's a high concentration of ship owners, but under IMO regulations, ships can be flagged elsewhere in other countries that offer so called flags of convenience. And what that means is that there, at least in some parts of the industry, has been a drive towards flags that have less stringent standards and the like. So it's a way of decoupling where the ownership of the vessels are, and what regulatory regime applies, if you will, or what regulatory framework applies. And, in a way, it would be a little bit, if you were building a factory, and you're allowed to have ownership in one country but it was regulated by another country, right. So it's an odd construct. But most of the ships are- it's quite fragmented still. But big ship-flags, countries that have a lot of ships flagged under their hood, so to speak, are Liberia, Panama, the Marshall Islands, Hong Kong, Singapore again, the Bahamas. So there's not necessarily a direct overlap with where the ownership is. And what it means that those countries that have a lot of ships flagged have traditionally had quite a lot of influence at the IMO. So countries like Panama, or the Marshall Islands have traditionally carried a significant influence in the negotiations, because they're going to have to implement the regulations that happen there right. And they have an interest in the outcomes of the IMO, in addition to those where the ships are owned. So that's a different dynamic, right?

Well, and I can remember that, when I was working on shipping when I was at Environmental Defense Fund, the Marshall Islands, was- in particular had joined the dots as a very vulnerable nation to climate change. And there was this wonderful Environment Minister Tony deBrum, who was bringing climate change into the discussions in a way that was really quite forceful. Do you think that helped shift slightly the dynamic, because as you say, it's been a sector which has been slow to take on these bigger, longer term challenges.

Yeah, it certainly played an enormously important role in the context of the greenhouse- the initial greenhouse gas strategy that the IMO adopted in 2018. The influence of the Pacific SIDS, led by the Marshall Islands, was enormous in in holding other nations to account to come up with a strategy. Shipping has been left out of the Paris Agreement, because it was seen as particular, it's a little different. There's a there's a concept known as "shipping exceptionalism" and this is one aspect of it, right? It's a little different, it's globally- you need a global level playing field, yada, yada, yada. So for that reason, it was held out of the Paris Agreement. And so it was incumbent on the IMO to come up with a framework that somehow matched. Of course, this initial greenhouse stress gas strategy was not at all aligned with the Paris Agreement. But nevertheless, countries like the Marshall Islands and other Pacific SIDS played a big role in getting that initial agreement across the finish line. And that was sort of the impetus for a big conversation in the industry and a big movement within the industry towards its decarbonisation, because even the goals that were set back then meant that the sector is going to need to undergo a fuel shift, a complete switch of the fuels that it's using, and now, of course, we've just had- and we can get into that, I suppose, is there's been a new agreement, right, and a ratcheting up of the targets that have been set most recently. So just to explain a little bit, at the IMO there was a meeting in July, where a new and a sort of strategy was adopted. So after an initial greenhouse gas strategy was adopted in 2018, a lot of work has gone into, you know how will we reach these goals? And the strategy was finalised and adopted in July. In conjunction with the adoption of the revised greenhouse gas strategy, it was actually significantly ratcheted up in terms of its its terms, if you will, its targets.

Specifically, it went from halving of global emissions by 2050, to now fully zero emissions by 2050, right. So that was a big jump in ambition. And is it true that in shipping, really the interest of the sector is to properly decarbonize? They're not offsetting, are they, they want true zero. And now they're aiming for that by 2050. That's quite a big jump. What do you think led to that sudden increase in ambition?

So yes, it is a huge jump. I think one of the things that has led to that jump is a line of sight on what the solutions might look like, in 2018 looked much less clear, now has really kind of come to the fore and understanding, "okay, what might that transition actually look like?" I think another big thing, honestly, the factor is that, you know, the effects of climate change are already visible. A lot has happened since 2018 in understanding the deepening climate crisis in which we live. And so that has also led to a sort of a renewed impetus, if you will. And then finally, there's been a lot of activists and others that have really spoken to this misalignment with the Paris Agreement and why one sector should be allowed to stand outside of that. I think that's been- that's been misgivings, and rightly so around that. So making sure that the sector is more in line with the objectives set by the Paris Agreement. It's not fully there, but it's pretty close. And one of the things that was exciting in addition to this sort of the 2050 goal is there were some interim targets set as well, that have been- that are really good. And so it gives not only an end goal, but a sort of trajectory of how to get there.

And I mean- I suppose the difference between the IMO and the UNFCCC, for example, is that shipping is used to setting rules that are enforced, right, that are regulated. And so, part of the slowness is the fact that it's not voluntary. It's an actually legally binding commitment on countries. And so the status of the targets, though, is still that they're part of a strategy. But we're now expecting legally-binding policies, right, and measures to come in, is that correct?

Yes. So alongside the objectives, so the strategy, there was- a work plan has been adopted for when legally binding regulations will come into place. And there's a schedule, effectively over the course of the next year, there's going to be a sort of a set of meetings, and each one of those has some specific goals as to which measures will be adopted at which time. And so by the end of next year, we should have the legally binding regulations, and they should enter into force by 2027. So that's the timeline that we have. So it's quite a, it's quite a tight timeline, if you will, if you think about especially what the sector- at which speed it normally moves. So this is, really exciting. And it's really exciting to see how quickly it has gone from sort of something that was deeply misaligned with a Paris agreement to something that's much more closely aligned with the Paris Agreement, and then the schedule of regulations that are sort of going to be coming down the pipeline over the course of the next year.

And those actual measures, then, to get to the targets, and there is a target set for 2030, right, so at least an objective to get to a reduction in 2030, they're going to take on different characteristics. There's likely to be a measure that's addressing fuel standards, right, or something about the CO2 content of fuels. And then they'll also be likely an economic measure, a measure that creates a kind of price, a carbon price that people can invest against. Is that, am I interpreting that correctly? That there are likely to be two measures that we get on shipping?

Yeah, yeah, that's correct. That's absolutely correct. And they are- and they will be- the idea is they will be pegged against the sort of the, the trajectory that's been agreed upon, right. So they need to follow the sort of- they need to be- have the effect that we reach the objectives that have been set by the strategy. So yes, that's absolutely correct. So a fueld standard and some kind of economic tool. And there are lots of different ways to skin that cat, and I'll leave it to the policymakers at the IMO to come down on what will be the most suitable one of these different- but there will be a combination of technical and economic measures. And they're comparable to tools that exist in other contexts as well. I mean, a fuel standard is not it's not a it's not an unknown instrument. It's something that's been applied to cars, it's been applied to, you know, in other contexts as well, right. So it's a known entity, and once it's in place, you can sort of fairly quickly see the market respond to that as well, which is quite interesting and why we really look forward to those measures coming into place. And then there some other aspects that sort of, you know, there's that kind of that trajectory of the sort of how we get to zero. But then there are also some additional targets. So one of the ones that we find quite interesting is there's a target to achieve 5%, 5 to 10%, zero, or near-zero propulsion by 2030. So the way to interpret that is it's basically a 5%, zero-emission fuel uptake by 2030, is effectively the objective that's been agreed upon. And that's, that's giving like really tangible "okay, that's a certain amount of fuel that's needed- of zero-emission fuel that's needed for shipping by 2030. So how do we get to that, right? It gives us these really concrete things to work towards, because it's specific volumes at specific timelines, and that allows us to sort of start unpicking what needs to get done in order for us to achieve that, which, you know, I mean, 2030, in the context of an industry with assets that have 25, 30 year lifespan, that's not a lot. Or indeed, like the infrastructure that- exactly that's tomorrow- well it's kind of yesterday actually!

Just sticking on the economic measures that- I mean, the reason this is needed, and we're gonna come on to talk about the particular ways in which you can switch fuel, but, it is because almost anything you do is going to be more expensive than burning heavy fuel oil, right and heavy fuel oil, it's the kind of bottom grade of the barrel, it's kind of pretty filthy stuff, it's cheap, and that's what the industry runs on, by-and-large. There's been some shift into gas, but it's not, it's still predominantly oil-fired. And that price difference is huge, right, to go from something that's dirt cheap, where your pay- and also you're paying absolutely no tax on your fuel, like aviation fuels, that shipping and aviation fuels don't pay any vat or income tax or anything or any tax on their fuel use. So to close the gap between these new fuels, which are going to be more expensive, and the cheap fuels that are used today, it's going to need quite a hefty economic instrument. But I suppose one thing I'm interested in is that, just as we've done in the power sector, whilst we might need a $250-a-ton levy or carbon price to actually close the gap, you don't need to levy that amount of money on everyone, right, you can put a much smaller levy on everyone's purchases, and then aggregate that up and pay it out to the people who were prepared to make the early investments that people were going to take the risks on the first of a kind, they can be they can be given a subsidy or a contract for difference even that helps close the gap. So you can get to a $250 a tonne carbon price, but that doesn't that's not enough. Not everyone has to pay that amount, right.

Yeah, that's exactly right. And indeed, to be completely frank, I mean, obviously the end objective is to have that economic instrument implemented at the IMO. But some of that can even be done in a regional or national context. Because for the first movers to move, they don't necessarily need a global regulatory scheme, rght. So there can be certain schemes that are implemented on specific trade lanes or in specific geographies, to support those first movers so that they can get out the gates, right, and sort of pave the way for the rest to follow. And so that's one of the really exciting things. And you're absolutely right, it is relatively small when you think about the scale of the change that is needed. And yeah.

So let's get on to this discussion then about how do you switch out heavy fuel oil, or LNG as it's being used some in some ships, into something different and that there are pluses and minuses with all the options that are out there, right. And I wonder if we can just quickly discuss- I mean, you've mentioned electrification, and electrification obviously is the solution for land-based transport, but it's a lot harder when it comes to long-distance ships, right? The ferries, the short haul, they are electrifying. I've seen an electrified tugboat, I've seen electrified ferries, but it's- we're really here talking about international global shipping and the really biggest vessels, and there electrification doesn't work. So we are looking at an alternative form of propulsion, and it groups into a set of alternative fuels. And we can also maybe talk about nuclear as well. So anyway, over to you, just to give us a flavour of what are the leading options when it comes to switching out.

Yeah, so I mean, what we can't do on board the ships I think we can do on land, which is electrification, right. And so pretty much all the fuels that are that are seriously in consideration for fuel-switch for the maritime sector are electricity- they're green hydrogen based right. Well I say electricity-based: it's a, you know, there's different categories of blues and greens and whatnot. So of course some could be produced in different ways, but effectively, all the fuels would be pretty much hydrogen derivatives. And the two leading contenders at this stage are ammonia and methanol. And let me start with methanol perhaps, because that's actually in use already. And it's really interesting to have seen how quickly this is moved were a technology that was seen as quite out-in-the-distance is now in operation. The first methanol-powered ship has been delivered. It was, it was named earlier this year, actually just a few months ago here in Copenhagen, where I'm based, and it's now in operation and running on methanol. And there are many more ships actually on order to run on methanol in the future, many of them being delivered over these coming years. The distinct advantages of methanol are just that, the technology readiness, right, and it's, it's a fuel, that's a pretty well understood, it's easy to handle, it has an existing regime already in place because it's been under development for some years. The ships that run on methanol, they can- the ships now running on methanol as a new build, but ships can be relatively easily retrofitted to run on methanol. And so those are some of the opportunities, but there are also some challenges. And the biggest challenge is that it's produced using- so it's a net-zero, well on a well-to-wake, it's a net zero of fuel, and it uses carbon- you need carbon to produce it right? So, and there are some concerns around the scalability of the fuel, and what that means in terms of the cost. So that's particularly so biogenic carbon, where shipping will compete with other sectors to use some of this for, for example, with aviation and other sectors who might be able to pay more for this fuel. And that's why ammonia is often seen as a long-run solution for the shipping sector, because it doesn't have those same kind of molecule constraints, if you will, it can be produced purely using green electricity, right. And that's kind of the potential of ammonia as a fuel.

Yeah. So the the real challenge then is methanol, a known substance, you know, relatively easy- shipowners are comfortable with it, but the feedstocks have to be sustainable, because as you say, it's taking a form of carbon, and that once burned, it releases that carbon back. So it has to come from a biogenic source, and that's going to compete with maybe food production, and also you say, sectors who can perhaps pay a bit more for a fuel that they really need like aviation. But if we think about then ammonia, which is essentially a carrier for hydrogen, right, it's NH3, it's a way of moving hydrogen around or using hydrogen. And because it doesn't have any carbon, there are no carbon emissions. That's the the advantage, right?

Right, and so from that perspective- and it has a cost. So again, the cost comparison with methanol comes out favourable in the long run, right. But it has the challenge, well it has multiple challenges right now. So the one is on the technology readiness, although I will say a lot has happened even these past few months. So the first engines are reaching the sort of the approval-in-principle phase, the first vessels are being ordered. Now they're not been or rather than sort of the high level, I want to reserve a slot to build to build a ship, eventually down the road when the engine is ready, right, so that- those sort of slot reservations are beginning to happen. So there's a lot happening right now over these months with technology readiness, and sort of the vessel orders and interest into ordering vessels with ammonia-powered engines. But we've got a lot to do still on the regulations and safety because of course, the big, big, big challenge with ammonia is that it's highly toxic, and highly corrosive, and flammable. So those are not great things. I mean, I think the advantage is that it has been used right, in fertiliser, it's, you know, it's been used and handled around, it's transported already. It's a commodity that gets traded already. There's existing ammonia infrastructure that could be used for these initial trades, but it is one that hasn't been used and applied in the context in which it's looking to be applied. And so we need to make sure that we get the regulations and the safety regimes in place so that it can beused safely in shipping. And there's lots of work ongoing in that so regulatory regime- sort of the regulatory authorities in Singapore, Rotterdam and some of the other big port-cities that are also big bunkering hubs. So fuel hubs for shipping are right now in the process of going through all these mechanisms, the engine manufacturers, the shipbuilders in Asia are also working full steam ahead to make sure to have the technologies ready and making sure that they get approved, and that you have all the sort of the safety regimes in place around the vessels so that they're ready to go from later this decade, probably around 27, 28 is when we're expecting the first ships to go fully into operation. There might be a few examples that start earlier, but that's yeah, that's sort of the timeline that we anticipate there.

Well, that's amazing, because the last time I looked at this was 2019, when the Environmental Defense Fund did a deep-dive on ammonia for shipping. And, I mean, you've mentioned many of the advantages, but one of them was that it doesn't need to be stored at cryogenic levels like hydrogen does. And because it's NH3, you can fabricate it using green electricity as you described, which could be coming from abundant solar and wind resources. And then it just needs to be combined with water and air. And then you've got a fuel right and it's a drop-in substitute for diesel in many engines, right, that you can blend, that you can actually adapt an engine to take full ammonia, and then it's got the prospect of fuel cells down the line, which would be even more sustainable once the costs come down on fuel cells. So it seems to have a good path. But as you say, it's not a nice substance to have to handle, and it also does create Nox, so you need Nox-abatement technology. So there isn't- it's not perfect. It also, in terms of storage, as I understand it, it takes about four times the volume of fuel, because it's not as carbon- it's not as energy dense as the heavy fuel oil they're currently using. So you do sacrifice some of your ship to larger fuel holding tanks. Which brings me to one of my favourite topics, which is nuclear because, I'm right that- now because of the targets, and because this 2050 goal is now a true-zero goal for shipping, there's been a resurgence in interest in whether we could adapt some of the military uses of nuclear propulsion for commercial ships. Is that- am I right? Or am I being too optimistic?

That depends who you ask! But yeah, let me- but can I just, if it's okay, I just wanted to make sure that we're getting the facts right. So ammonia and methanol are half as dense as regular fuel oil and I think in most cases, what is anticipated is that rather than sacrifice cargo space, it's about refuelling more often, basically, right. So it has definitely some implications, but it's not as dire as all that. So I think the biggest thing is really the cost and safety are the are the biggest issues both for methanol and for ammonia. But you're right, there has been a resurgence in interest in nuclear. And basically there're two things that are being looked at. And I think they probably are in different timelines is how I would assess it. One is around nuclear for producing the fuel. So power, you know, using it to produce the fuels, whether it's methanol, or ammonia, or whatever it might be. And that goes on board the ship. And the other option is to- the other opportunity is directly onboard the ships. And of course, one can see why that would be tremendously attractive, because it's super energy-dense. You- it's like putting a battery that never dies, or very rarely dies onto your ship, you can just stick it on there and the ship can probably operate for the majority of its lifespan on that one, small modular reactor, which is I think the technology that's, that's most sort of thought about for this application. And it also means that the ships could probably go quite a bit faster than what they do today. Ships generally travel significantly slower in order to save on fuels and lessen emissions. But with nuclear, you could go much faster. And it could be more efficient from that point of view as well. And, you know, the waste product- my understanding is that for the waste product from small nuclear reactors can probably be repurposed, reused, recycled, and- I mean what's the right terminology, you probably know better than I do - recycled? I think so it does have a sort of a- these inherent benefits that are incredibly attractive. But, and there are big buts right?

Some big buts, but it's worth pausing just to say that, obviously, large vessels including the entire fleet of aircraft carriers in the US, are currently powered with nuclear reactors. I mean, obviously, it's a military use so the costs are not as critical, but the security of it, and the reliability of it, and the ability for it to move large vessels long distances reliably, that's kind of proven. The big question is whether it can be done at a commercially cost-efficient way. And I guess the acceptability of it in terms of people being happy with it- but that feels to me less a technical challenge and more a social challenge that would need addressing.

Well there are some technical challenges as well, right. So- and I think you probably know more about what the readiness level of these sort of more modular concepts looks like. But you're right. So there's costs - from my point of view, there's a bit of like the readiness of the technology. And is it - you know, I think the proponents will speak of it as in this decade. And that might be true on-land. But for ships, I would say the application is probably a little further down the line more like 15 years or something like that, right, 10, 15 years down the line. And I do think that there's a sort of a social acceptance or perception issue around it. And there's a huge regulatory implication as well, right, because ships do go all over the world, and for some of the ships for whom this would be particularly attractive, they trade globally. And they are under a- as we've discussed before, with the IMO under a regulatory regime, but one that nevertheless differs, depending on where they're owned, where they're flagged, etc. So there, there there's certainly some concerns that are valid to raise.

I think that's true of any anything that's going to be have potential harm, human harm associated with it right, that also applies to ammonia, as you say-

That also applies to ammonia. Absolutely, absolutely. I think the difference with ammonia is that it's a commodity that's already traded, right, so it's already fairly well understood, whereas with nuclear, I think the commercial application is nevertheless- is a more challenging one. But yeah, but it's definitely worth keeping an eye on because we do see that enormous uptick in interest over these these past few years.

Yeah. One of my favourite facts, perhaps not a lot of people know, is that the US had a commercial nuclear fleet- nuclear ship called the HMS Savannah.

I know!

And are- there's a Russian bulk carrier as well. So it's not that it's not been done, it's just whether or not it could become widespread and affordable. Those are the questions, right. Anyway, because rather than spend too much time on, I wanted to- there's a couple of- one last question, actually, that I wanted to touch on, because it's important, is that there's a paper that's just come out. Back to the climate challenge, from Jim Hansen, Professor Jim Hansen, who's kind of, you know, the person who perhaps did most to bring climate to our awareness decades ago, who's been looking at the recent spikes in climate impact, and looking at the effect of having taken sulphur out of our fossil fuels, but not the CO2. So both on-land in terms of coal burn, we've cleaned out the sulphur because of acid rain. And shipping, as is its tradition was a little bit slow and it took sulphur out quite recently. And there's a kind of a non-trivial risk that having taken sulphur out, which actually has a effect of cooling, because it produces a lot of particulates that can that can defray some of the warming, that having taken sulphur out, but not CO2, we might have made a bad situation even worse. And I wonder- for me, that just signifies how important is that we we do everything we can to catch up on the carbon, on the CO2 problem that shipping has, because we might have just done the world's worst thing, which is clean up those particulates but not address the greenhouse gases.

I couldn't agree with you more. I think for me, it really speaks to the urgency that there's- we really have no time to wait. I think the other thing that's worse than that, I think that's spilled into this other conversation of some of the alternative fuels that are in play, it speaks to unintended consequences, right. So being mindful that any solution that we look at, that we look at them in a holistic point of view, and that we really think about all the potential sort of knock-on effects that they might have and understand those well, and really look at it from a systems perspective. So those two things are for me the key takeaways from that latest finding.

But the fact that- but it comes also back to the fact that the reason we were able to take sulhpur out is because we have a global rule-setting body which is the IMO. So if the IMO does follow its timetable, which is quite aggressive, to get these measures in and they're investable measures, and we see the front runners who are taking the risks being rewarded, and then technologies come down the cost curve, there's no reason why this sector couldn't become once again a completely clean way of moving goods around the world supporting development, sporting trades, putting economic growth, and then everybody can have full pride in being part of the shipping sector because I feel like there's still that pride but there's also a sense of feeling like they've been under a lot of criticism. Nobody likes to see the black smoke, you know, when a cruise ship or a big carrier comes in, you can see the impact it's having visibly right? And it probably is- it's not now impossible to think that we can get rid of that, that sort of guilt or shame that shipping perhaps carries, and move to a fully-clean system. And that's, that's presumably what gets you up in the morning and keeps you excited.

Yeah, most certainly. So I mean, I think if you look at the progress, and this is something that's - I think, for me has been one of the most rewarding parts of working with the Global Maritime Forum, and in the sector - is how big of an impact the work can have, right. The potential for impact is just so huge. It is in some ways a contained system, even though it connects to the rest of the world and to global trade. But nevertheless, it's a finite number of vessels, it's a finite amount of fuel that needs to be switched out, that needs to be replaced. It has, you know- and there is this enormous- and there's a sector that's really keen and willing to take the steps that are needed. And that's so exciting to see that play out and see how rapidly it moves. That's what makes me super, super excited about being part of the sector, and really being able to see how quickly it moves. And, you can really- there's line of sight on this. Obviously, there's no guarantees about how we make it happen. But there really is like- I sense the sort of, both urgency in the sector, the pressure that's on the sector to change, the regulatory regime that's moving fast, technology is moving fast. Like all the conditions are right for the sector to actually make it happen, in a way that's so hard to see across other sectors, right. So that's, that's super exciting. And where we can really see the speed matching the need, right?

And as you said really early on, that is the envy, potentially of other sectors, right? Because you've got a technology that can move, and you've got a rule-setting body that can help it, that can help defray the costs and make this affordable. And if you were sitting there in the steel sector, for example, you'd love a body like that, right to level the playing field, get rid of all the competitiveness distortions. So yeah. So perhaps we end with a bit of, you know, hope and excitement and praise to the fact that this is a sector that is now moving, and has a regulatory body to help it on its way, and as you say, national governments are also helping. So it's an exciting area, maybe we'll come back to it in a future conversation andsee how it's going?

Yeah absolutely. And then I think it probably- we probably don't need to wait that long to understand the big shifts that are already happening. I think there's a lot of concern, also, though, and I think that's worth just hitting on as well, which is around will the fuels be available, right- if I build the ship, will the fuel come? So it's also dependent on developments happening in other sectors, in particular on the green hydrogen fund. And we've seen, obviously, national policy, industrial policy play an enormous role in accelerating developments, they're bringing down the cost and whatnot. So it's a mix of sort of concern and some- and lots of optimism.

Thank you for ending with that, because - and I'm sure this will make Michael smile - is that Michael has been, you know, instrumental in bringing about this idea of the hydrogen ladder, that there are certain uses for green hydrogen that should take primacy in our discussions, in our policy, in our in our investments. And shipping is one of the top options for use of hydrogen. It's one of the places where it makes complete sense, especially if you convert it into something like ammonia, where it's then even more easy to to handle and store. The problem is that at the moment, we've got a sector that's looking at hydrogen as the kind of swiss army knife for every solution. And that might be actually being detrimental to getting it across the line in the places where it's really needed. And so perhaps we should pay tribute to that hydrogen ladder and also get, you know, leave with the message that this can happen. But we need to focus, right, and we need to make sure that we're applying those new fuels to places where they're most needed and where they can be most readily adopted.

Yeah, absolutely. And I encourage Michael to keep banging on that drum. I couldn't agree more. Couldn't agree more.

Don't worry, I think he will! Alright, well listen, we're gonna wrap it up there. And thank you so much for your time and lovely to catch up with you, Jo. I hope we can see each other again in real life. Hopefully, the GMF meeting, where's the next one going to be held?

The next one take will take place in Tokyo in October of next year. So that's also really exciting. It's an interesting nexus where this sort of convergence between industrial usesm, power sector, decarbonisation, maybe the nuclear debate as well. It's gonna be a great place to have a lot of these discussions in sort of a major shipping nation as well.

Wonderful. Well, I look forward to that. Okay. Thank you so much again, and I look forward to seeing you again. Take care.

Thank you.

So that was Johanna Christensen, co-founder and CEO of the Global Maritime Forum. And as always, we'll put links in the show notes to particularly interesting materials related to this conversation, including the recently announced IMO strategy.

If you've enjoyed today's conversation, please remember to like, share, and subscribe to Cleaning Up, or leave us a review on your chosen podcast platform. And do please, please spread the word on social media or by telling your friends and colleagues and if you want more from Cleaning Up, sign up for our free newsletter at cleaningup.live, where you'll find our archive of over 160 hours of conversations with extraordinary climate leaders. Cleaning Up is brought to you by our lead supporter, Capricorn Investment Group, the Liebreich Foundation and the Gilardini Foundation.

Is Shipping the Easiest "Hard-to-Abate" Sector? - Ep143: Johannah Christensen

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