Maersk Warns of LNG Risks in Carbon Trading Plan

The shipping industry is at a crossroads, with the implementation of carbon trading plans set to reshape its future. Maersk, one of the world's leading shipping companies, has raised concerns about the potential pitfalls of relying on liquefied natural gas (LNG) as a transition fuel. As the International Maritime Organization (IMO) pushes for net-zero emissions by 2050, the industry faces significant challenges and opportunities in its quest for sustainability.

The Environmental and Economic Risks of LNG

LNG has been touted as a cleaner alternative to heavy fuel oil, emitting approximately 25% less carbon dioxide (CO2). However, LNG is primarily composed of methane, a potent greenhouse gas that traps 86 times more heat in the atmosphere than CO2 over a 20-year period. A study comparing the life-cycle greenhouse gas (GHG) emissions from LNG to those of heavy fuel oil, very low sulfur fuel oil, and marine gas oil (MGO) revealed that when combined with a trend toward higher leakage, there is no climate benefit from using LNG, regardless of the engine technology. Specifically, the most popular LNG marine engine—low-pressure dual fuel (LPDF), medium-speed, four-stroke—emitted 70% to 82% more life-cycle GHGs than MGO. This finding underscores the environmental risks associated with LNG, particularly if methane leakage is not adequately controlled.

The economic implications of adopting LNG as a marine fuel are also significant. The IMO has signaled that it will regulate GHGs under its initial GHG strategy, and continued investment in LNG infrastructure on ships and on shore risks making it harder to transition to zero-emission vessels in the future. This regulatory environment could lead to stranded assets and increased costs for shipowners who invest in LNG infrastructure. Maersk's warning aligns with this perspective, as the company recognizes the need for a more sustainable and long-term solution to decarbonize the shipping industry.

The Impact of Carbon Trading Plans

The implementation of carbon trading plans, as warned by Maersk, significantly influences the adoption of LNG as a marine fuel. The EU-ETS carbon scheme, which came into effect on January 1, 2024, imposes additional costs on vessels operating within Europe. These costs are expected to increase over the next three years, reaching 100% of emissions cost by 2026. For Maersk, this means that the cost of shipping activities within the EU will rise significantly, impacting their profitability and operational strategies. As Morten Bo Christiansen, head of the energy transition team at Maersk, notes, "HFO and other fossil fuels, he says, are already beginning to give way to cleaner alternatives." This shift is driven by the need to reduce emissions and comply with new regulations, which will inevitably increase operational costs.



The Need for Rapid Technological and Logistical Changes

The IMO's regulations require commercial vessels to cut their carbon emissions by at least 30% in just six years. This rapid timeline necessitates significant technological and logistical changes. For Maersk, this means investing in new fuels and technologies, such as methanol, which can be sustainably sourced and significantly less polluting than fossil fuels. However, the transition to these new fuels is not straightforward. As Simon Bullock, a shipping and climate change researcher at the University of Manchester, points out, "Should the industry take any longer than that, it will be next to impossible for shipping companies to reduce emissions aggressively enough to meet the most ambitious regulatory targets." This urgency highlights the need for rapid innovation and adaptation, which can be challenging and costly.

Fuel Supply and Infrastructure Challenges

The transition to cleaner fuels also presents challenges related to fuel supply and infrastructure. For example, methanol, which Maersk is exploring as an alternative fuel, is currently in short supply. The global availability of methanol is nowhere near enough to meet the shipping industry's colossal demand. This supply constraint can hinder the industry's ability to transition to cleaner fuels, as noted by Christiansen: "The challenge for Christiansen and others like him, then, is to figure out how to transition vessels to alternative fuels without any major technological or logistical hiccups—and to do so in an incredibly short time." This challenge is not unique to Maersk; it affects the broader shipping industry, which must navigate similar supply and infrastructure issues as it transitions to cleaner fuels.

Conclusion

Maersk's concerns over the carbon trading plan highlight the environmental and economic risks associated with relying on LNG as a transition fuel. The implementation of carbon trading plans, coupled with the need for rapid technological and logistical changes, presents significant challenges for the shipping industry. However, these challenges also present opportunities for innovation and investment in cleaner, more sustainable fuels and technologies. As the industry navigates this transition, it will be crucial for companies like Maersk to lead the way in developing and adopting solutions that reduce total life-cycle GHG emissions, ensuring a sustainable future for global shipping.