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Efficient, but not yet sustainable

However, this very efficiency must not obscure the fact that the industry is facing a far-reaching environmental transformation, as operations are still largely based on fossil fuels.

Particularly problematic is the use of heavy fuel oil, a heavy residual product from refineries. This fuel is cheap, high in energy content and has been the standard in international shipping for decades. However, it is highly problematic from an environmental perspective. Its combustion produces not only CO₂ emissions, but also sulphur oxides, nitrogen oxides and soot particles. These pollutants impair air quality in ports and coastal regions, have a negative impact on the health of local residents and also contribute to Arctic warming when soot settles on snow and ice, reducing their reflectivity.

In addition, there are other environmental impacts that are often less visible in the public debate. Underwater noise disturbs marine mammals and other marine life, whilst sewage and waste pollute sensitive ecosystems. Whilst stricter regulations now apply to international shipping through the International Maritime Organization and the European Emissions Trading Scheme, the key question remains:

How can we achieve genuine decarbonisation in an industry that is globally interconnected and technically highly complex?

How can decarbonisation be achieved?

The answer does not currently lie in a single technology, but in a mix of short-term efficiency measures and long-term fuel switches.

Among the most effective immediate measures are:

  • Slower sailing, i.e. slow steaming,

  • better utilisation of ships’ capacity,

  • optimised route planning and

  • a more intelligent design of the hull and propulsion system.

  • Wind assistance via sail or rotor systems, as well as

  • digital connectivity, can also help to reduce fuel consumption and emissions.

When it comes to alternative propulsion systems, the picture is mixed.

  • Batteries and hydrogen are particularly suitable for short distances or ferry routes, but quickly reach their limits in terms of range, storage and infrastructure.

  • LNG (liquefied natural gas) is often presented as a bridging technology, but must be viewed critically in the overall assessment due to methane leaks.

  • Methanol is regarded as one of the most promising candidates because it is relatively easy to store and can, to some extent, be used in existing systems. However, its climate impact depends heavily on how it is produced. Only green methanol produced from renewable electricity can make a genuine contribution in the long term.

  • Ammonia, on the other hand, is seen as an option for the future, but the technology is not yet fully developed and raises questions regarding safety and emissions.

Well-to-wake analysis

For the industry, therefore, it is not just the fuel itself that matters, but the entire value chain. How is the energy generated? How is the fuel transported and stored? What emissions are produced from production through to combustion? This so-called ‘well-to-wake’ approach shows that solutions which are perceived as clean are, in practice, only sustainable if their production is also low-emission.

Mag. Jürgen Maier, Senior Fondsmanager, Aktien CEE & Global Emerging Markets, Raiffeisen Capital Management

Author

Mag. Jürgen Maier, Fund Manager, Emerging Markets Equities

At a turning point: sustainable shipping

Shipping remains indispensable to global trade, but its future will be judged by how quickly it reduces emissions, air pollutants and environmental damage. The path ahead is not an easy one, but it is a necessary one. For sustainable shipping means not only more efficient engines, but also cleaner ports, less pressure on the seas and coastlines, and a new balance between global trade and climate protection.

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