Dunlop: The environmental price to pay if we fail to act is high

The shipping industry is waking up to the fact that it needs to do something now to decarbonize, and ESG rightfully sits firmly alongside safety as a key decision driver in the industry, Matt Dunlop, Sustainability & Decarbonisation Director at V.Group said in an interview with Offshore Energy.

Matt Dunlop became V.Group’s Director of Sustainability & Decarbonisation in November 2021. Over the past year, Dunlop has been working with the Maersk McKinney Moller Center for Zero Carbon Shipping, a not-for-profit organization, dedicated to finding practical ways to decarbonize the maritime industry.

“Since taking up my role I have gained a clearer insight into the complexities and challenges facing our industry as we strive to meet or exceed the IMOs target of halving emissions by 2050. Although much has already been done to transition the sector to greater sustainability, it’s clear there is still much to be achieved by adopting pioneering and transitionary fuels, embracing new technologies, using more advanced digital practices, improving compliance and reporting standards, etc.,” Dunlop explained. 

The shipping industry is facing numerous obstacles when it comes to decarbonizing its operations. The scarcity of alternative fuels, the low level of maturity of certain technologies, and overall uncertainty regarding regulatory policies are hindering the acceleration of the process. Dunlop noted that the Maersk McKinney Moller Center has identified five critical levers that stakeholders could activate to meet the key challenges and accelerate the pace of decarbonization in global shipping. These are:

• Technical advancements on ships
• Energy and fuel advancements
• Policy and regulation
• Finance sector mobilisation
• Customer demand/pull

As explained, to continue propelling the shipping industry toward carbon zero by the middle of the century, all five levers need to be activated in concert.

“We need first movers with fast followers close behind to achieve the acceleration of our ambitions,” he said. “Without action, the shipping industry’s emissions would increase by 20 percent by 2050.”

Commenting on the key technologies and sustainability pathways the UK-based ship management company is looking at to decarbonize the operations of its customers, Dunlop pointed to the importance of condition monitoring solutions for achieving greater efficiency and optimization.

“We have been on this journey for some time now, preparing for dual-fuelled vessels. We can satisfy IGF Code requirements utilising our LNG experience as a starting position. Our crews’ skills are critical to the ability to manage such vessels safely and efficiently. We must continue to place training and development at the top of our agenda,” he said.

“V.Group’s diverse in-house marine services capability, SeaTec, is a key differentiator. We provide eco-solutions for existing tonnage, producing data and tailoring packages to improve customers’ cost efficiency and support their energy-reducing decision-making.”

As a ship manager, V.Group acts as an advisor to owners and operators in defining a decarbonization pathway for a certain ship. Collaboration and information sharing about opportunities, new technology, and new fuels are critical in making this journey a success, Dunlop explains.

“Such sharing and open discussion will help ensure we create the effective solutions required, in the most economical manner,” he said.

“One example of this collaboration is how we work with customers to optimize vessel routing to minimize fuel consumption and thereby lower carbon emissions. This has led to tangible reductions in emissions along with significant savings for our customers.”

“Another example is how, through our partnership with McKinsey specifically, we are providing solutions to the decarbonization challenge utilizing the Fleet Decarbonisation Optimizer (FDO). This uses algorithms to industrialize and automate analytics that would have taken several months but can now be done in 2-3 hours. The end-to-end process for a single shipowner is 1 week for a robust and well-calibrated decarbonization roadmap.

“The FDO provides the most rigorous, fact-based perspective on the economics (e.g., capex, opex) and decarbonization available. The recommendations are tailored to the customer’s fleet’s starting point, goals and constraints (e.g., decarbonization targets, capex constraints), and is specific to individual vessels. It benefits from a consensus view of the economics and decarbonization of over 100 different ship efficiency upgrades, engines, and fuels.”

As informed, the FDO is built on top of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping’s NavigaTE total cost of ownership (TCO) model, which provides an industry benchmark. The database, which is calibrated through input from the Center’s 30+ strategic and knowledge partners, is one-of-a-kind in the industry.

The chicken and egg dilemma surrounding the availability and scalability of alternative fuels production to decarbonize the shipping industry is beginning to untangle as stakeholders from the shipping industry double down on the push for the IMO to come up with a more ambitious decarbonization target and a timeline with clear emission reduction targets and an end date for the use of fossil fuels in the shipping industry.

The concrete time frame combined with a carbon tax to help bridge the price gap between alternative and fossil fuels is expected to accelerate the switch toward a greener future.

Launching of green corridors and cooperation between fuel producers, shipowners, and cargo owners are starting to send stronger signals on the existence of demand for zero-emission fuels providing some confidence to investors in the production ramp-up. However, regulatory uncertainties still remain a major hurdle for owners and operators in moving forward.

“There are many uncertainties around how CII is imposed to the industry, soft or hard enforcement. Therefore regulators and policymakers have a duty to ensure we are operating on a level playing field. The CII rating mechanism needs to be supplemented by additional information to accurately measure if a vessel is operationally carbon efficient,” Dunlop said commenting on the CII implementation.

“There will be a cost to decarbonise our industry, but we can be confident that with the level of collaboration already demonstrated and a commitment to the future, the investment in change will be justified. With concerted effort, our industry is in a position to influence and control the cost of moving from carbon fuels to carbon-free fuels. Ultimately, we expect this to be at least partly absorbed within the supply chain and ultimately, by the end customer. The environmental price to pay if we fail to act is unthinkably higher,” he noted commenting on the decarbonization of the shipping industry in general given the ongoing geopolitical turmoil and global economic trends.

“We have reinforced our long-standing ambition to be the partner of choice within the industry. The ability to tackle and engage with ESG matters head-on is how we believe we will be judged in the years to come.”