Lack of strong national policies on green fuels holds back investments in shipping infrastructure, report says

November 15, 2022, by Ajsa Habibic

A new report by the Tyndall Centre at the University of Manchester, which highlights the role of the shipping sector in transporting green fuels, is urging governments to create far stronger national policies on low-carbon fuels in order to bridge ‘a yawning gap’ between government-led projects and what is required.

The report called “Shipping’s Role in the Global Energy Transition” identifies growth in low-carbon hydrogen and sustainable bioenergy as essential to meet the Paris Climate Agreement’s goals.

However, it found that a lack of enabling policies from governments, such as guaranteed markets and prices for producers and consumers, was holding back investment in the shipping infrastructure needed to support the global energy transition.

The world needs 50-150 million tonnes of low-carbon hydrogen by 2030, but there is a major gap between this and what is planned to date; already-announced projects will only produce 24 million tonnes by 2030, according to the International Energy Authority, and only 4% of these projects have a final investment decision.

Therefore, researchers at the Tyndall Centre called for stronger government policies to give low-carbon hydrogen producers, shippers and consumers the confidence they need to invest.

The report found that the sea transport of ammonia and bioenergy in the coming decades could match shipments of gas and coal today. However, this would require around 20 large new ammonia carriers a year, to link green hydrogen producers with consumers.

Given the 2–3-year timeline for constructing new vessels, shipping industry representatives said they needed certainty on hydrogen production as soon as possible to be able to justify the necessary investments in new infrastructure, the report states.

International Chamber of Shipping commissioned and welcomed the report, calling on governments attending COP27 to send “stronger market signals” to the shipping industry to reduce fears that any new ships built to transport low-carbon fuels would never be used.

The Tyndall Centre’s report also identified several potential considerations for government policy to increase their effectiveness at enabling investment.

These include introducing mandates for increasing percentages of green hydrogen, creating ‘production credits’ for the production of hydrogen, or providing guaranteed markets and prices for producers and consumers. Such measures are already being trialled in the USA, Germany, and India.

Guy Platten, Secretary General of the International Chamber of Shipping, said: “The shipping industry knows it has a huge part to play in global decarbonisation in the coming decades, transporting the new green fuels the world’s economy needs. But for us to invest, governments need far stronger policies to de-risk green hydrogen production.

“National hydrogen strategies must include an explicit focus on supporting the transport infrastructure needed for both imports and exports. The industry is ready to respond but we urgently need stronger market signals and infrastructure investment to make this a reality.”