South Korea invites bids to support eco-friendly conversion of ships as it lays out strategy to decarbonize shipping by 2050

In response to the expected strengthening of decarbonization goals for the shipping industry, South Korea has released a strategy aiming to decarbonize its shipping industry by 2050.

The strategy is being released ahead of the anticipated 80th meeting of the Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) in July 2023, which is expected to raise the bar for global shipping and align its decarbonization goals with the Paris Agreement.

As a result, the IMO is expected to raise its 2050 carbon emission reduction target for international shipping from 50% to 100%. The introduction of a carbon tax is also one of the likely scenarios for shipping moving forward as a way of accelerating the adoption of green fuels.

Regulations in Europe are also tightening with shipping included in the EU ETS in line with the European Green Deal.

Acting preemptively to the expected shifts in the shipping industry, the Ministry of Oceans and Fisheries of the Republic of Korea (MOF) released a strategy to decarbonize the shipping sector by 2050.

According to the ministry, this is the first time such a target has been promoted in an Asian country.

The four major pillars of the strategy are the transition to an eco-friendly fleet, improving investment conditions for the shipping industry, expansion of eco-friendly technology and future fuel infrastructure, and establishment of carbon-free sea routes and international cooperation.

The first step in the strategy is the transition to an eco-friendly fleet by converting ships owned by national shipping companies into low-carbon and carbon-free fuelled ships, as a way of ensuring the country’s fleet remains competitive on a global scene.

The ministry said that 867 ocean-going ships weighing around 5,000 tons, which are subject to international regulations, would be candidates for conversion. In order to respond to the EU ETS regulations, a total of 118 vessels are planned to become eco-friendly by 2030, which is set to include preferential conversion of 60% of its liner fleets in Europe and the Americas.

In addition, the goal is to replace old ocean going ships with 100% eco-friendly ships by 2050.

For newbuilds, it is planned to equip them with dual-fuel propulsion enabling them to utilize eco-friendly fuels such as e-methanol and LNG by 2030, and promote the introduction of ammonia and hydrogen ships in line with the technological advancements in the sector.

The roadmap also plans to support the eco-friendly remodeling of ships that are less than 10 years old and can convert to eco-friendly fuel, and improve ship energy efficiency by installing eco-friendly equipment.

For this year, South Korea has earmarked KRW 13 billion ($10 million) to finance the conversion of over 7 ships in its national oceangoing fleet, MoF said.

A call for projects will be open from 22 February to 27 September seeking bids to convert ships to run on eco-friendly fuels, such as LNG or hydrogen, or install marine pollution reduction technology.

The winners would be selected by a screening committee based on the assessment of the eco-friendliness of the ship, the business soundness of the shipping company, and the feasibility of the business plan.

Meanwhile, in order to entice the eco-friendly transition of national shipping companies, subsidies (7-10%) are planned to be implemented according to the eco-friendly grades (grades 1 to 4) certified by the Korea Maritime Transportation Safety Authority (KOMSA).

The preliminary certification grade of eco-friendly ships will be determined by the KOMSA, and detailed projects will be carried out by the Korea Maritime Promotion Corporation, the ministry said.

One of the key considerations in the transition to greener ships is cost, and as such the ministry plans to provide support to its shipping companies to facilitate investment through policy and finance frameworks.

Due to the high cost of conversion, estimated to reach KRW 1.8 trillion by 2030, the government plans to expand support through public funds and financial institutions to provide ship loans and lower interest rates.

Furthermore, the government plans to establish a new fund of up to KRW 1 trillion to support small and medium-sized shipping companies’ eco-friendly transition. Potential public-private partnership projects are also being considered for small and medium-sized companies to help accelerate the transition.

Under the third pillar, the strategy will be supporting the development of eco-friendly technologies and infrastructure for future fuels. The government is funding a project to develop low-carbon and non-carbon ship technologies, including LNG, hybrids, ammonia propulsion, and hydrogen fuel cells over the period of 2022-2031. The plans cover the expansion of port facilities to prepare for fuel conversion to e-methanol, ammonia, and hydrogen. What is more, the strategy will promote the development of biofuel technology and the expansion of floating carbon-free fuel infrastructure.

Additionally, the government plans to improve laws covering the entire life cycle of marine fuel.

The fourth pillar is aimed at promoting the creation of green corridors with international partners such as the one agreed between the Northwest Seaport Alliance (NWSA), the marine cargo partnership between the Port of Tacoma and the Port of Seattle, and the Busan Port Authority. Under the partnership, Korea and the United States will study the feasibility of creating a green cargo shipping corridor and support the adoption of green fuels on these routes. The country aims to expand this type of partnerships across Europe in Asia.

The strategy for fully decarbonizing shipping will be executed in a collaborative effort between the government and the private sector. Industry CEOs and ministerial-level consultative bodies will periodically assess the implementation status and incorporate enhancements accordingly, the ministry added.

Overall, the government plans to invest KRW 8 trillion by 2030 and a total of KRW 71 trillion by 2050 for the alternative construction of eco-friendly ships. The strategy is expected to have a positive impact on the domestic shipping and shipbuilding industries, with economic effects of up to KRW 158 trillion by 2050.

The newly released strategy builds on the 2030 Green Ship-K Promotion Strategy, which the ministry released in 2020.

The initiative had initially set out to phase out greenhouse gas emissions of up to 70 percent by 2030 by exploring advanced emission-free technologies in ship design, future fuel, renewable energy, and equipment.

Under the plan, MOF wants to facilitate the transition of both the public and private sectors by turning 15% of the Korean-flagged ships (528 out of 3,542 ships) into greener ones. Upon successful implementation of the strategy, MOF forecasted that the GHG emission in 2050 would stand at around 5.93 million tons, half of that in 2017 (11.81 million tons).