Decarbonization of transport is key to reaching net-zero targets. But there doesn’t seem to be a one-fit-all solution to apply to all means of transportation.
In our interview with Eman Abdalla, we explore the challenges faced by the maritime sector and the important role that biofuels and energy policy play in reducing ships’ carbon footprint.
We’re not necessarily 100% sure as to whether biofuels are going to be the answer to decarbonizing shipping or not. We think it’s definitely a short- to mid-term solution that has the potential to be used to reduce the carbon footprint of the existing fleet.
Today, we’re absolutely using biofuels. We [at Cargill] are actually amongst the few that already have a biofuel program. We’re not just talking about trials and pilots.
We’re talking about scale, about a full-fledged program; we’ve supplied biofuels to more than 30 ships, approximately 12 to 13, 000 tonnes of biofuels have been supplied mainly in Rotterdam.
And we’ve also just started a biofuel supply program in Singapore; we’ve supplied two ships successfully without any issues. The good thing about biofuels is that they require zero capital investment and they mean a drop in fuel, so with an existing fleet, you can immediately start using them to reduce your carbon footprint anywhere between 20 to 30 percent.
We are big believers in biofuels – especially biofuels produced from second-generation waste. Cargill has recently built a biofuel plant in Ghent, Belgium, to process waste into biofuels.
The biggest challenge in biofuel production is access to waste oil.
For instance, out of 50 million tonnes of cooking oil being consumed globally, we only recycle 8 million tonnes.
Imagine if we had the logistics, network and setup necessary to collect 50 percent or 75 percent of the consumed oil, then the potential for biofuel output would be much bigger, and it would play a bigger part in decarbonizing maritime transport.
It is going to have a huge and positive impact on sustainability. Because the more biofuels we can use as an industry, the closer we get to reducing our carbon footprint.
In terms of cost, I would say that this is a product of scale. The more we scale our access to waste oil and the more refineries we manage to build to produce biofuels from second-generation cooking oil or waste oils, the better chances we’ll have to reduce cost.
Now, the most significant factor that will also play a role in determining cost and sustainability is an eventual carbon tax.
If International Maritime Organization (IMO) introduces a carbon tax, this will automatically compensate for the additional premium that we are paying today for biofuels.
For example, in Europe, we have subsidies, and we leverage those subsidies quite significantly. If there is a carbon tax, the premium you’re paying for the biofuels will ultimately be netted off by your carbon reductions.
We can’t really generalize. The growth of commodities depends on so many different factors.
Right now, geopolitical factors play an important role, for instance, but usually, all sorts of macro or micro factors may be involved. It tends to vary. But I think, eventually, commodities and the trading of commodities are going to change significantly.
Despite the fact that, up until now, there has been a globalization of the markets and, despite the fact that this may continue, there might be a lot more localization too, when it comes to trading patterns and also when it comes to the deployment of fleets.
As we continue on our decarbonization journey, we don’t think that the answer will be one specific type of fuel or zero-carbon fuel, whether this is methanol or ammonia or hydrogen. The answer will come from a combination of solutions.
That means that different segments and trades will be using ships with different types of zero-carbon fuels. Hence, the ease of trade and flexibility that we enjoy today will not necessarily continue in the future.
That is going to make freight procurement and trading freight a much more complex process.
That’s an excellent question. First of all, the maritime sector is a sector that is very challenging to abate.
The IMO faces a huge challenge within a very complex sector. In fact, the maritime industry consists of many sub-sectors that are extremely different in intricacies and in dynamics. For instance, you can’t compare the dry bulk market to the container market, and you can’t compare the tanker market with the cruise market, and so on. So, the IMO must be able to design and roll out policies that can actually apply to all of these different sub-sectors.
Overall, I think we’re definitely making headway.
We have seen the introduction of measures such as the Carbon Intensity Indicator (CII) and the Energy Efficiency eXisting ship Index or Eexi. The CII is more of an operational index, and, while we know that it’s not necessarily perfect and that it may suit certain segments more than others, we need to be pragmatic and acknowledge that this is a good starting point. We hope that, as we proceed in this journey, these policies will be refined and fine-tuned to better adapt to each sub-segment or sub-sector requirement.
The big question is when the IMO is going to deploy a market-based measure that will allow everybody to have a level playing field and make the right investment decisions to promote decarbonization even further.
For more information on the current biofuels market, take a look at our dedicated page for biofuels insights.