18 June 2019
If the shipping industry were a country, it would be the sixth largest emitter of CO2 on the planet. That equates to more emissions than Germany or Canada.
However, new changes aimed at curbing carbon emissions generated by the freight sector are expected to strengthen the industry’s environmental performance.
New International Maritime Organisation standards (IMO2020) for lower levels of sulphur in marine fuel1 will take effect early next year in a bid to create a more sustainable freight industry.
BHP charters transport for 250 million tonnes of product each year and we are working with vessel owners to make fully compliant the vessels we charter.
The challenges of delivering a more sustainable and environmentally responsible future are being faced through the industry. For example, most ship owners with compatible engine types are expected to shift to newly developed low sulphur fuels to meet the regulations. Others will look to add exhaust removal systems or ‘scrubbers’ to their ships to reduce emissions.
They will be limited by dry dock capacity, ‘scrubber’ systems being available, and the economics of dry docking a ship that would otherwise be working. Owners with vessels close to the end of their lives may consider retiring them earlier rather than incur the costs of compliance.
Operators across the shipping supply chain are bracing for additional costs triggered by the new standards. We estimate that IMO2020 fuel and refitting requirements will add between US$2 and US$3 per tonne to Western Australia to China freight and between US$4 and US$5 per tonne to Brazil to China freight, with the market to determine how these costs are absorbed.
BHP is exploring other ways to lay the groundwork for a greener future for freight.
In 2017, BHP collaborated with ship vetting partners, RightShip to introduce a CO2 ratings system that moves charters towards ships with lower emissions. In response, ship owners improved engine performance and reduced the drag of hulls to improve their sustainability rating. This resulted in a 12% decline in CO2 emissions for vessels we charter.
We’re also leading industry projects that accelerate the use of alternative shipping fuels. This includes designing ships that can transport iron ore and coal using LNG and testing low emission biofuels on existing vessels with one of our shipping partners.
The shipping industry will need to pull together to build a greener freight industry. But the changes have already spearheaded the push towards a more sustainable future.