Singapore Encourages Investment Toward Decarbonizing Shipping
Part of the Jones Day Carbon Disruption series.
The Situation: Currently, around 90% of world trade is by sea. International shipping accounts for between 2% and 3% of global greenhouse gas emissions, but like aviation, the sector's emissions are not covered by the 2015 Paris Agreement on climate change.
The Context: In 2018, the International Maritime Organization ("IMO") set targets for greenhouse gas emissions from international shipping to peak as soon as possible, and to reduce by at least 50% by 2050 (compared to 2008 levels), with continuing efforts to phase them out entirely.
Looking Ahead: Through a proactive strategy incorporating research and development projects, feasibility studies, financial support and incentives, Singapore is leading the way toward decarbonizing the international shipping industry.
The IMO's Decarbonization Strategy
In the wake of the 2015 Paris Agreement on climate change, the IMO adopted its initial strategy to reduce greenhouse gas emissions from ships ("Initial Strategy") in April 2018. The Initial Strategy aims for such emissions from international shipping to peak as soon as possible, and to reduce by at least 50% by 2050 compared to 2008 levels. The ultimate vision is to completely phase out greenhouse gas emissions from the international shipping industry as soon as possible this century.
The Initial Strategy sets out a number of possible steps toward achieving these objectives. Short-term measures primarily focus on strengthening energy efficiency designs of ships and reducing the carbon intensity of the shipping industry. However, the IMO acknowledges that the global introduction of alternative fuels is a critical component in decarbonizing the international shipping industry. It therefore also contemplates encouraging port developments, activities and infrastructure to support the supply of alternative low-carbon and zero-carbon fuels; initiating research and development activities; developing programmes to facilitate the uptake of alternative fuels; providing incentives for first movers; and ultimately to pursue the development and provision of zero-carbon fuels on the path toward decarbonizing the industry.
The IMO's Initial Strategy provides an enabling framework for low- and zero-carbon fuels, and especially green fuels such as green hydrogen and green ammonia (produced via electrolysis using electricity generated from renewables), to be promoted and developed as significant clean energy fuels of the future.
Singapore Is Actively Implementing These Measures
As the world's largest bunkering hub, Singapore is well-positioned to advance the adoption of zero-emission fuels for bunkering.
The Maritime Singapore Green Initiative ("MSGI") was launched in 2011 with the objective of reducing the environmental impact of shipping and shipping-related activities. The MSGI was updated as of January 1, 2020, and now promotes the complete decarbonisation of shipping. The MSGI contains four programmes:
·Green Ship Programme, which provides fee discounts and tax rebates for Singapore-flagged ships voluntarily adopting energy efficiency design solutions beyond the IMO's requirements, or which adopt engines capable of using liquefied natural gas ("LNG") or alternative low-carbon fuels (such as methanol and ethanol);
·Green Port Programme, which reduces port dues for ocean-going vessels that exceed the IMO's energy efficiency design index or use LNG to fuel its engines while in Singapore Port limits, with additional incentives for vessels using services provided by LNG-fuelled harbour craft within port limits;
·Green Energy and Technology Programme, which provides funding for companies to develop and conduct pilot trials and develop technology aimed at reducing maritime emissions; and
·Green Awareness Programme, which promotes awareness of green shipping and encourages companies to adopt carbon accounting and reporting.
The Maritime and Port Authority of Singapore ("MPA") has committed SGD 100 million by way of incentives that are available through 2024 in support of these programmes.
The introduction of LNG bunkering highlights Singapore's ability to successfully introduce low-carbon alternatives when market forces alone are insufficient. The MPA ran a pilot program from 2017 to 2020 to test operational protocols and gain operational experience in LNG bunkering. It also issued technical references, offered financial incentives for LNG-fuelled vessels using the Port of Singapore, co-funded the building of LNG-fuelled vessels and LNG bunker vessels to facilitate ship-to-ship LNG bunkering and promoted international cooperation with other key bunkering ports and authorities. Singapore's first commercial ship-to-ship LNG bunkering operation took place in May 2019.
Sights have now been set on low- and zero-emission fuels. In April the Singapore government released its Long-Term Low-Emissions Development Strategy. The Strategy outlines a whole-of-nation guide to transition to a low-carbon and climate-resilient future. In respect of shipping, it confirms Singapore's commitment to developing new low-carbon technologies and clean energy sources, including:
·the government will develop a Maritime Singapore Decarbonisation Blueprint 2050 to set out strategies to achieve a sustainable maritime industry in Singapore;
·the Singapore Maritime Foundation will establish an International Advisory Panel to formulate decarbonization strategies; and
·the MPA and its partners will create the Maritime GreenFuture Fund to fund research, test-bedding and adoption of innovative solutions in low-carbon technologies.
The industry has already responded. In March a consortium of Singaporean and Japanese companies agreed to research and develop technologies relating to the importation, transportation, storage and use of hydrogen as a zero-carbon fuel. In June another consortium entered a feasibility study to develop port infrastructure to establish a supply chain to use ammonia as a marine fuel in Singapore.
Singapore has a proven track record in supporting research, development and real-world implementation of new technologies. As Singapore continues to embrace a leading role in the pursuit of zero-emission shipping, it will provide further opportunities for domestic and international investors to participate.
Three Key Takeaways
- Action and investment is needed now if the IMO targets for emissions reductions are to be met.
- Singapore is playing a pivotal role in transitioning Singapore's maritime industry and international shipping toward decarbonization.
- Industry stakeholders also need to play a key part in the transformation, and Singapore is providing the framework and incentives to facilitate this investment.