Kait Borsay
Hello and welcome to Alongside, the podcast from Standard Club for the shipping industry across the world. I'm Kate Borsay. In this episode we look in detail at how the maritime industry is tackling the issue of becoming greener, with a focus on alternative fuels and decarbonisation. Despite the need for urgent action and to meet targets set for the industry, we've heard previously on Alongside that there is some confusion about what fields to adopt, and a need for greater understanding about safety and insurance implications. To discuss this, we're joined by David Roberts, who is managing director of Standard Asia and by Professor Lynn Loo, who's CEO of the Global Centre for Maritime Decarbonisation. Welcome to both of you.
Lynn Loo
Thanks, Kate.
David Roberts
Thanks, Kate.
Kait Borsay
Lynn, let's start with you, and an outline of the work that you and your organisation do in this sector.
Lynn Loo
So we are an NGO, a nonprofit, and we were formed about 14 months ago. The mission of GCMD for short, is to help the international shipping sector eliminate its greenhouse gas emissions. And we do this by helping shape future fuel standards by financing first of a kind projects. And by piloting low carbon solutions and technologies under real world operation conditions and the ideas, you know, if these pilots fail, we fail fast, and we learn faster. And when they're successful, we go a long ways to helping the industry lower the barrier and adopt these low carbon solutions so that we can get on the journey of decarbonisation.
Kait Borsay
And what's your role within that Lynn?
Lynn Loo
So I lead the Global Centre for Maritime Decarbonisation. And so in that respect, I look at bringing in partners who are willing to participate with us in these pilots and participation can be in many ways, it could be financing, providing the finance, to do some of these pilots. More importantly, it could be participating in the form of being involved in the pilots, right. And then the other is we are a group of engineers and scientists. And so we can do the due diligence, understand the pain points and scope pilots so that we can address these pain points.
Kait Borsay
And David, to you... at Standard Asia, how long have you been having discussions - how how far back to the discussions go about alternative fuels and decarbonisation? We're used to talking about it now. But I wonder when those discussions started for you,
David Roberts
They really started case about two years ago. And that is when we decided that given the IMO's plans, and the trajectory of the industry in respect of low carbon, the club really needed to develop its own expertise in this important area. So that we're in a position to advise and assist our members in the transition. And I think it's important at this stage to to state that we have never viewed our role as being to tell our members and our members of course are the ship owners or charterers as the case may be to tell our our members which alternative fuels they should be using or which design approaches they should be taking to to their vessels. That is certainly not the role of the p&i club and I think the other p&i clubs in the international group would agree with that. Our role rather is to guide and and assist. Most importantly, in relation to the insurance coverages that we're providing.
Lynn Loo
That's how we see our role at GCMD as well, it's not to sort of specify which fuel, which fuel type is sort of the future of fuel. Rather, it's to show these different pathways and to identify the gaps and the bottlenecks for these different pathways. And then to try and address these gaps to enable the sector to be able to adopt any of these solutions.
Kait Borsay
Lynn there are various targets associated with net zero for example, the Paris Climate Agreement net zero by 2050 to achieve the 1.5 degrees Celsius climate goal – I wonder whether the shipping industry is aligned with any of those targets? Do you work to them at all?
Lynn Loo
So the shipping industry is regulated by a single regulatory authority. This is the International Maritime Organisation and the IMO has set its target to reduce its greenhouse gas emissions by 50% by 2050, relative to the 2008 levels. So this is not aligned with a Paris target. In part, because shipping is a very difficult to abate sector, even getting to this 50% reduction is challenging in itself. So there is call for us to revisit this target, so that it's Paris aligned. So I think signalling the ambition is important. But at the same time, we need to look at sort of what's on the ground, and how we can get there. So to me, that's sort of looking at the intercept, right, net zero at 2050. And the slope, and so if you want the intercept to be fixed at net zero at 2050, that means the slope needs to be steeper.
Kait Borsay
So a steeper slope, there is work to be done. From your perspective, David, is the industry ready for those targets for the regulatory changes that are coming in next year?
David Roberts
It's complex, it's complex, I think many parts of the industry are ready. Others, it's probably fair to say are less ready. But I would agree with Lynn, you know, that we shouldn't underestimate the extent of the challenge here. And, you know, collectively worldwide, not simply in the shipping industry, but across all sectors. You know, we're trying to make up for lost time by doing a whole load of stuff in a very short period of time. And that presents, you know, massive challenges. And those challenges, of course, are compounded by what is what is going on right now, globally, you know, we see massive volatility. we have surveyed our membership and that survey shows that a high proportion of our members are either ready or will shortly be ready in anticipation of the January 23. Deadline. Shipping does consist of many different sectors, and there are particular challenges in different sectors of shipping. And, of course, you know, there are big ship owners and smaller ship owners. And I'm sure, one of the factors at play here is, is finance and finance weaves through all of this, you know, the availability of finance, the measures that are being requested and indeed demanded, don't come cheap.
Lynn Loo
So compounding that I would say is, is the notion that in order for shipping to decarbonize, we rely on stakeholders and players outside the sector, right. I mean, in order for shipping to decarbonize, we're looking at zero carbon fuels, that's sort of the end goal. Again, I mean, acknowledging that there are things we can do in the meantime. But really, if you want to decarbonize, you need to look at zero carbon fuels, and the production of zero carbon fuels are on at scale. And then as David mentioned, cost is an issue, we can look at how the zero carbon fuels are produced, you need to have sufficient renewable electrons to generate the green hydrogen. And then once you have the green hydrogen that has many end applications, one of the end applications is to generate then the green fuels, whether it's ammonia, or methanol, or any synthetic fuels, for the shipping sector. And so we're sort of at the mercy of players outside the sector. And it requires us to think about new infrastructure, because these are new fuels that we've not used as bunker fuels before. So the build out of the infrastructure is going to take time, it's going to take financing. So it's sort of in addition to the financing the ambition, I think time is an element that we just can't sort of throw out the window, it's just going to take time,
David Roberts
I would thoroughly agree, Lynne, with you on all of that. And, you know, there's a myriad of different technologies here, different fuels, as you rightly say, I think, you know, many people outside the shipping industry don't fully appreciate that a lot of those technologies are still effectively, you know, in experimental form. And, and Lynn, your organisation, of course, is involved in trialling some of these, but not all of them, I believe, are even ready for the trials. We're talking about new new technologies, the ship designs, you know, the the engine designs, in particular, have to be adapted case to deal with these new fuels. So, we really are, you know, at the cutting edge of, of technology here. And, Lynn, I think you said earlier, you know, that this in a way is sort of could be viewed as the fourth propulsion revolution, you know, we start off with wind and sail. The world then develops through to coal and steam then to oil, and now we're looking at zero carbon fuels. And as you said, Lynn, you know, the previous stages of the cycle, you know, we've had much longer to deal with those and get used to them - here were being asked to do things in a in a very short space of time. But a lot of the, the fuels are experimental, the engines haven't necessarily been been fully developed the designs. So understandably, you know, ship owners are faced with a huge challenge. And that's before you've started talking about the cost of these things, you know? So, you know, what, when is a ship owner...at what point is a ship owner going to make that commercial decision to invest in a new fuel technology? Are they going to take it? You know, are they going to be the trialers of it, the guinea pig, if you like, of that new technology? Or are they going to prefer to wait until you know it's more settled? So these are really, really difficult commercial decisions, and at a time when inflation is going through the roof, so you could invest a whole load of money in one of these new technologies, and then end up with what economists call a stranded asset, you know, something that just doesn't work out and has been superseded by other technologies.
Lynn Loo
I think that's why organisations like like GCMD is so important, because we're here, and we're able to do some of these trials. And so I mean, I'll give you a concrete example. I mean, what we're trying to do is identify the gaps, right? So, you know, we're looking at ammonia as a potential future for your green ammonia. You can look up and down the supply chain - well upstream of us. These are the fuel producers. They're working on scaling and figuring out how to scale it in the cheapest manner possible, the production of green ammonia. Of course, in the shipping sector, the first engine is said to be available in 2024. And then the first ship will be available shortly after that in 2025. And so as we speak with stakeholders in our ecosystem, we identified a gap and that gap is looking at the safety associated with bunkering ammonia and using ammonia as a Marine fuel. So we wanted to do a pilot to bunker ammonia. And then we realised quickly that we can't actually do a pilot to bunker ammonia because there are no safety guidelines associated with bunkering ammonia and using ammonia as a fuel. So we actually took one step back and we commissioned a safety study this was the one of the first things we did at GCMD and they safety study is to define the safety envelopes and the operation envelope on bunkering ammonia, how do you do so safely because ammonia is super toxic, right? And so this study is ongoing. It's being led by DNV and Surbana Jurong and Singapore Maritime Academy. So in addition to identifying the safety guidelines, it's really to look at developing a competency framework because you need to train the seafarers to be able to handle ammonia safely. We can piggyback on the safety guidelines that are that that exist for looking at transporting ammonia as a cargo but that's insufficient, because when we talk about using ammonia as a bunkering fuel, that transfer frequency and the volume volumetric flow rates are actually quite different. You'd be doing it at a port that significantly more crowded as opposed to being in a remote chemical site. So the safety guidelines need to be bolstered essentially. And so that's what this safety study is all about. I'm happy to report that there are no showstoppers. So far that's been identified and this safety study will be completed by the end of the year. And in doing this, you know, we're assembling industry partners to provide their expertise He's in their experience so that, you know, the safety study is robust.
Kait Borsay
And we're getting an understanding here of how complex it is. It's not just using an alternative fuel and giving it a go. There are huge implications for ground that hasn't been trodden before, materials that haven't been transported in this way or used in this way before. And it's great that the Centre for Maritime Decarbonisation is involved in some of those early processes. It does naturally lead me David to ask you about the insurance implications, lots of different alternative fuels, Lynn's mentioned a few and I know you have to how does the insurance industry navigate for all these changes? It feels like it's an evolving situation and and probably will be over the next decade.
David Roberts
Yeah, it is evolving. Over the decades and the p&i Club system has been going for about 150 years, we have adapted our cover always to meet the needs of new challenges, new situations, for the protection of our members. And this is a classic example of where it might be necessary to make some tweaks and the fullness of time to the cover. We feel that the cover is broadly Okay, at the moment. The risks that we're looking at in the context of alternative fuels, and Lynn, you've touched upon a few of them already. But the key risks I would say are injury, illness or death risks to crew and passenger passengers caused by the use of alternative fuels. That's one another would be pollution. This would be pollution or environmental damage caused by the use of alternative fuels. And the third key area would be fines and other related penalties imposed by international authorities for breach of the statutory requirements. So, those are the main areas that our cover would respond to, but there are many other areas where claims could arise. For example, if you have a ship that loses main engine power caused by a particular alternative fuel, so that the qualities of that fuel cause damage or failure to the to the engine, the ship is underway loses power and drifts in so drifting, she could then come into contact with a port facility or birth, or indeed another ship or some other or obstruction, which could on a worst case result in that ship sinking, or, or grounding with the need for hugely expensive wreck removal, loss of cargo, leakage of cargo, all of all of those sorts of scenarios. So that's, that's, you know, perhaps more on the extreme side, but certainly the coverage that we have would respond to all of those sorts of losses. And remember that we give very high limits of cover for most of these risks, so the club system is there to protect owners and also charters, although charter is interest is clearly a bit different in the context of alternative fuels. And we believe our members should therefore rest assured that they have the necessary coverages and as I say, if in the fullness of time, it becomes necessary to tweak or enhance the cover that we give to respond to, to particular risks that we do, let's call them emerging risks that that we don't yet fully understand, or indeed, that we may not fully be aware of at this point in time. Then our shipowner boards, I have no doubt would would consider such adjustments.
Kait Borsay
Lynne, I'm interested to know more broadly from you whether these targets, particularly the one set by the IMO, whether it's realistic, we've we've heard some really interesting thoughts there, you know, from an insurance point of view from David, and but also from yourself about examples like ammonia, you know, different using alternative fuels, which is, which is key to decarbonisation? Are the targets broadly realistic?
Lynn Loo
The targets are there, the targets are the targets, and I think we need to work towards the targets is really the short answer.
David Roberts
I think I think that's right. And, you know, I mean, there are, you know, many in the industry and observers of the industry who, who criticise the targets, who say, in particular, that they're not ambitious enough. And so that's that's an issue, do they go far enough? Many say no. There are many who say that, even if they do go far enough? How are you going to enforce them? And I think there's a growing concern that they lack teeth. You know, if you have a ship that, you know, has effectively failed its CI exam, if I can put it like that. How do you stop that ship from going into a particular port? What powers do have to do Port State Control have to do state authorities have? So I think I think this, this is certainly perceived to be by many as an issue right now. You know, that inevitably, there will be a section of the industry, as we were discussing earlier, who, you know, are finding it a bit more challenging to comply for various reasons, and might be late in complying. So, I think the, the IMO is meeting next year, and we'll be discussing such matters and possible ways of tightening up and enforcing compliance. And I think there's a particular review, as I understand it taking place in 2026, it seems like a long way away. It's possible that the, the provisions will be strengthened from that time. So yeah, you know, what one issue is, is, is compliance, the ability of people to comply, the other is how are we going to enforce it for those people who don't?
Lynn Loo
I think signalling and ambition is very important, because I think it's the beacon that we're after, right? It's sort of the lighthouse and the beacon that we're after. So I think having an ambition is critically important. But at the same time, I think we just need to be sober about the scale of the cause and the time. And so for GCMD, we're more focused on the slope. How can we get a steeper slope as possible? How can we accelerate this journey, so that we can get there as quickly as possible? Because in my mind, I think you know, the conversations have moved past, whether we're going to do this and whether we're going to decarbonize, really the question is, how fast can we do it? When can we get it done? Right? So it's about the timing. So the ambition is there. It's important because it's a beacon. And then we just need to kind of get going, roll up our sleeves and do it.
Kait Borsay
Call to Action there for you, Lynn, you touched earlier on the energy crisis that's impacting the whole world because of the war in Ukraine. And I actually wonder whether whether this will accelerate a move to alternative fuels, or whether, because things are so expensive at the moment that sets the industry back.
Lynn Loo
Yeah, I think David touched upon this a little bit. in the short term, I think we're gonna see carbon emissions go up in the short term, we're going to see a crunch. And then hopefully, what the conflict has done is to raise awareness and is to, is to actually kind of push the tail forward so that, you know, we end up with a good outcome, subsequently.
Kait Borsay
David, just just elaborate on that, as we look for positives, we've obviously discussed a lot about the challenges of trying to meet some of those targets, and try and get all different parts of the shipping industry involved in that. Where are the positives, here we are, you know, understanding lots about different alternative fuels, it's an exciting area, it's a growing area. Where is the optimism for you?
David Roberts
I think the optimism, in well, in simplistic terms, really is all about saving the planet. And that that's clearly what we're all trying to achieve here. And with that in mind, we need to be optimistic about the investments we're making this time, whether in terms of alternative fuel technology, or otherwise. And as Lynn said, you know, the in the short term, it's bumpy. You know, there's been, there's a lot of focus, for example, at the moment on lack of conventional energy sources, such as, you know, oil and gas, and that that is probably in the short term going to going to spur well, that together with the higher oil price and gas price is probably going to spur increased exploration and development, rather than less exploration and development. But in the long term, I'm very hopeful, as Lynn said, that, and certainly by let's say, 2050, that we should be looking at a situation where at least half of global energy supply is coming from non fossil fuels. And the great thing about the renewables and the electrification piece, you know, the whole battery piece is that actually, it should be cheaper, most projections are showing that that should be cheaper. So, you know, we need to get through the next, you know, 22 years or so, and invest and stick with it. And we, for example, on the insurance side, on the services side need to be supporting our members in order to achieve that just as Lynn in her business in the GCMD is trialling and and supporting all of these, it is very much about partnership, Lin, isn't it and and that was the word you used earlier. You know, no one sector is going to achieve this by itself. You know, we're all we live in an ecosystem, a maritime ecosystem, and and indeed a wider economic, financial ecosystem. And we all have to support each other. And I'm very optimistic about that. And, you know, we're seeing that happening in Singapore, both Lynn and I are based here in Singapore. And there is very significant impetus, you know, the Singapore government is is hugely involved in all of this. We have, you know, most of the p&i clubs have representation here in Singapore. You know, everybody is, is talking about this and doing stuff about this. So that gives me gives me huge optimism. At the same time. I'm very sanguine, and mindful about the about the challenges. And I think, you know, we need to be very mindful about the challenges because if we don't properly understand the challenges, then that could impact on our ability to succeed, but I have no doubt that we will succeed. And one just has to look at the the huge work on the technology side, for example, that has been put in, in a very short space of time. I mean, just you know, over the last two years, for example, and it seems Lin, you know, to be gaining momentum, that's the impression I have.
Lynn Loo
Yeah, I can't agree more with what David said, I would just add one point to why I'm hopeful. I like to use the word hopeful, more than optimistic. Because I feel like that's more of a verb and it's more action oriented. But anyway, I think you know, shipping is such an integral part of the global supply chain. If we don't decarbonize many sectors can't decarbonize - our scope one emissions are many sectors' scope three emissions. Right. And so I think we have to decarbonize and so that gives us the impetus to do it, and do it fast. That's, and I think, you know, what we can do in addition to trialling and to piloting some of these solutions. To see how we can add value. The other thing we can do is to raise awareness, I think there are lots of different solutions. And so it's really important to know how we can measure carbon carbon emissions and the carbon intensity. Right. And so I mean, just even looking at these alternative fuels, and you just have to look at the biofuels that are available. I mean, they all have different carbon footprint. And so it's to understand how to measure the carbon footprint so that you know, how much to what extent your investment is actually abating carbon emissions, for example. So So in doing so, what we've also just recently done is to launch a pilot. We do this with biofuels simply because biofuels are available, but it's to provide the quality quantity and abatement assurance on biofuels on the supply chain side, right to bolster the supply chain integrity, to be able to justify the green fuel premium that's associated with purchasing biofuels. So understanding that lifecycle analysis and understanding how you calculate the the carbon emissions abatement or carbon abatement associated with an alternative fuel is super important. And so to the extent that we can contribute to that, that's what GCMD is doing as well.
Kait Borsay
Well, it's been so fascinating to hear from both of you, as we discuss the aim by the IMO to reduce greenhouse gases by 50%. Lynn, you say it's a steep slope to meet, but having a target is a good thing. And it's really important to raise awareness. And for you, David, you're realistic about the challenges ahead. And you've highlighted really how important it is to support businesses through this period. Thank you to both of you for joining us on this episode of alongside that's David Roberts, Managing Director of Standard Asia and Professor Lynn Loo from the Global Centre for Maritime Decarbonisation. Join us next time on alongside when we continue to explore key topics affecting the maritime industry and those who are part of it. Click follow on this podcast to ensure you don't miss an episode.
Thank you again to both our guests from me Kait Borsay, thanks for listening.
Hello and welcome to Alongside, the podcast from Standard Club for the shipping industry across the world. I'm Kate Borsay. In this episode we look in detail at how the maritime industry is tackling the issue of becoming greener, with a focus on alternative fuels and decarbonisation. Despite the need for urgent action and to meet targets set for the industry, we've heard previously on Alongside that there is some confusion about what fields to adopt, and a need for greater understanding about safety and insurance implications. To discuss this, we're joined by David Roberts, who is managing director of Standard Asia and by Professor Lynn Loo, who's CEO of the Global Centre for Maritime Decarbonisation. Welcome to both of you.
Lynn Loo
Thanks, Kate.
David Roberts
Thanks, Kate.
Kait Borsay
Lynn, let's start with you, and an outline of the work that you and your organisation do in this sector.
Lynn Loo
So we are an NGO, a nonprofit, and we were formed about 14 months ago. The mission of GCMD for short, is to help the international shipping sector eliminate its greenhouse gas emissions. And we do this by helping shape future fuel standards by financing first of a kind projects. And by piloting low carbon solutions and technologies under real world operation conditions and the ideas, you know, if these pilots fail, we fail fast, and we learn faster. And when they're successful, we go a long ways to helping the industry lower the barrier and adopt these low carbon solutions so that we can get on the journey of decarbonisation.
Kait Borsay
And what's your role within that Lynn?
Lynn Loo
So I lead the Global Centre for Maritime Decarbonisation. And so in that respect, I look at bringing in partners who are willing to participate with us in these pilots and participation can be in many ways, it could be financing, providing the finance, to do some of these pilots. More importantly, it could be participating in the form of being involved in the pilots, right. And then the other is we are a group of engineers and scientists. And so we can do the due diligence, understand the pain points and scope pilots so that we can address these pain points.
Kait Borsay
And David, to you... at Standard Asia, how long have you been having discussions - how how far back to the discussions go about alternative fuels and decarbonisation? We're used to talking about it now. But I wonder when those discussions started for you,
David Roberts
They really started case about two years ago. And that is when we decided that given the IMO's plans, and the trajectory of the industry in respect of low carbon, the club really needed to develop its own expertise in this important area. So that we're in a position to advise and assist our members in the transition. And I think it's important at this stage to to state that we have never viewed our role as being to tell our members and our members of course are the ship owners or charterers as the case may be to tell our our members which alternative fuels they should be using or which design approaches they should be taking to to their vessels. That is certainly not the role of the p&i club and I think the other p&i clubs in the international group would agree with that. Our role rather is to guide and and assist. Most importantly, in relation to the insurance coverages that we're providing.
Lynn Loo
That's how we see our role at GCMD as well, it's not to sort of specify which fuel, which fuel type is sort of the future of fuel. Rather, it's to show these different pathways and to identify the gaps and the bottlenecks for these different pathways. And then to try and address these gaps to enable the sector to be able to adopt any of these solutions.
Kait Borsay
Lynn there are various targets associated with net zero for example, the Paris Climate Agreement net zero by 2050 to achieve the 1.5 degrees Celsius climate goal – I wonder whether the shipping industry is aligned with any of those targets? Do you work to them at all?
Lynn Loo
So the shipping industry is regulated by a single regulatory authority. This is the International Maritime Organisation and the IMO has set its target to reduce its greenhouse gas emissions by 50% by 2050, relative to the 2008 levels. So this is not aligned with a Paris target. In part, because shipping is a very difficult to abate sector, even getting to this 50% reduction is challenging in itself. So there is call for us to revisit this target, so that it's Paris aligned. So I think signalling the ambition is important. But at the same time, we need to look at sort of what's on the ground, and how we can get there. So to me, that's sort of looking at the intercept, right, net zero at 2050. And the slope, and so if you want the intercept to be fixed at net zero at 2050, that means the slope needs to be steeper.
Kait Borsay
So a steeper slope, there is work to be done. From your perspective, David, is the industry ready for those targets for the regulatory changes that are coming in next year?
David Roberts
It's complex, it's complex, I think many parts of the industry are ready. Others, it's probably fair to say are less ready. But I would agree with Lynn, you know, that we shouldn't underestimate the extent of the challenge here. And, you know, collectively worldwide, not simply in the shipping industry, but across all sectors. You know, we're trying to make up for lost time by doing a whole load of stuff in a very short period of time. And that presents, you know, massive challenges. And those challenges, of course, are compounded by what is what is going on right now, globally, you know, we see massive volatility. we have surveyed our membership and that survey shows that a high proportion of our members are either ready or will shortly be ready in anticipation of the January 23. Deadline. Shipping does consist of many different sectors, and there are particular challenges in different sectors of shipping. And, of course, you know, there are big ship owners and smaller ship owners. And I'm sure, one of the factors at play here is, is finance and finance weaves through all of this, you know, the availability of finance, the measures that are being requested and indeed demanded, don't come cheap.
Lynn Loo
So compounding that I would say is, is the notion that in order for shipping to decarbonize, we rely on stakeholders and players outside the sector, right. I mean, in order for shipping to decarbonize, we're looking at zero carbon fuels, that's sort of the end goal. Again, I mean, acknowledging that there are things we can do in the meantime. But really, if you want to decarbonize, you need to look at zero carbon fuels, and the production of zero carbon fuels are on at scale. And then as David mentioned, cost is an issue, we can look at how the zero carbon fuels are produced, you need to have sufficient renewable electrons to generate the green hydrogen. And then once you have the green hydrogen that has many end applications, one of the end applications is to generate then the green fuels, whether it's ammonia, or methanol, or any synthetic fuels, for the shipping sector. And so we're sort of at the mercy of players outside the sector. And it requires us to think about new infrastructure, because these are new fuels that we've not used as bunker fuels before. So the build out of the infrastructure is going to take time, it's going to take financing. So it's sort of in addition to the financing the ambition, I think time is an element that we just can't sort of throw out the window, it's just going to take time,
David Roberts
I would thoroughly agree, Lynne, with you on all of that. And, you know, there's a myriad of different technologies here, different fuels, as you rightly say, I think, you know, many people outside the shipping industry don't fully appreciate that a lot of those technologies are still effectively, you know, in experimental form. And, and Lynn, your organisation, of course, is involved in trialling some of these, but not all of them, I believe, are even ready for the trials. We're talking about new new technologies, the ship designs, you know, the the engine designs, in particular, have to be adapted case to deal with these new fuels. So, we really are, you know, at the cutting edge of, of technology here. And, Lynn, I think you said earlier, you know, that this in a way is sort of could be viewed as the fourth propulsion revolution, you know, we start off with wind and sail. The world then develops through to coal and steam then to oil, and now we're looking at zero carbon fuels. And as you said, Lynn, you know, the previous stages of the cycle, you know, we've had much longer to deal with those and get used to them - here were being asked to do things in a in a very short space of time. But a lot of the, the fuels are experimental, the engines haven't necessarily been been fully developed the designs. So understandably, you know, ship owners are faced with a huge challenge. And that's before you've started talking about the cost of these things, you know? So, you know, what, when is a ship owner...at what point is a ship owner going to make that commercial decision to invest in a new fuel technology? Are they going to take it? You know, are they going to be the trialers of it, the guinea pig, if you like, of that new technology? Or are they going to prefer to wait until you know it's more settled? So these are really, really difficult commercial decisions, and at a time when inflation is going through the roof, so you could invest a whole load of money in one of these new technologies, and then end up with what economists call a stranded asset, you know, something that just doesn't work out and has been superseded by other technologies.
Lynn Loo
I think that's why organisations like like GCMD is so important, because we're here, and we're able to do some of these trials. And so I mean, I'll give you a concrete example. I mean, what we're trying to do is identify the gaps, right? So, you know, we're looking at ammonia as a potential future for your green ammonia. You can look up and down the supply chain - well upstream of us. These are the fuel producers. They're working on scaling and figuring out how to scale it in the cheapest manner possible, the production of green ammonia. Of course, in the shipping sector, the first engine is said to be available in 2024. And then the first ship will be available shortly after that in 2025. And so as we speak with stakeholders in our ecosystem, we identified a gap and that gap is looking at the safety associated with bunkering ammonia and using ammonia as a Marine fuel. So we wanted to do a pilot to bunker ammonia. And then we realised quickly that we can't actually do a pilot to bunker ammonia because there are no safety guidelines associated with bunkering ammonia and using ammonia as a fuel. So we actually took one step back and we commissioned a safety study this was the one of the first things we did at GCMD and they safety study is to define the safety envelopes and the operation envelope on bunkering ammonia, how do you do so safely because ammonia is super toxic, right? And so this study is ongoing. It's being led by DNV and Surbana Jurong and Singapore Maritime Academy. So in addition to identifying the safety guidelines, it's really to look at developing a competency framework because you need to train the seafarers to be able to handle ammonia safely. We can piggyback on the safety guidelines that are that that exist for looking at transporting ammonia as a cargo but that's insufficient, because when we talk about using ammonia as a bunkering fuel, that transfer frequency and the volume volumetric flow rates are actually quite different. You'd be doing it at a port that significantly more crowded as opposed to being in a remote chemical site. So the safety guidelines need to be bolstered essentially. And so that's what this safety study is all about. I'm happy to report that there are no showstoppers. So far that's been identified and this safety study will be completed by the end of the year. And in doing this, you know, we're assembling industry partners to provide their expertise He's in their experience so that, you know, the safety study is robust.
Kait Borsay
And we're getting an understanding here of how complex it is. It's not just using an alternative fuel and giving it a go. There are huge implications for ground that hasn't been trodden before, materials that haven't been transported in this way or used in this way before. And it's great that the Centre for Maritime Decarbonisation is involved in some of those early processes. It does naturally lead me David to ask you about the insurance implications, lots of different alternative fuels, Lynn's mentioned a few and I know you have to how does the insurance industry navigate for all these changes? It feels like it's an evolving situation and and probably will be over the next decade.
David Roberts
Yeah, it is evolving. Over the decades and the p&i Club system has been going for about 150 years, we have adapted our cover always to meet the needs of new challenges, new situations, for the protection of our members. And this is a classic example of where it might be necessary to make some tweaks and the fullness of time to the cover. We feel that the cover is broadly Okay, at the moment. The risks that we're looking at in the context of alternative fuels, and Lynn, you've touched upon a few of them already. But the key risks I would say are injury, illness or death risks to crew and passenger passengers caused by the use of alternative fuels. That's one another would be pollution. This would be pollution or environmental damage caused by the use of alternative fuels. And the third key area would be fines and other related penalties imposed by international authorities for breach of the statutory requirements. So, those are the main areas that our cover would respond to, but there are many other areas where claims could arise. For example, if you have a ship that loses main engine power caused by a particular alternative fuel, so that the qualities of that fuel cause damage or failure to the to the engine, the ship is underway loses power and drifts in so drifting, she could then come into contact with a port facility or birth, or indeed another ship or some other or obstruction, which could on a worst case result in that ship sinking, or, or grounding with the need for hugely expensive wreck removal, loss of cargo, leakage of cargo, all of all of those sorts of scenarios. So that's, that's, you know, perhaps more on the extreme side, but certainly the coverage that we have would respond to all of those sorts of losses. And remember that we give very high limits of cover for most of these risks, so the club system is there to protect owners and also charters, although charter is interest is clearly a bit different in the context of alternative fuels. And we believe our members should therefore rest assured that they have the necessary coverages and as I say, if in the fullness of time, it becomes necessary to tweak or enhance the cover that we give to respond to, to particular risks that we do, let's call them emerging risks that that we don't yet fully understand, or indeed, that we may not fully be aware of at this point in time. Then our shipowner boards, I have no doubt would would consider such adjustments.
Kait Borsay
Lynne, I'm interested to know more broadly from you whether these targets, particularly the one set by the IMO, whether it's realistic, we've we've heard some really interesting thoughts there, you know, from an insurance point of view from David, and but also from yourself about examples like ammonia, you know, different using alternative fuels, which is, which is key to decarbonisation? Are the targets broadly realistic?
Lynn Loo
The targets are there, the targets are the targets, and I think we need to work towards the targets is really the short answer.
David Roberts
I think I think that's right. And, you know, I mean, there are, you know, many in the industry and observers of the industry who, who criticise the targets, who say, in particular, that they're not ambitious enough. And so that's that's an issue, do they go far enough? Many say no. There are many who say that, even if they do go far enough? How are you going to enforce them? And I think there's a growing concern that they lack teeth. You know, if you have a ship that, you know, has effectively failed its CI exam, if I can put it like that. How do you stop that ship from going into a particular port? What powers do have to do Port State Control have to do state authorities have? So I think I think this, this is certainly perceived to be by many as an issue right now. You know, that inevitably, there will be a section of the industry, as we were discussing earlier, who, you know, are finding it a bit more challenging to comply for various reasons, and might be late in complying. So, I think the, the IMO is meeting next year, and we'll be discussing such matters and possible ways of tightening up and enforcing compliance. And I think there's a particular review, as I understand it taking place in 2026, it seems like a long way away. It's possible that the, the provisions will be strengthened from that time. So yeah, you know, what one issue is, is, is compliance, the ability of people to comply, the other is how are we going to enforce it for those people who don't?
Lynn Loo
I think signalling and ambition is very important, because I think it's the beacon that we're after, right? It's sort of the lighthouse and the beacon that we're after. So I think having an ambition is critically important. But at the same time, I think we just need to be sober about the scale of the cause and the time. And so for GCMD, we're more focused on the slope. How can we get a steeper slope as possible? How can we accelerate this journey, so that we can get there as quickly as possible? Because in my mind, I think you know, the conversations have moved past, whether we're going to do this and whether we're going to decarbonize, really the question is, how fast can we do it? When can we get it done? Right? So it's about the timing. So the ambition is there. It's important because it's a beacon. And then we just need to kind of get going, roll up our sleeves and do it.
Kait Borsay
Call to Action there for you, Lynn, you touched earlier on the energy crisis that's impacting the whole world because of the war in Ukraine. And I actually wonder whether whether this will accelerate a move to alternative fuels, or whether, because things are so expensive at the moment that sets the industry back.
Lynn Loo
Yeah, I think David touched upon this a little bit. in the short term, I think we're gonna see carbon emissions go up in the short term, we're going to see a crunch. And then hopefully, what the conflict has done is to raise awareness and is to, is to actually kind of push the tail forward so that, you know, we end up with a good outcome, subsequently.
Kait Borsay
David, just just elaborate on that, as we look for positives, we've obviously discussed a lot about the challenges of trying to meet some of those targets, and try and get all different parts of the shipping industry involved in that. Where are the positives, here we are, you know, understanding lots about different alternative fuels, it's an exciting area, it's a growing area. Where is the optimism for you?
David Roberts
I think the optimism, in well, in simplistic terms, really is all about saving the planet. And that that's clearly what we're all trying to achieve here. And with that in mind, we need to be optimistic about the investments we're making this time, whether in terms of alternative fuel technology, or otherwise. And as Lynn said, you know, the in the short term, it's bumpy. You know, there's been, there's a lot of focus, for example, at the moment on lack of conventional energy sources, such as, you know, oil and gas, and that that is probably in the short term going to going to spur well, that together with the higher oil price and gas price is probably going to spur increased exploration and development, rather than less exploration and development. But in the long term, I'm very hopeful, as Lynn said, that, and certainly by let's say, 2050, that we should be looking at a situation where at least half of global energy supply is coming from non fossil fuels. And the great thing about the renewables and the electrification piece, you know, the whole battery piece is that actually, it should be cheaper, most projections are showing that that should be cheaper. So, you know, we need to get through the next, you know, 22 years or so, and invest and stick with it. And we, for example, on the insurance side, on the services side need to be supporting our members in order to achieve that just as Lynn in her business in the GCMD is trialling and and supporting all of these, it is very much about partnership, Lin, isn't it and and that was the word you used earlier. You know, no one sector is going to achieve this by itself. You know, we're all we live in an ecosystem, a maritime ecosystem, and and indeed a wider economic, financial ecosystem. And we all have to support each other. And I'm very optimistic about that. And, you know, we're seeing that happening in Singapore, both Lynn and I are based here in Singapore. And there is very significant impetus, you know, the Singapore government is is hugely involved in all of this. We have, you know, most of the p&i clubs have representation here in Singapore. You know, everybody is, is talking about this and doing stuff about this. So that gives me gives me huge optimism. At the same time. I'm very sanguine, and mindful about the about the challenges. And I think, you know, we need to be very mindful about the challenges because if we don't properly understand the challenges, then that could impact on our ability to succeed, but I have no doubt that we will succeed. And one just has to look at the the huge work on the technology side, for example, that has been put in, in a very short space of time. I mean, just you know, over the last two years, for example, and it seems Lin, you know, to be gaining momentum, that's the impression I have.
Lynn Loo
Yeah, I can't agree more with what David said, I would just add one point to why I'm hopeful. I like to use the word hopeful, more than optimistic. Because I feel like that's more of a verb and it's more action oriented. But anyway, I think you know, shipping is such an integral part of the global supply chain. If we don't decarbonize many sectors can't decarbonize - our scope one emissions are many sectors' scope three emissions. Right. And so I think we have to decarbonize and so that gives us the impetus to do it, and do it fast. That's, and I think, you know, what we can do in addition to trialling and to piloting some of these solutions. To see how we can add value. The other thing we can do is to raise awareness, I think there are lots of different solutions. And so it's really important to know how we can measure carbon carbon emissions and the carbon intensity. Right. And so I mean, just even looking at these alternative fuels, and you just have to look at the biofuels that are available. I mean, they all have different carbon footprint. And so it's to understand how to measure the carbon footprint so that you know, how much to what extent your investment is actually abating carbon emissions, for example. So So in doing so, what we've also just recently done is to launch a pilot. We do this with biofuels simply because biofuels are available, but it's to provide the quality quantity and abatement assurance on biofuels on the supply chain side, right to bolster the supply chain integrity, to be able to justify the green fuel premium that's associated with purchasing biofuels. So understanding that lifecycle analysis and understanding how you calculate the the carbon emissions abatement or carbon abatement associated with an alternative fuel is super important. And so to the extent that we can contribute to that, that's what GCMD is doing as well.
Kait Borsay
Well, it's been so fascinating to hear from both of you, as we discuss the aim by the IMO to reduce greenhouse gases by 50%. Lynn, you say it's a steep slope to meet, but having a target is a good thing. And it's really important to raise awareness. And for you, David, you're realistic about the challenges ahead. And you've highlighted really how important it is to support businesses through this period. Thank you to both of you for joining us on this episode of alongside that's David Roberts, Managing Director of Standard Asia and Professor Lynn Loo from the Global Centre for Maritime Decarbonisation. Join us next time on alongside when we continue to explore key topics affecting the maritime industry and those who are part of it. Click follow on this podcast to ensure you don't miss an episode.
Thank you again to both our guests from me Kait Borsay, thanks for listening.
