Decarbonising Shipping Industry

Mains syllabus: GS3 - Indian Economy and issues relating to planning, mobilization of resources, development | Science and Technology- developments and their applications and effects in everyday life.

Why in the news?

The recent developments shows that global shipping is on course towards decarbonisation by 2024-50 by means of using green fuels.

What are the green fuels?

• Green Fuels – These are energy sources derived from renewable resources, designed to minimize environmental impact compared to traditional fossil fuels.

• Advantages – It reduces greenhouse gas emissions, improves air quality, and enhances energy independence.

What are the green fuels used in shipping?

• Existing fuels – Merchant ships largely use Very Low Sulphur Fuel Oil (VLSFO), diesel, and methane gas stored in liquid form as fuel.
• Transition fuel - LNG-powered engines with their higher efficiency of some 5% are likely to be a transition fuel before shipping moves to green fuels.
• Initial preferences of green fuel – It is green methanol due to easier engine and storage adaptation and it emits some 10% of carbon dioxide only.
• It is almost drop-in replacement for VLSFO and can be stored as a liquid at ambient temperature.
  • Already, more than 360 ships capable of operating on methanol are either in service or in order.
• Future preference - Green ammonia is favored in long-term as it does not emit greenhouse gases during combustion.
• But requires significant onboard handling adjustments.
• Rejected fuel - Shipping will not use green hydrogen directly because of issues with storage and transportation of hydrogen, a highly volatile fuel.

What are shipping decarbonization plans in India?

• Transitioning to green hydrogen, methanol, and ammonia reduces shipping’s carbon footprint, directly contributing to national targets—such as India’s net-zero by 2070 pledge.
• Green fuel potential - India has the land and expertise for solar power to be a major supplier of green fuels to global shipping.
• India’s aggressive push in creating 1.5 GW of local electrolyser manufacturing capacity and growing industrial CO2 sources (from steel and cement industries) positions India strategically to develop integrated green fuel hubs.
• Green Fuel Hubs - Development of green hydrogen hubs and green fuel bunkering stations at key ports like Kandla, Paradip, and Tuticorin support supply and export of sustainable marine fuels.
• Export green fuels – The efforts are underway in producing and supplying green fuels to Singapore.

• Challenges - Solar panels and electrolysers to make green hydrogen need to be imported.

What are the implementation challenges?

• Technology dependence - Electrolysers and some key equipment still need to be imported, increasing capital costs.
• Pricing discrepancy - Green fuel production is significantly more expensive than conventional fuels, driven by the cost of renewables and CAPEX (Capital Expenditure) for production facilities.
  • A 100% sustainable e-methanol as bunker fuel costs USD 1,950 per tonne (of VLSFO equivalent) in February, 2025 in Singapore, while VLSFO averaged at USD560 per tonne.
• Lack of regulations - Absence of standardized regulatory frameworks.
• Supply Chains - Scaling up renewable energy and domestic electrolyser manufacturing remains a bottleneck.

How India can become a marine green fuel production hub?

• Sovereign guarantees – They have emerged as a powerful de-risking mechanism for green methanol investments that can considerably reduce prices.
• These government-backed assurances can fundamentally transform project economics by enabling access to international capital markets at significantly lower interest rates.
• Production-linked incentive (PLI) schemes for electrolysers – It can relieve supply chain bottlenecks by territorialising value chains and lessening transportation costs of raw materials.
• Carbon capture, utilisation, and storage (CCUS) incentives – They can increase the feasibility of the production of green methanol from sequestered CO2.
• Leveraging Multilateral development bank funds - They offer financing at rates as low as 4%, as opposed to 11-12% by domestic lenders.

What lies ahead?

• Governmental incentives and foreign partnerships (with Korea, Japan) can attract global shipbuilders and stimulate economies of scale.
• Integrated green fuel hubs and supportive policy frameworks can position India to revitalize its shipowning and shipbuilding industries while meeting decarbonisation targets.

Reference

The Hindu| Decarbonization in Global Shipping