Shell’s six decarbonisation proposals
AS WAS reported in The Business Times last month, oil giant Shell faced significant pressure to strengthen its ambitions to fight climate change at its annual general meeting (AGM) in London. A resolution to that effect was supported by about a fifth of the shareholders who voted, even as about 100 activists tried to disrupt the meeting.
In fact, the call to “strengthen its ambitions on climate change” is putting it mildly, relative to the position taken by most environmental lobby groups. Activists who have been taking direct action in the UK – in some cases, going to prison as a result – are a lot less nuanced in their demands. They use slogans such as “Just stop oil” and “Ban fossil fuels”. I would be surprised if those very phrases were not yelled out by activists as they were ejected from the meeting.
Activists who use this sort of language see things in black-and-white terms. Any use of fossil fuels is bad, and should be banned – and banned right now, they argue. Those in the opposing camp who want to push for the practicality of weaning society in general – and shipping in particular – off oil and natural gas tend to get short shrift.
In reality, decarbonisation is a massive and complex project. Like it or not, the big-energy companies, as the oil majors prefer to style themselves these days, will have to be significant players for years to come.
By coincidence, about a week after the AGM, Shell and consultancy company Deloitte released an update of a 2020 report that identified a dozen “tangible actions to decarbonise the industry”.
The updated report, titled All Hands on Deck 2.0, said “some progress” has been made towards decarbonisation of the marine sector. However, “action and investment must increase in both size and pace to achieve the ambition of being net-zero by 2050, as shipping volumes are expected to increase in tandem with the growth of global trade”. Featuring research and analysis based on insights drawn from leaders across all segments of the shipping sector, the report proposed six recommendations for shipping:
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The first recommendation: “Scale up pockets of demand to create clearer signals of demand through natural demand aggregation for low-carbon fuels and low-emission vessels.” To a significant extent, this is already happening, with large shippers becoming concerned about meeting environmental, social and governance objectives.
The second: “Take a segment-specific approach. Identify common characteristics of each segment to allow for the prioritisation and tailoring of solutions, starting with first movers.” This sounds reasonable, but implies a centralisation of control over the decisions of private-sector companies.
The third: “Leverage local/regional regulation for momentum by driving progress as a means of advancing near-term material impact on total greenhouse gas (GHG) emissions for the shipping sector, while anticipating that global regulation will need to quickly follow to achieve a level playing field for working towards a net-zero target.”
This appears to be support for the current unilateral moves by the EU to include shipping in its emissions-trading scheme (ETS) and, by implication, the Fund and Reward proposal about to be considered at the International Maritime Organization (IMO). We are probably already well past the point of no return on the road to what IMO refers to as “market-based measures”.
The fourth: “Drive clarity on fuel pathways. Increasing demonstration projects and investments in these would support first-mover decision-making for both fuel suppliers and shipowners – and should recognise the complementarity of different pathways.” This, again, sounds fine. It is almost a statement of the blindingly obvious, except that it continues an interventionist theme.
The fifth: “Adopt an integrated view on asset improvement. Recognising fleet composition is crucial in tackling the decarbonisation challenge and requires an integrated set of levers. These include efficiency measures, greater investment in dual-fuel-capable vessels, and increased modularity via retrofits, as well as sufficient new-build and repair-yard capacity to undertake these changes.”
Actually, this already happening big time. Crucially, owners are starting to look carefully at carbon capture. Just as sulphur-oxide scrubbing turned out to be a practical way to comply with IMO sulphur-limit regulations, carbon capture could well be a viable way to decarbonise shipping. As with sulphur oxide scrubbing, carbon capture will happen, much to the chagrin of the environmentalists.
The sixth: “Activate the first green corridors. Taking the steps to operationalise the first green corridors offers a concrete proof point that can be scaled from inter-regional impact to an eventual global one.” Yes, this is something that is being adopted, but is yet another interventionist measure.
Promoting the report’s recommendations, Shell Marine’s president Melissa Williams said: “Change is often the only certainty we have in the shipping industry, but the continued urgency to decarbonise is one constant that remains.
“All Hands on Deck 2.0 shows that action is underway. But crucially, it also shows that this action is not happening at the speed required by the energy transition, especially in areas such as infrastructure replacement and around roles and decision-making.
“I therefore encourage organisations across the industry to carefully consider how to act next, and to reach out to a partner, like Shell, which can help them overcome their decarbonisation challenges. Because, by working together, we can secure a brighter horizon for the entire shipping ecosystem.”
Well, I am sure Shell is very keen to help “the entire shipping ecosystem”. But the obvious way to accelerate decarbonisation is for the global shipping industry’s regulator IMO to, well, regulate. It already has mechanisms – albeit imperfect ones – for determining carbon-dioxide emissions output. The emphasis should be on improving these mechanisms and then introducing emissions limits in the same way the sulphur issue was regulated.
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