Energy Transition Shipping

Why the world’s first carbon neutral container ship will trade in the Baltic

Latin America has a long way to go to attract similar projects

A.P. Moller – Maersk and Hyundai Mipo Dockyards have agreed on a contract for Hyundai Mipo to build a feeder vessel with a dual engine technology, enabling it to sail on either methanol or traditional very low sulphur fuel. Maersk announced the intention to order the vessel, an industry first, on 17 February 2021. It will fly the Danish flag.

The 2,100-TEU feeder will be 172 meters long and will sail in the network of Sealand Europe, a Maersk subsidiary, on the Baltic shipping route between Northern Europe and the Bay of Bothnia. Delivery is expected by mid-2023.

The methanol propulsion configuration for the vessel will be developed by MAN Energy Solutions and Hyundai Engine and Machinery (main engine) and Himsen (aux engine) in collaboration with Hyundai Mipo and Maersk. Classification society will be American Bureau of Shipping (ABS).

The Danish company chose the Baltic due to technical and commercial reasons. The Baltic Sea traverses Danish waters, giving easy access to the ship for Maersk and MAN. “The vessel is very important for us to gather experience in operating this new type of technology, so it makes sense for our engineers and experts to be nearby for easy access. Also, many of the most progressive companies within the decarbonization agenda are based in Northern Europe and active on this trade route”, commented Mikkel Elbek Linnet, Senior Manager of Regional Media Relations, A.P. Moller – Maersk.

The commercial viability of the ship is still a work in progress, since it will be costlier to build and operate than conventional vessels. However, in Europe, the prospects are much more favorable due to stricter carbon regulations in the pipeline. While it seems increasingly likely that no global market-based measures (MBMs) to decarbonize shipping will be implemented by the IMO before 2026, it may come much sooner in Europe. The European Union is expected to include shipping in its EU Emissions Trading System (ETS) by 2023.

Carbon prices are not the same throughout the continent, and guess which countries are in the top five carbon tax list currently? Finland and Sweden, the two that share the Bay of Bothnia. Sweden is #1, while Finland is #4. The highest the carbon tax to be enforced for shipping, the more competitive a carbon neutral vessel becomes.

Image credits: A.P. Moller – Maersk

In developing regions such as Latin America, the situation is completely different, therefore it is harder to attract similar projects. Most countries are still subsidizing fossil fuels instead of taxing them. That is the case in Venezuela, Ecuador, Mexico, Argentina, Brazil, and others. However, final consumers are already pressing for greener products and services. The companies, then, are faced with the challenge of decarbonizing their supply chain, which includes shipping. In Europe, this trend is already forcing companies into swifter action.

More than half of Maersk’s largest clients have set – or are in the process of setting – ambitious science-based or zero carbon targets for their supply chains, making the order another important step in the Maersk efforts to support the rising number of customers calling for carbon neutral products.

“This groundbreaking container vessel shows that scalable solutions to properly solve shipping’s emissions challenge are available already today. From 2023 it will give us valuable experience in operating the container vessels of the future while offering a truly carbon neutral product for our many customers who look to us for help to decarbonize their supply chains,” says Henriette Hallberg Thygesen, CEO of Fleet & Strategic Brands, A.P. Moller – Maersk.

Alternative fuel supply is another key factor, as we have already discussed here and in interviews with the group’s executives in the region. While Lars Nielsen from Maersk argues that we need to see a move forward in the fuel supply side, Michael Britton from Sealand Americas stresses that companies that are investing in providing these fuels in a cost-effective way will do well on the future. Although a few initiatives are already under way, it is simply too risky to deploy a carbon neutral vessel in Latin America right now.

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