THE LINK BETWEEN TRADE AND TECHNOLOGY CHOICES

The wide range of vessels in the global fleet and their diverse trade routes create unique opportunities and challenges for shipowners as they set a course to decarbonization. Both short- and deep-sea vessels can be used for international trade and carry similar types of goods. However, the markets are distinctly different in terms of ability to adopt new technology, available resources and the complexity of their regulatory frameworks. These differences and commonalities will greatly influence the pathways that owners choose to reach the International Maritime Organization's (IMO) greenhouse gas (GHG) reduction targets for 2030, 2050 and beyond.

Short-sea vessels are primarily used in environmentally sensitive areas, such as the Baltic Sea, inland rivers or lakes located close to urban areas, where emissions are strictly regulated.

About 60 percent of the European sea trade is handled by short-sea shipping across areas such as the Mediterranean, the North and Irish Seas, the Baltic and throughout the continental countries served by rivers. Similar national and regional trade clusters exist in Africa, Asia, North and South America. Also, the short-sea trades tend to be governed by local and regional regulations, rather than global ones.

Ownership of short-sea vessels tends to be distributed among small- to medium-sized companies that usually have limited resources to spend on new technology. Therefore, they tend to be supported by government initiatives that incentivize the adoption of any new technologies designed to benefit the public.

Examples of such initiatives are the European Union’s (EU) Connecting Europe Facility 2 and Horizon 2020 3 .

The trade and regulatory landscape of short-sea vessels make them ideal candidates for early adoption of the new technologies that promote environmental sustainability. Some examples include low- and zerocarbon fuels such as liquefied natural gas (LNG), methanol and ammonia, as well as hybrid-electric power generation and propulsion systems.

Fuels such as methanol and ammonia have strong potential to lower the carbon footprint of shipping; but one of their challenges is their low energy content and the comparatively lower amount of energy they can store in the tanks of a ship.

Short-sea shipping can accommodate the use of fuels with low energy content — such as methanol or ammonia — that require more frequent bunkering.

Trade Factors and Technology Adoption

Short Sea

• Access to frequent refueling • Often travel on a fixed route • May benefit from government subsidies • Good early adopters of technology

Deep Sea

• Purpose-built; designed for a function • Follow a holistic approach • High capital cost for new equipment • Built new or retrofitted

Similar challenges arise from the use of batteries in hybrid-electric propulsion systems, which require frequent recharging when the vessel is periodically operated in full electric mode. From a commercial perspective, short-sea shipping competes with ground transportation, so new technologies will need to satisfy the regulatory landscape to keep the sector environmentally and economically competitive.

Deep-sea vessels are used for intercontinental trade and are therefore subject to global regulations. The trend toward more stringent regional regulations, such as those seen in emissions control areas, may increase the complexity of maintaining the compliance of deep-sea vessels that tend to operate in multiple jurisdictions.

Also, from a commercial perspective, the large vessels used for deep-sea shipping tend to be designed for a single cargo, which is more subject to market fluctuations and supply chain risks. This uncertainty makes shipowners more cautious about adopting new technologies before they are operationally and economically proven.

Furthermore, charterers considering further ways to differentiate themselves are increasingly likely to set stronger requirements for environmental performance and compliance with strict regional regulations.

For these reasons, the technical development of large vessels requires a holistic approach to their design, so that efficient and sustainable operations can be optimized.

The adoption of low- and zero-carbon fuels for large vessels is more challenging than for smaller ones. Using fuels with low energy content, such as methanol and ammonia, would require a significant redesign, not least because their fuel tanks would need to be expanded to store enough energy for longer deep-sea travel.

With capital expenses for redesigns and retrofits rising, the vessel’s employment prospects would need to justify this investment.

However, certain types of vessels could be early adopters of alternative fuels, if they carry those fuels as cargo. Aside from LNG carriers, liquefied petroleum gas (LPG) carriers also can utilize their cargo in dual-fuel engines, while reducing their carbon footprints.

In an effort to harmonize the global fleet with IMO goals and regulations, each vessel type faces a challenge to optimize the performance of its technical, financial and operational elements.

Short-sea vessels can be early adopters of new fuels and technologies that may compromise their range at sea, but offer environmental benefits; however, deep-sea vessels will require more holistic approaches to adopting new fuels and technologies so that they can improve their operational efficiency.

The nature and trade route of each cargo will have a great influence on the fuels and new technologies adopted by each vessel as they pursue a pathway to a zero-carbon future.