SXSW: Why wind is the future of zero-carbon ocean shipping

 

Every day, thousands of ships transport most of our food across the world’s waterways.

At the same time, sea transportation contributes about 3% of the world’s total greenhouse gas emissions each year.

Zero-carbon shipping can offer a more sustainable future. But how can we make it a reality?

One answer: wind.

At South by Southwest (SXSW), Cargill’s ocean transportation business leader Jan Dieleman spoke with Bloomberg’s Isis Almeida about how we can harness wind to build a more sustainable shipping industry.

The live example they discussed: the launch of the Pyxis Ocean. It’s the first bulk carrier with WindWings that use wind-assisted propulsion to power the ship forward.

Listen to the audio from the March 14 panel and follow along with the transcript below.

Want to learn more about how we’re working on zero-carbon shipping to build a sustainable maritime industry? Learn more about the Pyxis Ocean, including the people behind WindWings’ maiden voyages.

 

Transcript: ‘Making Zero Carbon Ocean Shipping a Reality’

Note: We encourage you to listen to the audio above if you are able. This transcript was generated with a combination of speech recognition technology and human transcribers. Please check the corresponding audio above to confirm accuracy before quoting in print.

Isis Almeida: So shipping is a backbone of the global economy. The vessels carry more than 80% of the goods traded around the world. But with the overwhelming majority of ships still running on fossil fuels, there's a clear price for the environment.

The sector accounts for about 3% of global emissions, spewing more CO2 into the atmosphere each year than Germany, or the equivalent of 283 coal-fired power plants.

Cheap solutions aren't easy to come by, and today we are here with Jan Dieleman, the head of shipping for Cargill and also the chair of the Global Maritime Forum, to talk about decarbonization in the sector.

Cargill is the world's largest agriculture commodity trader and it holds some 225 million metric tons of cargo around the world. The company has some 700 charted vessels on the water at any given time.

So Jan, thank you so much for being here, and talk to us a little bit about why is it so hard to decarbonize the shipping industry and why has the industry been behind?

Jan Dieleman: Well, thanks for being here with me today.

So a couple of things I would say. What you said earlier is that the maritime sector research is a sector, which I don't think is very known to people, but it's extremely important as you say for world trade. Eighty to ninety percent of what gets moved around the world gets moved by ships.

It's also the most efficient way of transporting things around. But as you said, the emissions, if you add them all up, are enormous. I think if you put it as a country would be No. 6, somewhere in between Japan and Germany. So that's significant.

I think what we can say is that if we're not able to decarbonize the maritime sector, we won't be able to get to the 1.5°. So I think [that is] something people sometimes forget.

So why is it so important? First of all, it's a vast industry, many, many ports. It's global. You have the high seas, which is very different than what you see land-based, and it's very difficult to find solutions. So it's one of the hard-to-abate sectors as we called it in the Paris Agreement.

So there's not that many solutions what you can do. For instance, on batteries, they might play a role on intercoastal, maybe on the waterways, but it's impossible to use this on the high seas because we did a calculation. You would need as much space for the batteries than you would actually need for the cargo. So, you could be theoretically sailing around, but you couldn't move any cargo though. So that's not really sustainable either.

Isis: I think it's really interesting that you talk about the batteries there because I think a lot of people would think, you know if we can switch to electric vehicles, why can't we just electrify the ships. So talk to us a little bit about that difficulty and what are the fuel options available if we can't go electric?

Jan: As Cargill we've been on the journey on decarbonizing for quite a while. It's not an easy journey I have to say.

We are [a] leader in the industry and we also want to lead in some of the topics which are complex. I don't think you can lead just in the easy things.

We also think that there's huge opportunities because what we just talked about, the whole energy transition, if you got that right, there's also huge opportunities there. So we really look at it from two sides.

If you look at what you can do today to decarbonize the sector, you have basically two options if you really take a step back. The one is all around efficiencies and the other one is around low- or zero-carbon fuels.

If you go to the efficiencies, there's a couple of things you can do. One is all around the supply chain management — making sure that ships end up in the port at the right time, right place, which is something that sounds obvious, but it's still not happening everywhere. You can do things around weather routing, taking the best routes. Data-driven is something that we're also looking at a lot. And there's a host of things you can do around the ship itself.

There's things you can do with paint, and people would say, what does paint have to do with decarbonization? But if you have low-friction paints, you can actually save a lot of fuel because you're going a lot smoother through the water.

You can do a lot of things in the engine room, power limitations, all kind of things like that. But also very simple things like LED lights, and a lot of ships today, when they come from the yard, they don't even have LED lights. So there's a lot of things you can actually do on the efficiency side.

What is nice about the efficiency side, they will have a payback because you're saving fuel. If you're saving fuel, you're saving money. So the sector is really trying to double down on this and really also making sure that we make the problem with the new zero- or low-carbon fuels a lot smaller.

So when you go to the low-carbon fuels, there's a couple of things you can do. There's LNG, which has not really gained a lot of traction in the industry. It's quite expensive, some carbon savings, a lot of controversy around the methane slip and all these kinds of things that I don't need to go there today.

Then you have something that is really, really interesting, I think, is the biofuels. So biofuels are either made from crops, which is first-generation, or it's basically from waste-based. And we’ve actually been trialing quite a bit on the waste-based, and it's something you can do today and you can save an enormous amount of carbon by doing that. So if you drop in 30%, so you can probably get to 24% reduction of emissions, which is quite substantial.

And then you have the other zero-carbon fuels, which are a little bit further out. So we're talking about the green methanol and the green ammonia, which are expensive, not really available today and having some safety issues.

Isis: And when you think about crop-based biofuels, I think that there's been a lot of debate over the past couple of years whether, you know, we should or shouldn't be using. I think right now there's a huge amount of traction in that industry for renewable diesel as well. You know, I'm interested in, you know if we are going to go down that route, is there feedstock for every one of the industries that's trying to use some of it?

Jan: Well, that's the big debate I think that you have. And the maritime sector has really been focusing on the second-generation biofuels, so really the waste-based- biofuels.

Ourselves we have a plant in Ghent that is producing some of that, and that is where people are really focused on. The problem with that, of course, is there's a limited supply. You are competing with other sectors. But it's clearly a lever that we can use today and bridging somehow the time to the other fuels are available. But if we really want to get to zero emissions in this sector, we will have to move towards zero-carbon fuels, i.e. the methanols and the ammonia.

Isis: And the ammonia, too, has some sort of issues in terms of pollution is hard to handle. When do you envision that we could get to a point where you know, green methanol and green ammonia are realities?

Jan: Yeah, so methanol and ammonia, they do exist, right. So these fuels, they do exist, but we don't need ammonia, we don't need methanol. We need green ammonia and green methanol, and that is a bit of challenge. So you're really talking about the e-fuel. So you have to have a not renewable power to do that or you have to have actually the biogenic side of the story. 

The methanol has a big advantage and we've been dipping our toes into that. We ordered the first five methanol capable burning ships, which are going to be delivered in 2026. That's the fuel that's actually available today.

So you can do that. You can use the engines which are relatively similar. So it's a relatively easy thing to do. 

Price is a problem and availability is still a problem when you're talking about ammonia. The first engines are probably going to be ready next year. So that is a big, big progress.

I think the big issue we have in ammonia is there's still a safety concern that we still need to overcome and it's not so much the safety on board of ships, but it's really around the fueling operations import, there’s quite some things to be done. But we believe over time that challenge will be overcome.

Isis: And both ammonia and methanol, they're not really new. What's new is the green ammonia and green methanol, and I don't know if any, a lot of people know the difference. So maybe we want to explain a little bit about how do you make ammonia and methanol versus how you make green ammonia or ethanol.

Jan: Yeah, so it's all around the basically the source that you're using to produce those fuels. 

Methanol today is mainly made out of coal production and to some extent natural gas. They call that grey and blue ammonia. And I'm sure we're going to have a lot more colors going forward. Purple is if it's on with nuclear.

So the green is really around using the biogenic CO2 from agricultural waste. That is one way of doing it, and the other way is using the e-fuels, which is basically using renewable power. With ammonia it's really around the e-fuels and you're really looking at producing the hydrogen with renewable power.

Isis: Thank you. That's really, really interesting and I think it's a big challenge for the industry. 

I think the International Maritime Organization, which is the UN agency that regulates global shipping, they have a goal to reach net zero by or around 2050, you know, and they do say that they need to take into account different national circumstances. 

It is a goal that's more ambitious than their previous goal, but it's not a goal that is in line with keeping global warming to 1.5, which is really what a lot of people would like to see. So do you envision any way in which the shipping industry can step up its game to get there?

Jan: Yeah. So I think looking back on the sector, I think we've come a long way. Five years ago when I would have a discussion around green shipping, as we like to call it in the sector, there was a lot of pushback. There was a lot of pushback. It was not going to happen. It's too complicated, hard-to-abate sector, and there was always something that was a reason that it was not going to come because it was too complex.

A lot of changes in the meantime. And I think when you ask people in the industry nowadays, most people will agree that shipping has to do its fair bit in the energy transition. I do think a lot of people, and to be honest for the right reasons, are still a little bit struggling how to do it, who's going to pay for this and all the other questions with that. So I think that's the starting point.

Then I think the IMO, what they've done in the MAPC 80, that's one of the meetings that they have to decide these kind of things, I think it's been a landmark decision, and I think it's the first industry actually that has been able to globally come up with an ambitious plan on how to do this. And the IMO, as you said earlier, the International Maritime Organization, is a UN organization, so you have to get 190-plus countries aligned on something, which is not easy. And I think it's quite commendable that they've been able to do that.

Now the proof is going to be of course in the pudding. And now they have to translate that ambition into real goals and real regulation, and that is something that they will have to do now and is really, really necessary. Because up to now the industry has been relying on first movers like us and some other people. But if we really want to scale it, we need the regulator to back this up.

Isis: Is there any hope that the shipping industry will get to a point where we can keep it to 1.5 or is it too late now and the reality is that we're more stuck with, you know, restricting global warming to 2°C?

Jan: I'm an optimist by nature so maybe that is a little bit coloring my answer here. But I think it is possible. And if you look at some of the numbers, if you want to get to the goals, you probably need around 5% of the fuel used in the shipping industry by 2030 to be zero carbon, so i.e. the methanols and the ammonias.

And I think that is not impossible. And I think the amount of energy that is going into the industry, the amount of money that is available to invest, I think is really starting to line up.

I think there's two issues that we're having is still the regulator needs to move, because it's going to make the industry a lot more investable. And the second thing is we also need to realize that we are competing with other industries and all industries have the same goal, decarbonizing by 2050, and we're all competing for the same fuel. So that's going to be a little bit of a challenge.

Isis: And talk to us a little bit about the investment side of it. You know there's so much uncertainty in various countries and what the regulation is going to look like. And you know, if you are an investor, you might be thinking, “Why am I going to invest in building a ship with technology A if I don't really know that that's what my country will back? And then I'll go to Technology B.” So what is the investing environment looking like right now?

Jan: Well, it's actually been surprising how much activity has been taking place. There is a group of people rightfully that say, “You know what, let's wait and see because I don't know what to order, I don't know what to invest in” and nothing happens, which I think is just a temporary phase that we're in.

But we also see a big sector, and I would say mainly on the container lines where all new ships that have been ordered are actually ordered with a dual fuel capability, and some of them is LNG, some of that is the methanol side.

And I think that is really based just on societal demand, it's not really based on the regulator. So there is real demand especially in the container sector, where you're very close to the end user to actually pay for this additional cost. And if you take that per unit, it's actually quite affordable.

Isis: So you're seeing not just yourselves but others follow suit and really try to order those ships with, you know, new technologies?

Jan: Yeah. So we've seen it mainly in the container sector that is one, but also in the bulk sector, which is a little bit more, I would say a little bit further away from the end user, a little bit more complicated to make that connection.

When we ordered the first five ships, that's about a year ago, there was actually another 10 done by other people. And that's actually what we'd like to see. We like to lead, but we also want to see others to follow suit and then to make sure that this becomes the standard and not just something that we are focused on. So we're really trying to move an industry in that respect.

Isis: You've all seen the video that has Pyxis Ocean, which is the Cargill chartered ship as an 80,000-ton bulk carrier that now has something called the WindWings. You know if you think about wind, if you look at the history books, that's how ships used to move, right? They used to move on wind and now sort of coming back to that idea and bringing sails back onto cargo ships that are, you know, crossing the ocean with grains with oil or iron ore, so be it.

Tell us a little bit more about how that idea came about, the technology and what are the advantages?

Jan: Yeah. So we've been intrigued by wind for a very, very long time. And actually more than a decade ago we actually experimented with kites. And to be honest with you, that didn't work, and it also put us off a little bit. We got a little bit scared of innovating for a while.

But when we started to look at the decarbonization, because in those days it was just around the fuel efficiency play, and when we really started to look at the decarbonization side and trying to dig into it, we very quickly realized that we needed help.

We needed other people to somehow work with us because we were not going to figure this out on our own. And we did a bit of a challenge where we reached out to a lot of people with new ideas and we got a host of ideas. And one of them was again of course wind, and as you say we're not going to go back to the wind days. We want to get the best of both worlds right. You want an engine to make sure you arrive in time, but you want somehow the wind to make sure that you do that with the least fuel consumption. And so that’s where the wind-assisted propulsion was born.

And we started to work with a company called BAR Technologies, and BAR stands for Ben Ainslie Racing. He's an America's Cup winner. He was also very much involved with people from Formula 1. And if you want to win in those sports, you basically win on data.

So what they've been really, really good on is really using data, using modeling and taking the latest art. So we really combined the best of top sports with a hard-to-abate, hardcore industry or kind of sector like the shipping. And the innovation has been amazing.

Last August we put the Pyxis Ocean out. It's a ship that has been retrofitted. So it's a ship that was not built for wind, it's a ship that was already on the water. It has these two massive wings on there, which are 38.5 meters tall. That is as high as, for people who've been in Paris, as the Arc de triomphe. So it gives you a little bit of a sense of how big they actually are.

They’re retractable. So when you get in port you can actually load and discharge. And they really look a lot like airplane wings I would say, made of the same composite that you have in windmills. And the ship is completely sensored. It's the most sensored ship in the world, I think, with a lot of data that we're getting from there. It has cameras on it and it's really been a game changer for us. There she is and it's been great.

Isis: I know you've been, you've been testing it. Correct me if I'm wrong, but I know that the Pyxis Ocean went from Shanghai to Singapore, it went to Brazil and I think they went from Brazil, from the Netherlands. How are the trials going? And I know that initially you talked about, you know, that WindWings could actually help cut fuel use by a fifth. Did that happen? Talk to us about how the trials have gone so far.

Jan: Yeah. So when we put the Pyxis Ocean on the water six months ago and we announced that to the world, so to speak, we also made the commitment that we were going to share the results because, as we said earlier, we want to move an industry. We want to make sure that people see what actually the wind could do. 

And at the time, to be honest, we didn't know if it was going to work. We took some risk. Of course, we thought it was going to work otherwise you wouldn't have done it. But there was a lot of question marks.

So when we put it on, the ship actually did what you said, basically crossing the Indian Ocean, Pacific Ocean, went around Good Hope, ended up in the Atlantic, did Cape of Good Hope. So we basically had a very good picture of how it actually develops in all the areas.

So there was a couple of things for us important to test. One: was it actually technically working? Are the wings going up and down when they need to? It's a very easy system: green, orange, red. And it worked really well. So that one I would say green marks, very well done.

The other thing for us was important going back to what I said earlier on the kites that we used, is how's the crew actually dealing with this? Because it's a little bit less intervening for the crew than the old days, but you still need the crew to be excited about this to really work, and the crew was really really happy to be on board of the ship. They actually managed at some point to outpace the storm. So they were very happy with that. And so it was a very good experience for people as well. And I think when we talk about decarbonization, we sometimes miss the human element, and I think it's an important one to basically have in there.

Then the other thing that we were testing was the customers, right, because we put this out and we wanted to see how customers were really reacting. And we had a lot of people, when we announced it, we had a lot of people calling us and saying, “I want my cargo on this ship, it's great. I want to be associated with this,” which was great.

To be honest with you, we hadn't had people that said, “You know what, and I'll pay substantially more for that”, but that might still come. But at least there was a good demand, which validates for us that there's demand for these new technologies and being associated to those new technologies.

And then the other thing was around ports, because it's great that you have an efficient ship that can seal from A to B, but if you can't discharge it, you have a bit of a problem. So we actually had a bit of mixed results on the ports. There was a couple of ports which were a little hesitant. The ship is different, didn't know what to do, so some people took a bit of the risk-averse approach. But we also had some ports that went the additional mile and gave us preferential treatment. So we've actually had very different experiences and I think over time we'll see more of that.

Then the last question, of course, is how well did it perform, right? Because that was the other thing that we were really testing. And what was important for us is we had this model and we wanted to really test how was the reality versus that model. 

And we’ve actually come very, very close. We're coming something in between the 10% between the model and the reality, which is actually really, really strong. She's not optimized for wind, so she didn't do only routes with a lot of wind, but she performed really, really well. 

And we're getting very, very close to the numbers that you were talking about, which is about 1.5 tons of fuels per wing, which is basically something like 12 tons of CO2 per day when the wings are up, which is a kind of the equivalent of 500 cars. So it's not insignificant.

Isis: And the Pyxis Ocean had two sails. Would it be possible to put more sails on and would that, how much would that do we know how if that would improve the performance or you know, how do we think about it? And is it too expensive? That's the other thing I wanted to hear from you, what does a payback look like for a company like Cargill?

Jan: Yeah, so you can put more on. We had a long discussion [about] two or three, we ended with two because for some other reasons. There is a ship actually at the moment sailing around with four wings, which is a cape size which has more space.

For wind, we also have to be realistic, right. Not every ship is going to be suitable for wind, not every route is going to be suitable for wind. So it's going to be a little bit of a give and take.

In terms of cost, I don't think cost itself is something to look at, but we really look at what you're saying yourself is payback. This was a pilot, so the pilot is not something that has a great payback. It was a learning exercise. It was showing people, showing the industry what is possible. I think that's a very important thing for us as well.

But I think the payback was probably around 10 years and there's two problems at the moment. Fossil fuels are too cheap, which is something is difficult to change, right? So that, it is what it is, but what we need to work on and are working on a lot is trying to get the CAPEX, so bringing it on board and really the installation, trying to make that cheaper. 

And the fact that it's not completely economical now I don't think is a problem. I don't think any pilot goes economic the next day. So I think there is some time to work on that.

But if you put yourself in the new scenario with the new fuels that we were talking about, which are probably going to be three or four times more expensive, then every ton of fuel you're going to save is worth a lot more. So if you put those two combinations together, you're getting a really, really interesting business case. 

And everything the IMO is doing and everything that we're hearing about carbon taxes, we are very confident that wind has a role to play. It has a significant role to play. We are however also looking at different types of wind and not just this one.

We're having a rotor at the moment and we have some other foil technology just to make sure that we also test the different types of wind.

Isis: And you know, normally ships will take the routes that are more economical for them, but we know that the wind doesn't blow the same way everywhere. So do you envision that if these ships were to become a reality, we would have specific corridors in which they would operate?

Jan: Yeah, theoretically these ships should be deployed where there's the wind, right? It's very simple in that respect. I think we have a bit of an issue still in the in the maritime industry is that the notion of insetting, mass balancing, book and claim, or whatever you want to call [it], is not well accepted. So we are still making inefficient choices and I think that's something that we need to look at.

The wind story I think is a good one. These ships should be deployed where there's wind, but you can make the same argument for the green methanols and the green ammonias, which we should be putting ships on the trade routes where that fuel is the cheapest. But that might not be where the physical customer actually is willing or able to pay for this flow. So we have something that we still need to work on, but I'm confident that we will get there.

Isis: Is there a particular route that you have in mind where you say, well, this is a really windy route and are we likely to see the ship more going from X to Y?

Jan: It's interesting, right? In shipping, there's so many factors that play a role. It's not just the wind, it's also lake and it is certain customers that [are] not able to do it. I talked to you about the ports. At the moment we're getting some beneficial treatment in some ports, which is actually offsetting maybe some of the gains that we might have on the windy route. So there's a lot of complex factors there. 

But theoretically these ships should probably be deployed most in the North Atlantic where you have A) most wind and you also have an ETS carbon scheme that is helping to make the fossil fuels and the savings a little bit more interesting.

Isis: And you also talked about how the Pyxis Ocean was a ship that already existed, it wasn't a new ship. Is there a difference in cost or can you basically retrofit just about any ship? Or would you say like, OK, it's a ship’s this old, it would be worth it. The ships that are, you know, very close to being scrapped [are] clearly not going to be worth the investment. So how do you think about what ships you could retrofit and how do you think of the cost of retrofitting into an older ship versus putting it on a new ship?

Jan: Yeah, so, it's exactly that, right. If you look at the retrofit, I think you need to look at the ships below 10 years of age. Otherwise it doesn't make an awful lot of sense. The retrofit is still a bit of an issue because there's a lot of steel that needs to go in because these ships are not built for wind. So this ship wasn't built for wind.

We actually worked through the yard and made a design which we call the Cargill Max, which is really a ship that will be actually optimized for wind as well. So it would also have slightly different shapes and things like that.

And then it starts getting really, really interesting. So I think the way we're looking at it, especially on the new build ships we’re installing should be a little bit cheaper, but also having the dual fuel capability and the more expensive fuels, that is the sweet spot and, I've called it the last couple of days a bit of a no-regret move. And I think on the real at scale retrofit there's still things to be done on the economics to make it more appealing.

Isis: Cargill has been very public with this project. I think we've seen it on the news and you probably have seen on Bloomberg News itself several times. It's a really interesting way of thinking about how to decarbonize the sector. It's curious. It takes you back to your history lessons. It takes you back to sports. So it's obviously a very appealing story.

But we know that Cargill has higher emissions than a lot of its peers, and part of it is because Cargill has a shipping division. So how can you show this, the public, that this is just not one more project, it's not simply just greenwashing?

Jan: Well, it's fair, right? And there's a lot of greenwashing happening in the world. I think we all know that. There's a lot of greenwashing also happening in the sector, to be very frank with you.

But honestly, I don't think this is greenwashing. If I just look at the focus that we've had over the last many, many years is really to try things and to move things and to come up with some real kind of things on the water and not just promises on what we're going to do in five years’ or 10 years’ time. And I think we have a lot of proof points.

We started seven years ago, the first one to basically report our emissions and make them public. You can go and look them up and now that's the standard in the industry.

We started to join a lot of the institutes trying to figure out the fuel paths, the Maersk Mc-Kinney institute, Global Maritime Forum, etcetera etcetera.

We tested a lot of energy-saving devices. We did the wind and not just this one, but we also have two other technologies of wind where we don't know if it's going to work, but we're really willing to try. And we're also the first one that actually ordered the first five methanol-ready burning ships in the sector.

So I think we're trying to do a lot of things. You can always argue we should do more and we should go faster, but we're really trying to pull our weight and lead also from the front in these kind of things, which are not obvious and are complex to be very frank with you.

Isis: And do you have plans already and now that the ship is tested, I know you said still not economical, but when you look forward do you plan to, you know, retrofit it into more ships or get new ones? Or what does Cargill’s plan look like?

Jan: Yeah, I think with this pilot we've proven that wind has a role to play in the energy transition, and actually a significant role. Because again, right, if these fuels are two, three, four times more expensive, if you can save 20%, that's saving 20% of a problem and it also helps to make these fuels available for other sectors again, right. So I think there's really something here which is very, very important.

So what we're doing is we are looking at putting wind specifically on those five ships, where we have the more expensive fuel that we will be burning most likely. We are still working on retrofitting programs as well. So we really believe this has a role to play and there's definitely going to be more ships with wind in our fleet going forward.

Isis: That's really good to hear. I think the one interesting challenge that the shipping industry has in general is that the IMO rules and their ambition to reach 2050 net zero isn't really enforceable, right? It depends on every country stepping up their game and saying, “I am going to translate this into legislation.” And legislation isn't being translated the same way in different parts of the world.

So maybe we start here with the European Union. I think the European Union has an emissions trading system in which people who are, you know, the companies that are polluting need to pay for carbon. And, you know, the ETS system has now been extended to shipping. The estimates out there is that this will add a 3.6 billion bill just this year.

Talk to us a little bit about the challenges of the different legislations and I think the first one is the EU because it's so prominent right now.

Jan: Yeah, on the IMO just to start with there. I think it’s also going to depend a little bit on how this is going to get written into regulation, because there is clearly regulation that is still not ratified, if you look at the scrapping convention and stuff like that.

But there's also the 2020 fuel change that we did from high sulfur to low sulfur, which was implemented globally from the one day to the other. So they have proven that they can actually make it enforceable. So let's see how that goes.

If you look at the ETS, I think it's clear Europe gave a clear signal to the IMO and saying, “If you're not going to do it, we're going to go ahead.” And I think that's right. It's a lot of complexity. It's not easy, but I think it gives the right signals for the industry to do so.

The industry is not used to this. This industry is used to a single fuel, a single regulator. And now we're ending ourselves up with multiple fuels and multiple regulators, which is going to make it a lot more complex, I would say.

Isis: And when we think about the challenges, I think that if you look at the European ETS, you'll already hear loads of talk about how can we skirt the rules. You know, how can we as a company, you know, unload our ship in Morocco or unload our ship in Egypt or unload it nearby and they take it to Europe the other way so that you can kind of skirt the regulations.

Do you envision a lot of those things happening? And do you think that maybe a block of countries starting to impose something ahead of others will create challenges like this for the sector?

Jan: There's always questions on this, right? And whatever regulation you put in you will always have people that [are] trying to outsmart the regulator and that will happen again in this case. The way they're implementing it is also in phases. So they also leave room to somehow tweak it and make it a little bit more robust over time. So I'm personally not too worried about that. You might get some retaliations that some people see this as a kind of an import ban and there's going to be a little bit of push back here and there.

But in the background the IMO is actually working with the backing of all countries on a carbon scheme as well. I think as long as that carbon scheme moves ahead and we're going to get something that is meaningful. I think at some point you could even envision that the ETS is going to disappear and just gets folded into the overall regulation. But I think it's something that the sector needs and I'm fully behind that. 

Isis: And is paying a price for carbon the best solution out there?

Jan: I think that there is no silver bullet in technologies. There's also no silver bullet I think in regulation. I do think putting a price on carbon will help in the transition.

Of course, there's also the other side of it and getting more of this public-private kind of initiatives in the green corridors as they call them, where we could get two incentives, which would also be very, very helpful. 

But the sector could also look at things what is happening, for instance, in the car industry where you could also put the deadline on a certain day and say as of 2035 or whatever the number would be, you can only deliver the ships on the water if they have a dual fuel capability. That is also something they can do. Like in Europe, some countries have said, “No more fossil cars can be sold as of date X,” so they could also go that way.

So I think it's a mix of operational measures, a price on carbon and maybe somehow an end date on fossil fuel capability burning ships.

Isis: And how big of a challenge it will be also because here we are talking about the European Union and talking about the U.S., talking about the developed nations. But how big of a challenge will it be for the developing nations to be able to get on the bandwagon here?

Jan: Yeah, there's a whole discussion and that's not just in our sector. I think it's a broader discussion on a just transition, right, I think everybody agrees that that needs to be just. I think the problem, the definition of justice is not that easy to determine. But what you see very clearly in the IMO proposals is that there is a piece where some of that would go to developing nations.

There is some of that which could be invested in infrastructure, because don't forget, developing nations could play a huge role in in this energy transition, especially when you talk about the need for solar, the need for wind. There's a lot of things you can actually do and promote it in those kind of countries.

So I think it's going to be a complicated discussion, but I'm certain that we will find a solution for that.

Isis: You know, we've been talking about wind so far, but you just brought solar and could we have solar panels on ships?

Jan: I think if you cover a full ship with solar panels, you go like two knots and a normal ship goes about 12. So I wouldn't recommend to go on the high seas with that.

Isis: Fair enough. The other challenge that we're seeing now is geopolitical. It's really started with, you know, [the] Russian invasion of Ukraine and the sanctions on Russia that meant that ships were, you know, taking different routes, traveling longer.

And then we had the Middle East conflict that we now see a lot of ships instead of going through the Swiss Canal, going through, you know, around the Cape.

And on top of it we've had a drought that's lowered the waters in the Panama Canal, making ships also take longer routes.

Talk a little bit about these challenges and how much more emissions do they bring and you know, how big of a headwind is this in the fight to reduce emissions in the shipping industry?

Jan: It’s clear, right, having been in the sector for quite a while, disruptions is something that we live with every day. I think what is happening at the moment is there's quite a lot at the same time, but I've never seen in my career having issues in Panama and Suez at the same time. So I think that is something that is new.

But yeah, inefficiencies in the supply chain normally mean higher emissions. And if you just go back to the days of COVID, I think nearly every industry was actually having less emissions in that time apart from the shipping industry that actually exploded on emissions because there was a lot of shift from need for services to need for products. And everybody clicked on the screens all the time and the sofas and whatever that got ordered, created so much demand that we actually created huge congestion and huge issues and that created speeding up, speeding up is more emissions, etcetera, etcetera.

I think this time it's slightly different. You clearly have inefficient trade flows and you didn't even talk about sanctions, which is also adding to that the same thing. So with that, yes, we are increasing emissions. It's not going to be, in my mind as bad as it was in COVID, mainly because there's a lot more ships available, so we don't see this crazy speeding up of ships that we've seen in those days.

But yeah, clearly if you have supply chain inefficiencies that does mean higher emissions. 

Isis: And I think you touched on something really important there, which was COVID. And I didn't really talk about that. I think during the period of COVID, all of you guys, myself included, were sitting at home a little bit bored, you know, trying to do your work, but at the same time ordering your Pelotons and washing machines and fridges and everything else, but really contributed to global warming in a way that we may not have thought about.

Talk to me a little bit about consumer education and how can we make the consumer maybe more aware of that? I don't think anyone who was ordering their Pelotons or washing machines during COVID was really consciously doing and knowing that actually I'm contributing to a significant increase in emissions here.

Jan: No, I think that's right. And I think it links very much to what I said at the beginning. This is a sector that is not very known, not much talked about.

I think during COVID it got a little bit more attention also because we had a seafarer crisis in the meantime as well with people not being able to get off board of ships after 12, 13, 14 months.

So we got a little bit more in the spotlight. But I think it's still an industry that people don't understand. People don't understand where their food is coming from. People don't understand where their products are coming from and people don't understand what the emissions footprint is that comes with that. So I think we would all benefit from more transparency in that case and really making sure that people can have an educated choice on what to buy and maybe what not to buy.

Isis: And can you also explain like during COVID, the big issue is not necessarily more ships, but was the speed at which the ships were going. Explain to us how it works. Why do we accelerate? You know, why was at the speed going up? And why does that mean actually more emissions?

Jan: Yeah, If you look at ships, they're designed for an optimal, which reduces the emissions or at least you reduce the fuel consumption. If you go over that, you exponentially start burning more, which also creates exponential more emissions. 

So why do people do that? It's clearly because there was more demand than supply. This is an industry where demand can fluctuate day-to-day, month to month, but it takes two to three years to build a ship. So there was clearly a mismatch of supply and demand, and what you see is if there's a high demand then you speed up because you want to do as many hauls as possible.

The crazy thing that you see then sometimes is people are speeding up and then to find themselves waiting for two weeks in the port. And that is something that has not been very smart.

Isis: Going back to the consumer, you know, we talked about the consumer and you know the consumer now more and more wants to know where the food comes from, whether it was grown ethically, you know, what are the emissions attached to it, to the products that they buy as well. But are they ready to pay the price that it really costs?

Jan: It's an interesting one, right? We always talk about the cost. That's why I think it's so important to focus on these emission reduction ways that are out there and that's what wind really fits in, right, because we'll make the problem smaller.

You could argue that for society actually the price of not doing is maybe even higher and probably even higher than doing something. So I think that’s where I would start. I also think that if you really take it to the end user, actually some of the increased costs are actually relatively low. And there's quite some research done on that. And on a pair of sneakers, I think we're talking about less than $0.50. Well less than $0.50 is something that I think we could all afford.

But I think what needs to happen here is we all need to work together. I think everybody has a role to play. It comes from the innovator, it comes from the academia, from business, the regulator that needs to step in. But I think it's also all us in the room, and what we talked about is we have a role to play. We need to be critical and demanding somehow transparency and also somehow willing to contribute financially as well to that solution. Because if you're not all going to do that, I think we're just not going to get there.

Isis: Coming to my last question is really like, what's the role of government, the role of the private sector and the role of the consumer, and who should really pay the bill for decarbonizing the industry?

Jan: Yeah, I don't believe that you can just pass the bill on and say you pay it. I think this is something that we will have to figure out together. I think everybody has a role to play.

I also think it's very important to all collaborate and bring all these ideas together and really trying to pull it to the same direction. And I start seeing that's happening in the sector. I think in the old days it was very transactional. People are much more strategic. Now we're seeing alliances. The conversations that we have with owners is very different. The conversations that we have with governments is very different.

So I think we all have a role to play. We all need to pull our weight and let's focus on trying to scale this because if we can scale this, we can make it cheaper. If we can make it cheaper, it's going to be a lot more affordable.

But it's going to be a bumpy road. It's not going to be an easy road. But I think we will owe it to ourselves to pull our weight in this.

Note: This transcript has been edited for clarity and brevity

 

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