Transforming the Shipping Industry: An Infrastructure Overhaul to Support Alternative Fuel Is Long Overdue

in Volume IV

By Sophia Sahagun


Increasing investor and consumer climate-consciousness, with impending UN deadlines for carbon emissions reduction converge to send a clear message: it is time for a dramatic overhaul of the international shipping industry to make it more efficient and more environmentally sustainable. Historically, progress has stalled due to concerns about expense and confusion about how to reduce the industry’s greenhouse gas emissions as much as possible. The environmental impact and difficulties of the recent supply chain crisis have created even more urgency for a widespread transformation of the industry, and alternative fuels have emerged as the most viable choice for emissions reduction. Finally, there has never been a more pressing time to embrace an infrastructure overhaul to support alternative fuels as our oil access has been dramatically restricted as a result of the Russia-Ukraine war and fuel costs have spiked. It is time to update shipping industry infrastructure to support alternative fuels.

International Regulations on Emissions

Because shipping mostly takes place in international waters, most nations recognize that international treaties are the best way to handle collective difficulties inherent to shipping, especially safety. Thus, the International Maritime Organization (“IMO”) was initially formed in 1948 by the United Nations to negotiate and enforceme the many conventions related to shipping the world’s primary shippers would enter and enforce. The IMO was formed with the express purpose to “provide […] for cooperation among Governments[…]engaged in international trade[…]and facilitate the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and prevention and control of marine pollution from ships.”[1] The IMO is empowered to handle legal and administrative matters related to these purposes[2] and is responsible for ensuring conventions are enforced and new conventions are adopted as needed. Today, 175 nations are IMO members.[3]

Each new convention and major update to an existing convention is adopted and implemented by seven groups within the IMO: the Assembly; the Council; and five specialized committees.[4] The assembly is the highest governing body and meets every other year. All recommendations to member nation governments about pollution and safety must be handled during a full assembly meeting.[5]

By the late 1960s, pollution emerged as a significant and growing problem that the IMO would have to tackle with focused new measures. In 1973, the International Convention for the Prevention of Pollution from Ships (“MARPOL”) was introduced within the IMO to reduce global pollution caused by the shipping industry, including both accidents, such as oil spills, and regular ship operations.[6] Though the primary catalyst for MARPOL’s initial introduction was pollution by solid waste and oil spills, the initiative has since been updated to extend to chemical and air pollution.[7]

In 1985, the Marine Environment Protection Committee (“MEPC”) was established as a committee within the IMO, giving all IMO member nations power to suggest, approve and enforce conventions that reduce or prevent the pollution of major shipping equipment.[8] The MEPC is aided in its enforcement work by the sub-committee on Pollution Prevention and Response (“PPR”).[9] The MEPC makes these decisions by a simple majority vote among all IMO member nations.[10]

In 2015, the United Nations Framework Convention on Climate Change established the Paris Agreement, a treaty signed by nearly 200 nations around the globe to do as much as possible to limit the global temperature increase by 2100 to a maximum of 2 degrees Celsius.[11] The most impactful measure within the Agreement is a commitment to a widespread reduction in global greenhouse gas (“GHG”) emissions, which include carbon dioxide (“CO2”) emissions as well as other pollutants such as nitrous oxides and methane.[12] Though the Paris Agreement does not formally discuss shipping emissions, adjusting shipping emissions is crucial to its goals because the industry is responsible for about three percent of GHG emissions.[13]  The IMO, as the main regulatory body of the global shipping industry, has thus committed to the goals of the Paris Agreement.[14] To date, the IMO’s commitment to the Paris Agreement reflects the only “energy efficiency measures that are legally binding across an entire global industry and apply to all countries.”[15]

The MEPC set to work with a greenhouse gas reduction plan roadmap in 2016, and rolled out its initial strategy to reduce greenhouse gas emissions from ships in 2018.[16] Broadly, the initial strategy aims to reduce greenhouse gas emissions within the shipping industry and to phase them out entirely across the industry by the end of the century. The initial strategy laid out three levels of ambition from least to most ambitious to outline the pursuit of this goal. First, ship design requirements for new ships will have increased energy efficiency requirements, with a percentage improvement specific for each ship type. Second, carbon intensity will be reduced by an average of at least 40 percent by 2030 and ideally 70 percent by 2050, as compared to levels measured in 2008. Third, GHG emissions overall will be reduced by at least 50 percent by 2050 as compared to 2008. IMO members have pledged to revise the initial strategy by 2023. [17]

Criticism of Industry Progress Toward Regulatory Goals

The IMO’s progress toward these goals has been widely criticized as slow and deficient.[18] For example, the IMO has implemented energy efficiency requirements for new ships as well as mandatory regulations for existing ships, both meant to cut down on emissions. Unfortunately, this policy alone will only reduce emissions by 2030 by less than two percent overall. Unless further, more impactful measures are implemented, the carbon intensity reduction goal of 40 percent by 2030 would thus be far out of reach.[19]

So far, the IMO’s strategy has focused on reducing GHG emissions by improving the use efficiency of existing fossil fuel types.[20] But this isn’t enough: merely adhering to the Initial Strategy’s current measures make full decarbonization by the middle of this century impossible and a 50 percent reduction by that point highly unlikely.[21]  In fact, without further action, the shipping industry’s emissions are projected to grow by 2050.[22] Even a 50 percent reduction by 2050 will likely require that at least some shipping vessels are zero emissions by then.[23]

One temporary solution is thought to be Liquefied Natural Gas (“LNG”), and investment into LNG as a “bridge” is increasing as better, long-term solutions are pursued.[24] However, widespread use of LNG would actually worsen the adverse climate impacts of the global shipping industry. Further, significant investment into LNG infrastructure will make the transition to alternative, zero emissions fuels even more difficult.[25]

In the long term, the only way for the MEPC to realize its goal of fully decarbonizing and reducing emissions across the industry to zero is by pursuing alternative, zero emission fuel alternatives.[26] This requires significant research and development into all possible alternative fuel sources, as well as major changes to the entire shipping supply chain to support new energy sources.[27] As of March 2022, at the 78th meeting of the MEPC, member nations acknowledged the importance of reducing GHG emissions and investing in alternative fuel research and development, and proposed a commitment to net zero emissions by 2050. [28] However, full adoption of the proposal will require a realistic strategy outlining exactly how this will be achieved within the proposed timeline.[29]

Internal Pressures Within the Industry

In addition to international regulations that are increasingly pushing for a global reduction in GHG emissions, the global shipping industry is under significant private pressure from consumers, major industry leaders and investors to “greenify” and reduce GHG emissions caused by international shipping.[30]

Environmental, social and governance (“ESG”) policies, and especially the pursuit of sustainability, has become a major part of capital investment in general, which contributes to the pressure felt within the shipping industry.[31] Some investors are now required to report their investment into ESG initiatives.[32] Others independently seek to include ESG initiatives in their portfolio as demand for improved sustainability increases across all industries. Leading loan education association Loan Syndications and Trading Association developed an ESG Questionnaire in 2020 to enable corporate borrowers to make information about their individual business’ progress towards ESG goals available to lenders.[33] This is evidence that both lenders and borrowers across the investment space are increasingly concerned with sustainability and making their commitment clear to the public with accessible information about their progress.

Shipping industry leaders are conscious that their profitability is closely linked to their reputation among consumers, and that consumer reputation increasingly depends on their commitment to sustainability.[34] One study found even environmentally indifferent consumers want a sustainable shipping option available at the point of purchase.[35] Consumers, major clients and investors all increasingly prioritize sustainability as a condition of purchase, investment or a business relationship and as a result, many major shipping companies have committed to reducing GHG emissions to zero independent of international laws.[36] Companies like Amazon, Unilever and H&M that rely heavily on global shipping are willing to pay a premium for a sustainable supply chain.[37]

Primary Alternative Fuel Types

Because improving the emissions efficiency of current oil-based fuel sources will never reach the UN’s lofty zero emissions goals, alternative fuel sources are widely acknowledged as the only way forward.[38] Many fuel alternatives have been suggested, such as ammonia, hydrogen, and methanol. No single alternative fuel is a frontrunner among the options being explored by the industry, and experts contend a zero emissions future may involve multiple alternative fuels.[39]

Any alternative fuel source will require infrastructure to support it; transporting, storing and delivering any new type of fuel will likely require major adjustments to the current methods used for oil-based fuels on and offshore.[40] Currently, no alternative fuel type is available on a scale large enough to accommodate the whole industry without significant investment into storage, safety, and distribution methods.[41] Evaluating the many proposed options for fuel requires consideration of cost, storage, safety, distribution, scalability, and infrastructure in addition to proposed emissions for each fuel type.

One especially popular option is renewable methanol, an alcohol that can be easily derived from multiple sources such as compost.[42] Though methanol would not completely eliminate GHG emissions, it can immediately reduce emissions by up to 60 percent because it is widely available and can be made sustainably with existing methods.[43] If sustainable production methods are scaled to accommodate the entire industry, CO2 emissions can be reduced by as much as 90 percent or more.[44] Further, methanol can be safely transported and stored using existing fuel storage and transportation methods, which would ease the transition to wide implementation.[45] One major drawback is that methanol, and especially “green” methanol produced without emissions, is significantly more expensive than alternatives.[46] Shipping engines would need significant, expensive retrofitting to combust methanol and building new ships designed for methanol would cost 10-15 percent more than traditional models.[47] This concern has been diminished as consumers and investors alike are increasingly willing to pay a premium for reduced emissions throughout the shipping process.[48]

Maersk, the world’s largest shipping company, announced in 2019 its commitment to leverage methanol to reduce its carbon footprint to zero.[49] In June 2021, they announced specific next steps toward that commitment: their oldest container ships would be replaced with methanol-fueled ships, and the first methanol ships would be deployed in 2024.[50] This step alone will reduce Maersk’s overall emissions by three percent.[51] Though methanol is expensive, Maersk is confident its climate-conscious customers will pay the price for increased sustainability. Jacob Sterling, Maersk’s Head of Decarbonization and Innovation, says implementing changes has been a “chicken and egg problem” where no industry leader wanted to be a first actor, and that Maersk’s decision “will unlock the scaling that needs to happen.”[52]

Another similarly popular alternative fuel option is ammonia, a chemical often found in cleaning products and fertilizer.[53] Ammonia produces nearly zero carbon emissions, which makes it an especially appealing choice.[54]  However, ammonia has several disadvantages. First, it is highly toxic and poses severe safety risks to shipping crews and marine life.[55] It is also difficult to store, requiring very low storage temperatures and about three times as much space as oil, which reduces precious cargo space aboard ships.[56] These safety and infrastructure concerns would require significant changes to existing fuel transportation and storage methods.[57] Finally, ammonia combustion poses a significant risk of nitrogen pollution, which could “replace a carbon problem with a nitrogen problem.”[58] Like methanol, scaling ammonia’s use would require significant investment into a sustainable fuel production program as well as into redesigning ship engines to support ammonia combustion.[59] Ammonia would also require an expensive scaling period, but would be significantly cheaper to produce than methanol in the long term.[60]

Another option is hydrogen, which is especially attractive due to its renewability: eventually, it could be produced using only water, solar power and wind power, making it a strong choice for a zero emissions future.[61] Safe storage and transportation aboard ships is already well underway: a ship transporting hydrogen fuel began its first voyage in January of 2022, and has inspired many other industry leaders to follow.[62] Unfortunately, however, this will likely be difficult to scale because hydrogen must be stored under high pressure at or below -253º Celsius, and packaged in unwieldy, heavy tanks.[63] Hydrogen quickly ceases to be a cost-effective option as its significant storage and transportation requirements would eliminate precious cargo space aboard ships and require more trips than other fuels. Finally, though it is less dangerous than ammonia, it poses a severe risk of explosion and fire.[64]

In recent years, several studies have isolated methanol, ammonia and hydrogen as the most promising fuel alternatives, and have explored how such new fuels would be implemented throughout the supply chain, from vessel to direct consumer.[65] Ammonia’s zero-carbon emissions made it an especially popular choice initially, but the significant safety risks and logistical difficulties posed have raised doubt about its viability.[66] Hydrogen is subject to the same concerns given its storage difficulties and safety risks.[67] Because cost has become less and less of a dealbreaker for consumers and investors willing to prioritize sustainability, and methanol technology has improved significantly in recent years, methanol has surpassed both ammonia and hydrogen in viability.[68]

However, because methanol is not yet a zero-emission fuel, it alone cannot bring the global shipping industry in line with the zero-emission goals of the Paris Agreement.[69] The best path forward towards zero GHG emissions is continued research on all available options, including ammonia and hydrogen, with cost, sustainability and scalability in mind.[70] Indeed, a sustainable future will likely include multiple fuel types, with different fuels tailored to different needs of various industry segments.[71]

The Industry’s Push for Zero Emissions and the Supply Chain Crisis

Meanwhile, alongside mounting pressure from the IMO and from within the shipping industry to modernize and move towards a zero-emission supply chain, the COVID-19 pandemic has given way to a global supply chain crisis.[72] The shipping industry is deeply involved, given that shipping is the primary link between global manufacturers and consumers; ports all over the world have seen significant shipping delays and increased pollution from ships idling at ports as they wait out delays.[73] Thus, updates to the infrastructure of the entire supply chain are especially timely. Cost concerns have stalled progress on infrastructure updates to the shipping industry in the past, but experts, consumers and investors agree that changes to the overall industry must be made soon.[74] There has never been a better time to modernize the shipping industry to make it both more efficient and less harmful to the environment.[75]

The COVID-19 pandemic saw a dramatic increase in mail-based purchasing when in-person shopping became difficult or impossible. Consumer demand for goods fell and then spiked dramatically; huge demand for goods has been a major cause of supply chain fallout all over the world, resulting in delays, inflation, environmental damage and more.[76] This has caused a dramatic increase in shipping pollution, which further stalls the progress made by recent initiatives to decarbonize.[77] However, addressing supply chain problems and reducing emissions within the shipping industry are not mutually exclusive. Rather, they dovetail as a problem with a common solution: a shipping infrastructure overhaul.

In the past, shipping companies have been daunted by the huge expense of industry-wide emissions reduction initiatives and have hesitated to invest.[78] However, these costs are more defensible than ever given consumers are willing to pay a premium for products shipped sustainably.[79] Luckily for consumers, emissions reduction within the shipping industry would add little to the overall cost of consumer goods: the cost of a zero emissions shipping overhaul could add as little as $0.06 to a $100.00 pair of shoes.[80] Moreover, COVID-19 has led to a huge increase in shipping globally, which has increased profits for shippers tremendously. There is little reason to hesitate to take the leap for any longer: as one study put it, “swimming in profits, major shipping companies have no excuse to not pay up for cleaner shipping options.”[81]

An industry-wide redesign has never been more feasible or timely given the industry’s goals, the goals of international regulations, and the weaknesses of an outdated system overdue for an update. All of these problems can be solved via a single, simultaneous transformation.[82]

Finally, in addition to the supply chain crisis, the cost of traditional, oil-based fuel has risen precipitously in the wake of the ongoing Russia-Ukraine war. [83]  Sanctions on Russian oil imports have caused worldwide supply shortages, causing record-breaking, “parabolic” high prices.[84] Some experts suggest shipping fuel costs will triple in coming months, with most costs passed on to consumers.[85] The cost-based opposition to a zero-emissions transformation of the shipping industry is now all but non-existent.


The shipping industry is in desperate need of an overall transformation of its infrastructure and processes and is facing pressure from all directions to begin its journey toward an efficient, zero-emissions future. International regulations requiring an urgent reduction in GHG emissions from shipping and increasing investor and consumer demand for shipping sustainability both call for the adoption of alternative, sustainable fuels and the gradual elimination of natural gas. This would require an expensive and logistically difficult transformation of shipping industry infrastructure, which has caused industry leaders to hesitate in the past. However, there has never been a better time for such a transformation, given the exacerbated environmental damage and inefficiencies caused by the pandemic-induced supply chain crisis. Finally, record-high shipping profits and the skyrocketing price of oil create additional incentives for the industry to pursue alternative fuel sources and phase out natural gas.

Methanol has emerged as a frontrunner alternative fuel source, but it is not sufficient to achieve true zero GHG emissions. Further research on alternative fuels and the construction of infrastructure to support their introduction, storage, renewal and environmental viability are crucial to reaching the ultimate regulatory goals set by the IMO, slow global warming and to satisfy consumer demand for sustainability. Consumers, government officials, industry leaders, environmental scientists and investors agree: there has never been a better time to transform the shipping industry.

[1] U.N. International Maritime Organization, A Brief History of the IMO, (last visited Apr. 24, 2022).

[2] Id.

[3] U.N. IMO, Member States, (last visited Apr. 24, 2022).

[4] U.N. IMO, Structure of IMO, (last visited Apr. 24, 2022).

[5] IMO, supra note 1.

[6] Id.

[7] U.N. IMO, International Convention for the Prevention of Pollution from Ships (MARPOL), (last visited Apr. 24, 2022).

[8] IMO, supra note 4.

[9] U.N. IMO, Sub-Committee on Pollution Prevention and Response (PPR), (last visited Apr. 24, 2022).

[10] IMO, supra note 4.

[11] U.N. IMO, Full Speed Ahead With Climate-change Measures at IMO Following Paris Agreement, (last visited Apr. 24, 2022).

[12] Id.

[13] Climate Action Tracker, IMO Policies & Action – International Shipping, (last visited Apr. 24, 2022).

[14] U.N. IMO, UN Body Adopts Climate Change Strategy for Shipping, (last visited Apr. 24, 2022).

[15] IMO, supra note 11.

[16] IMO, supra note 14.

[17] U.N. IMO, Initial IMO GHG Strategy, (last visited Apr. 24, 2022).

[18] IMO, supra note 13.

[19] Id.

[20] Climate Action Tracker, Mitigation Options – International Shipping, (last visited Apr. 24, 2022).

[21] Climate Action Tracker, Summary – International Shipping, (last visited Apr. 24, 2022).

[22] Id.

[23] Id.

[24] Climate Action Tracker, supra note 20.

[25] Id.

[26] Id.

[27] Id.

[28] U.N. IMO MEPC Session 78, Reduction of GHG Emissions from Ships, 1 (last visited Apr. 24, 2022).

[29] Id. at 5.

[30] John H. Geager & John F. Imhof, Under Pressure: Shipping Navigates Toward a Sustainable Future, Vedder Price (January 13, 2021)

[31] Id.

[32] Id.

[33] Id.

[34] Kushal Nahata, How Brands Can Impact Consumer Decisions About Sustainable Last-Mile Delivery, Forbes, Apr. 5, 2022.; Capgemini Research Institute, Sustainability in Consumer Products and Retail Survey, March 2020.

[35] Alyssa Sporrer, Survey: Even Environmentally Indifferent Consumers Want Sustainable Shipping Option, Yahoo! via FreightWaves, Aug. 12, 2021.

[36] Anmar Frangoul, Maersk Spends $1.4 billion On Ships that Can Run on ‘Carbon Neutral’ Methanol, CNBC, Aug 24, 2021.

[37] Cristina Belda Font, What Kind of Ships and Fuel Is the Shipping Industry Looking At to Reduce its Environmental Impact?, Equal Times, Feb. 9, 2022.

[38] Raucci Carlo et. al.,  Aggregate Investment for the Decarbonisation of the Shipping Industry, UMAS, January 2020; Climate Action Tracker supra note 20.

[39] Charles Haskell, Decarbonising Shipping – Could Ammonia Be the Fuel of the Future?, Lloyd’s Register, May 6, 2021.; Geager & Imhof, supra note 30.

[40] Haskell, supra note 39.

[41] Marcus Hand, No Silver Bullet to Shipping’s Decarbonisation Journey, Seatrade Maritime News, Sep. 21, 2021.

[42] Font, supra note 37; Methanol As a Marine Fuel, Methanex, 2020. (last visited Apr. 24, 2022).

[43] Ajsa Habibic, Methanol is Key Solution for Shipping Decarbonisation Today, Research Suggests, Offshore Energy, Jan. 26, 2022.

[44] Id.

[45] An Inside Look at Methanol As a Fuel, Bureau Veritas, 2022 (last visited Apr. 24, 2022).

[46] Adrienne Murray, The Shipping Giant Banking On a Greener Fuel, BBC News, 4 Mar. 2022.

[47] Id.

[48] Id.

[49] Taylor Johnson, Towards A Zero-Carbon Future, Maersk News, 26 Jun. 2019.

[50] Font, supra note 37; Jack Wittels, Maersk Makes $1.4 Billion Green Bet on Methanol-Fueled Ships, Bloomberg, Aug, 23, 2021.

[51] Wittels, supra note 50.

[52] Murray, supra note 46.

[53] Nils Rokke, Ammonia: A Sustainable Fuel Option For Shipping, Forbes, Oct. 5, 2021.

[54] Id.

[55] Andy Extance, How Ammonia Could Decarbonise Shipping, Chemistry World, Nov. 9, 2021.

[56] Id.

[57] Id.

[58] Id.

[59] Adam Forsyth, Methanol and Shipping, Longspur Research, 15 Jan. 25, 2022.

[60] Id. at 25

[61] Forsyth, supra note 59, at 18.

[62] Amy Gunia, Australia Just Exported Its First Batch of Fuel That Doesn’t Emit CO2. There’s Just One Catch, Time, Jan. 28, 2022.

[63] Forsyth, supra note 59, at 19.

[64] Id.

[65] See, e.g. Randall Krantz et. al., The Scale of Investment Needed to Decarbonise International Shipping, Global Maritime Forum, Jan. 2020; Madeline Rose et. al., Shady Ships: Retail Giants Pollute Communities and Climate with Fossil-Fueled Ocean Shipping, Pacific Environment, Jul. 20, 2021.

[66] Extance, supra note 55.

[67] Forsyth, supra note 59, at 19.

[68] Wittels, supra note 50.

[69] Id.

[70] Font, supra note 37.

[71] Id.; Wittels, supra note 50.

[72] Ben Casselman & Ana Swanson, Supply Chain Hurdles Will Outlast Pandemic, White House Says, New York Times, Apr. 14, 2022.

[73] Will Knight, The Supply Chain Crisis Is About to Get a Lot Worse, Wired Magazine, Mar. 20, 2022.

[74] Renny Vandewege, Supply Chain Is Not Only Stressor On Shipping; Climate Change And Decarbonization Also Pose Challenges, Forbes, Jan. 14, 2022.

[75] Id.

[76] Craig Austin, How the Supply Chain Caused Current Inflation, and Why It Might Be Here to Stay, PBS News Hour, Nov. 10, 2021.

[77] Vandewege, supra note 74.

[78] Krantz, et. al., supra note 65, at 1.

[79] Rose et. al., supra note 65, at 25.

[80] Id.

[81] Id.

[82] Brandon Richardson, Supply Chain Needs 2022 to Be a ‘Year of Transformation,’ Long Beach Port Director Says, Long Beach Business Journal, Feb. 9, 2022.

[83] Greg Miller, Ship Fuel Spikes to Historic $1,000/Ton Mark As War Fallout Worsens, American Shipper via FreightWaves, Mar. 4, 2022.

[84] Id.

[85] Patricia Cohen, Within Days, Russia’s War on Ukraine Squeezes the Global Economy, New York Times, Mar. 1, 2022.