How is Global Shipping trying to Decarbonise?

Global shipping is on course towards decarbonisation by 2040-50. 

• This presents a substantial opportunity for India, enabling it to transition from being a fossil fuel importer to a renewable fuel exporter, boosting its economy, and emerging as a reliable global partner.

Current Fuel Landscape and Transitional Path

• Merchant ships primarily operate on Very Low Sulphur Fuel Oil (VLSFO), diesel, or liquid methane gas. 
• To meet the ambitious decarbonisation targets, a phased approach is necessary. 
• Liquefied Natural Gas (LNG)-powered engines offer a 5% efficiency improvement and serve as an important transitional fuel. 
• This transition will precede a full shift towards truly green fuels like green ammonia, green or e-methanol, and biofuels.

Green Fuels Necessary For Decarbonisation

• Green Hydrogen: Produced via electrolysis of water using renewable electricity (e.g., solar, wind energy). 
  • Direct use in ships is currently impractical due to its high volatility, storage, and transportation challenges, as well as the need for extensive engine redesign.
• Green Ammonia: Created by reacting green hydrogen with nitrogen. 
  • It is more stable than green hydrogen. 
  • The Indian government actively promotes green ammonia production, not only for shipping but also to reduce reliance on LNG imports for fertiliser production.
• Green Methanol: Formed by reacting green hydrogen with captured carbon dioxide (CO2) from industrial sources like cement or steel industries.

Preferred Fuel By Shipping Industry

• The shipping industry is inherently conservative, adopting new technologies slowly. Given this, green methanol currently appears to be the most promising option.
• Ease of Adoption: Unlike green ammonia engines, which are a novelty requiring extensive onboard processes and engine tweaks, green methanol can be almost a “drop-in replacement” for VLSFO. 
  • It requires minimal modifications to existing engines and fuel systems.
• Storage and Handling: Green methanol can be stored as a liquid at normal ambient temperatures, similar to conventional fuels, eliminating the need for complex temperature regulation. 
  • This contrasts with LNG or green ammonia, which have more demanding storage requirements.
• Industry Backing: Over 360 ships are already operating on or ordered with methanol capability. 
  • Major container shipping companies, including Maersk, CMA, CGM, and Evergreen, strongly support methanol. 
  • While green methanol still emits about 10% CO2, it is seen as a practical step before moving to zero-emission fuels like green ammonia.

Challenges in Green Methanol Adoption

• High Production Cost:  Despite its advantages, cost remains a significant barrier.
  • One tonne of e-methanol costs approximately $1,950 compared to $560 for VLSFO. 
  • This high cost stems from:
    • Expensive Renewable Electricity: The cost of electricity from solar or wind energy is currently higher than conventional generation methods. Each tonne of green e-methanol requires 10-11 MWh of power.
    • High Upfront Capital Investment: Establishing large-scale electrolyser facilities for methanol production requires substantial initial investment.
    • Supply-Demand Gap: Projections indicate that demand for green methanol will exceed 14 million tonnes by 2028, but the anticipated supply is only around 11 million tonnes. This demand-supply imbalance is likely to further increase prices.

Indian shipping’s decarbonisation plans

• India is actively working towards decarbonising its domestic shipping sector and positioning itself as a global leader in green fuel supply.
• Domestic Focus: India is committed to green technology for its domestic shipping and is developing green fuel bunkering points (refuelling stations for ships) at key ports like Tuticorin’s V.O. Chidambaranar Port and Kandla Port.
• International Engagement: India is engaging with Singapore, a major global ship fuelling hub (accounting for nearly a quarter of global ship fuelling), to explore exporting locally manufactured green methanol. 
  • Singapore itself is committed to becoming a green fuel supplier and will require millions of tonnes of green fuels.
• Strategic Advantage: India possesses vast land resources, expertise in solar power, and a growing renewable energy capacity. 
  • It also has a significant source of CO2 from its iron, steel, and cement industries, which can be captured and used for green methanol production.

Strategies for India to Become a Green Fuels Hub

• Indigenous Green Hydrogen Production: India needs to develop its own capability to produce green hydrogen, rather than relying on imports of solar panels and electrolysers.
• Learning from Solar Energy Success: India’s significant growth in solar capacity, from 2.82 GW in 2014 to 105 GW in 2025, provides a blueprint. This success was driven by:
  • Sovereign Guarantees: Government guarantees to investors de-risk investments in green energy projects, enabling access to international capital markets at lower interest rates (e.g., less than 4% compared to 9-10% from domestic banks).
  • Off-take Assurance: Agreements to purchase the product (e.g., green methanol) even before the plant is operational, ensuring market demand.
• Supply Chain Support: Strengthening local supply chains to reduce import dependency and overall costs.
• Innovative Financial Instruments:
  • Production-Linked Incentive (PLI) schemes for electrolysers can boost local manufacturing, tackle supply chain bottlenecks, and reduce raw material transportation costs.
  • Carbon Capture, Utilisation, and Storage (CCUS) incentives make green methanol production from sequestered CO2 more viable, simultaneously reducing atmospheric greenhouse gases.
• Scaling Local Capacity: The government’s push to develop 1.5 GW of local electrolyser manufacturing capacity and expand CO2 capture from steel and cement industries is crucial for integrated green fuel hubs.
• Leveraging Multilateral Development Banks: Accessing financing from multilateral development banks (MDBs) at low interest rates (around 4%) is more cost-effective than domestic loans (10-12%).

Harnessing Green Fuels to Revive India’s Shipowning and Shipbuilding Sectors

• Boosting Indian Shipowning and Shipbuilding Decarbonisation efforts also present an opportunity to revitalise India’s shipbuilding sector.
• Demand-Side Support: Government incentives to create demand for green fuel-capable ships will spur economies of scale.
• Foreign Collaboration: Partnerships with global shipbuilders from South Korea and Japan are essential to enhance India’s shipbuilding capabilities.
• Fleet Modernisation: The strategy involves retrofitting existing ships for green fuel compatibility and building new ships designed for green fuels. 
  • India plans to purchase over 110 ships worth $10 billion.
• Government Incentives: The Government can provide incentives so 10-20% of these are green fuel-capable, built in Indian shipyards, and are Indian-flagged.

Conclusion

These concerted efforts will not only contribute to global decarbonisation goals but also boost India’s domestic manufacturing, create jobs, and establish India as a global leader in green energy and sustainable shipping.