Regulatory Reform Needed to Push Shipping Fuel Decarbonisation

The maritime sector accounts for approximately 3% of global emissions, largely due to conventional bunker fuels such as heavy fuel oil, marine diesel, and gas oil. To address this, the International Maritime Organization (IMO) has set a target for net-zero emissions by 2050, aiming for 5% to 10% of shipping energy to come from alternative fuels by 2030. However, per a recent report published by the Global Maritime Forum titled “A Missing Piece of the Net-Zero Puzzle,” significant regulation gaps hinder the adoption of alternative fuels.

Regulatory Frameworks for Conventional Fuels

Current regulatory frameworks for conventional fuels are well established. For example, the 1992 Civil Liability Convention (CLC) ensures compensation for oil pollution damage, supported by mandatory insurance and a second-tier fund financed by cargo receivers. The 2001 Bunkers Convention addresses spills from ships’ bunker fuel oil, requiring mandatory insurance but lacking a second-tier fund. Various other conventions, such as the 2007 Wreck Removal Convention and the 1986 Limitation of Liability for Maritime Claims (LLMC), provide additional layers of liability and compensation mechanisms.

Risks Posed by Alternative Fuels

Alternative fuels, including biofuels, ammonia, methanol, and hydrogen, present unique risks. While less polluting, biofuels do not fall under current conventions like the CLC. Lithium-ion batteries used in electric or hybrid power systems pose explosion risks. Ammonia is toxic and combustible, methanol is corrosive, and liquefied gases like LNG and LPG can cause methane slippage. Hydrogen fuel is highly explosive.

Regulatory Gaps and the Need for New Frameworks

The absence of specific international regulations for alternative fuels leads to significant risks. For instance, an ammonia spill would not be covered under existing conventions, resulting in jurisdictional and liability uncertainties. The lack of mandatory insurance and a second-tier fund for alternative fuels further exacerbates these issues.

Addressing the Gaps

To facilitate the adoption of alternative fuels and ensure comprehensive coverage, several steps are necessary, according to a recent report by the Global Maritime Forum:

  1. Ratification of the 2010 Hazardous and Noxious Substances (HNS) Convention: This would provide strict liability, mandatory insurance, and a second-tier fund for incidents involving hazardous and noxious substances.
  2. Development of a New Alternative Fuels Convention: Modelled on existing conventions, this would address the specific risks of alternative fuels.
  3. International Cooperation: Multistakeholder engagement is needed to develop robust frameworks to mitigate crew, vessels, and environment risks.

As the maritime sector transitions to sustainable practices, addressing the safety challenges and regulatory gaps associated with alternative fuels is imperative. Indeed, failure to address these issues could expose shipowners and insurers to substantial claims, thereby discouraging the prompt shift to alternative fuels and net-zero targets. Therefore, insurers, policymakers, and industry stakeholders must collaborate to facilitate the adoption of alternative fuels and help achieve net-zero emissions by 2050.