The maiden launch of the simple raft surely rates among the most important moments in our human evolution. From there, technological innovation and daring explorers have allowed us to traverse the oceans, opening up trade, new lands and peoples. Over time, this voyage of discovery has revolutionised our understanding of the geometry of the earth and our place in the universe.

Today, the maritime world encompasses a wide variety of surface and sub-sea activities, from huge cruise liners to small pleasure boats. This fragmented industry includes cargo transport, that accounts for over 80% of the volume of international trade, from upstream minerals and fossil fuels to downstream consumer goods.

The sector accounts for 3-4% of annual anthropogenic greenhouse gas (GHG) emissions. They lie outside the 2015 Paris Agreement, ‘unseen’ in national emission registries. The main climate impact comes from the combustion of Heavy Fuel Oil (HFO) and Marine Gas Oil (MGO), the dirt-cheap, untaxed dregs of the barrel.

Environmental risks are heightened further right now, as older vessels steam ahead for longer, with little scrappage. There are some immediate factors for this, including the lucrative rates that older ships can achieve on more dangerous routes and cargoes in the current fractious international environment.

At a deeper level, there are two fundamental rocks blocking a sustainable decarbonisation course for the industry: regulatory uncertainty and the unknown rate of technological development of alternative propellants.

These structural factors have created an option value for shippers to defer new investment. Torn between the Scylla of more conventional, cheaper designs and the Charybdis of environmentally friendly but more costly possibilities, the best thing is simply to drop anchor and wait.

In terms of regulatory unknowns, there is hope. The International Maritime Organisation (IMO) has global responsibility for the prevention of atmospheric pollution by ships, adopting and auditing legislation which its member states must implement. The IMO’s geographical scope and clear remit help in tackling ‘big’ problems like global warming and enforcing solutions. Its target is to reach net zero GHGs for international shipping “by or around 2050”, with reductions of at least 20% by 2030, and 70% by 2040, all relative to 2008.

Further, the IMO’s structure, including a flotilla of ‘flags of convenience’ states, naturally gives a louder voice to developing countries and islands, often those most at risk from climate change. This is crucial, as unlocking holistic, global solutions to climate threats has a strong distributional angle.

Furthermore, the ‘culture’ of the shipping industry brings advantages in seeking consensus solutions. This ancient sector has evolved along collaborative grounds, given the inherent dangers of navigating the oceans. To see this, we need to think no further than convoys of ships banding together through pirate-haunted passages, or the mariners’ convention to go to each other’s aid when life is imperilled.

So, the international will is there. The EU is taking a policy lead by integrating GHG emissions from shipping into its trading system (EU ETS) from 2025. In addition, a maritime buyers’ alliance, including Amazon, is now committed to encouraging the deployment of zero-emission shipping alternatives with relevant demand signals.

Alas, it is more complex when we come to identifying future sustainable fuels, unless we envisage a return to the Golden Age of Sail and the windjammers.

Electrification is possible for pleasure boats, tugs and ferries, but is unlikely to be feasible for large ocean-faring ships, for technological and commercial reasons. Nuclear power is a wild card – some aircraft carriers and submarines are fuelled this way, so the concept is proven. However, cost and security issues mitigate against a generalised rollout, at least in today’s stormy political seas.

That brings us to methanol and ammonia. The starting point is not great, at least today – in addition to material cost disadvantages when produced sustainably, each has environmental challenges, of which climate damage is just one.

Methanol (one oxygen, one carbon, and four hydrogen atoms) emits CO2 on combustion, so ‘green methanol’ requires an offsetting lifecycle pathway in order to be sustainable. Thus, it needs to use ‘green’ hydrogen and air-captured CO2 as feedstocks, or to use 100% bio-sourced methane. There is an accelerating order book for methanol-enabled ships and associated bunkering infrastructure in ports.

Ammonia (one nitrogen and three hydrogen atoms) has no associated CO2 emissions on combustion, but its sustainable production also requires green hydrogen. It has significant toxicity issues and its own GHG challenges – its combustion creates nitrous oxide (laughing gas) with more than 250x the global warming impact of CO2 over a 100-year time horizon.

And so, there is no easy passage to decarbonise the maritime industry. It will depend on us paying a premium for it, much greater progress on costs and further advances in technology. Sustainable seas are only a prospect on the distant horizon – for now, batten down the hatches.

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Disclaimer: The blog does not aim to give investment advice, but is designed to afford relevant longer-term context to investors, encouraging a broad perspective where uncertainty is high and a spirit of learning is important. The views expressed are those of the author, not those of Investec.