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Climate change to hit shipping industry most-III: Limited options
Nov 04: The other two fuel switching options that can be considered for the shipping industry involves the use of bio-fuels.
8It is assumed that the shipping industry adopts biofuels in a similar way to road transport, through blending targets which involve high, medium or low offtake of bio fuels. But biofuels has an uncertain future in the rapidly changing global energy dynamics.
8But in any of these scenarios, the use of fuel oil (FO) may well continue before it tapers off, as its price is expected to remain cheap in a rapidly decarbonizing world.
8There is however a reasonable amount of uncertainty over the future of fossil fuels. If in the long run, if the economy’s demand for crude-oil-derived fuels is removed, it would seem unlikely that refineries will continue to run just to satisfy shipping’s demand for a residual fuel.
8The most likely situation will be that the shipping industry may not be able to stay within the carbon emission budget and may have to fall back on buying offsets of CO2 in the market.
8This scenario represents a future where shipping has a higher cost of decarbonisation than other sectors in the economy.
8But when the offsetting allowance is reduced, the shipping industry will have no choice but to achieve the emissions reduction via earlier adoption of technology, which is why there is likely to be an earlier appearance of alternative fuels, such as hydrogen, in these scenarios.
8This ensures that the industry is well prepared for the transition to zero carbon at some point after 2050.
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