Insights from maturing a global portfolio of green shipping corridors

Publication

Insights from maturing a global portfolio of green shipping corridors

The maritime industry is working towards a large-scale green transition, with a goal to reach net-zero greenhouse gas emissions from international shipping by around 2050.1 However, it takes time to initiate the transition and get the various parts of the value chain off the ground. Individual segments of the value chain – fuel producers, ports, shipowners/operators, and cargo owners – are each working with their individual suppliers and customers to initiate the transition.

Green shipping corridors offer an approach where these individual attempts can be coordinated in timing and pace, allowing first-mover actions to be matured into joint efforts, and enabling the cost gap to be estimated and funding options to be pursued. In this paper, we synthesize learnings and insights from our global portfolio of green corridor projects to highlight some key enablers that will allow green corridors to progress from plan to reality – thereby helping to catalyze the maritime industry’s green transition.

Green shipping corridors

are routes where commercial vessels operate using alternative, low-emissions fuels or other means of low-carbon propulsion, such as electricity, supported by coordinated efforts across the value chain.

Green corridors can be network, point-to-point, or single-point corridors.

Acting as strategic testbeds, green shipping corridors are designed to accelerate the maritime sector's transition to zero-emission operations. Green corridor projects bring together the entire maritime ecosystem, including fuel producers, ports, vessel owners, and cargo owners, to assess the feasibility of deploying low-emissions fuels.

Widespread adoption of green solutions in the maritime ecosystem is challenging

Zero- and near-zero-emissions (ZNZ) fuels

refers to those fuels or other means of propulsion needed in the 2050 shipping energy mix, meeting the requirements from the International Maritime Organization (IMO) for both carbon intensity and sustainability.

1. ZNZ fuels cost more than conventional fuels

The outlook from our portfolio of green corridor projects is that ZNZ fuels cost 1.5 to 4 times more than conventional fuel. This is primarily because ZNZ fuels are in a nascent state with limited economies of scale and high-risk premiums, and because the maritime industry can use cheaper fractions of crude oil and sustainable bio-oil.

2. There is a lack of transparency around what it takes to drive early adoption

Instruments – such as regulation and public funding – must drive early adoption. However, the exact design of the instruments to best incentivize early adoption is unclear.

3. Large investments in decarbonization solutions must be made

The maritime industry's infrastructure and technologies are currently geared toward fossil fuels. This means investments must be made to develop the infrastructure to produce, store, and distribute ZNZ fuels.

4. There is a first-mover disadvantage due to high investment costs and the risk of stranded assets

Pioneering investments carry higher costs, reflecting the early-stage development of ZNZ fuel solutions. At the same time, the full benefit of green investments may not be realized due to, for example, the low availability of green fuels.

5. The maritime value chain is complex

In the mature maritime industry, it is uncommon for collaborations to span entire value chains of fuel producers, ports, vessel owners, and cargo owners. Increased coordination and collaboration are required to ensure investment pace is aligned and to innovate new ways of working with green initiatives.

Green shipping corridors are a catalyst to accelerate the transition before decarbonization projects become commercially viable.

The corridors can help mature the maritime deployment of green solutions by:

1. Enabling the coordinated pacing of investments

... across the value chain and coordinated allocation of accrued investment costs for individual projects.

2. Reducing complexity

... through small-scale implementation and providing sandboxing for testing technical, regulatory and funding solutions, which can inform governments in addressing barriers to full-scale adoption.

3. Contributing to future cost-downs

... by enabling and sharing early learnings and adoption capabilities prior to commercial viability. Here, ‘cost-downs’ refers to technological advancements and learnings gained through concrete implementation (e.g., building a fuel production facility), which reduce the costs for subsequent projects of a similar nature.

4. Allowing regulatory bodies to update GHG penalties

... that may be required to incentivize green solutions, depending on pricing developments in ZNZ and conventional fuels.

5. Provide clear options for allocating funding

... should relevant funding mechanisms be established for fuel projects, infrastructure, and/or full value chain projects.

The potential of green shipping corridors was first recognized by the Clydebank Declaration.

The declaration set a collective aim to provide relevant support and incentives for green shipping corridors, promote partnerships, establish at least six green shipping corridors by the middle of the decade, and scale up activity in the following years.

Map of Clydebank Declaration signatories.

The Clydebank Declaration

"It is our collective aim to support the establishment of at least six green corridors by the middle of this decade, while aiming to scale activity up in the following years, by inter alia supporting the establishment of more routes, longer routes and/or having more ships on the same routes. It is our aspiration to see many more corridors in operation by 2030."

"Signatories pledge to:

Facilitate the establishment of partnerships, with participation from ports, operators and others along the value chain, to accelerate the decarbonisation of the shipping sector and its fuel supply through green shipping corridor projects.
Identify and explore actions to address barriers to the formation of green corridors. This could cover, for example, regulatory frameworks, incentives, information sharing or infrastructure.
Consider the inclusion of provisions for green corridors in the development or review of National Action Plans.
Work to ensure that wider consideration is taken for environmental impacts and sustainability when pursuing green shipping corridors."2

Noteworthy corridors in the MMMCZCS portfolio advancing toward operation

The MMMCZCS's project portfolio features several examples of green shipping corridors with line of sight to operation within the next five years. The ROK-US PCTC Green Corridor (using green methanol), for instance, is planned to be in operation during 2027, while the Chile Copper Concentrate Green Corridor (using green ammonia) will be operational around 2030. These projects are characterized by successful value chain collaboration, close collaboration with key governmental bodies. and active investigation of measures required to close the cost gap – showing that challenges can be overcome to enable maritime decarbonization.

Noteworthy front-runner green corridor projects from the MMMCZCS portfolio.

The solution: How to unlock green shipping corridors

Value chain collaboration and the ability to cover the cost gap is required for green corridors to become operational. A stringent methodology enables collaboration. Similarly, it is easier to collaborate if the project has low complexity. Several measures, when combined, may close the cost gap. These include optimized financing, regulation, an end-customer green premium, value chain cost management, and public funding.