WEBVTT - Methanol Sets Sail as EU Targets Shipping Emissions 0:00:00.520 --> 0:00:03.360 This is Dana Perkins and you're listening to Switched on 0:00:03.600 --> 0:00:07.080 the B andF podcast. Seaborn freight is a critical part 0:00:07.120 --> 0:00:10.520 of the global economy and supply chains are inescapable. The 0:00:10.560 --> 0:00:13.280 shirt you bought, or perhaps the phone or the toy, 0:00:13.640 --> 0:00:16.440 all of them probably shipped to you at some point, 0:00:16.640 --> 0:00:18.560 if not in the end state that you bought it in, 0:00:18.760 --> 0:00:21.680 perhaps as the components that were put together. So let's 0:00:21.720 --> 0:00:24.439 use an electric vehicle as an example. Even with more 0:00:24.520 --> 0:00:27.680 onshoring and near shoring of manufacturing of batteries, the raw 0:00:27.720 --> 0:00:31.280 materials the nickel, cobalt, and lithium that are required to 0:00:31.440 --> 0:00:34.040 make the battery are sourced from all over the world 0:00:34.200 --> 0:00:36.960 and were sent to the manufacture on you guessed it. 0:00:37.200 --> 0:00:41.200 Ships with oil based bunker fuels powering the vast majority 0:00:41.240 --> 0:00:45.320 of the global shipping fleets. The emissions are significant. Consumption 0:00:45.360 --> 0:00:48.320 of marine fuels accounted for over five percent of global 0:00:48.320 --> 0:00:51.360 oil demand and two point five percent of global CO 0:00:51.560 --> 0:00:54.760 two emissions in twenty twenty two. Shipping remains one of 0:00:54.800 --> 0:00:59.400 the hardest to abate sectors faced with economic and regulatory challenges. Now, 0:00:59.400 --> 0:01:02.040 if we look at shipbuilders order books and the new 0:01:02.160 --> 0:01:04.920 vessels that are coming online. We're starting to see ships 0:01:04.920 --> 0:01:08.680 that are powered by cleaner fuels such as methanol, biofuels, 0:01:08.720 --> 0:01:12.000 and liquefied natural gas. On today's show, we're going to 0:01:12.040 --> 0:01:15.800 talk about the BNAF twenty twenty four Marine Fuel Outlook 0:01:15.920 --> 0:01:19.600 with Mohit Vallamala, a senior associate from BNF's oil team. 0:01:19.800 --> 0:01:22.520 We'll dive deep into the different marine fuels that could 0:01:22.560 --> 0:01:25.319 shape the future of the maritime industry, which has the 0:01:25.360 --> 0:01:28.240 potential to include things like ammonia. We're going to get 0:01:28.240 --> 0:01:32.320 into the decarbonization target set by the International Maritime Organization 0:01:32.560 --> 0:01:35.160 and talk about what it might take for these targets 0:01:35.200 --> 0:01:38.720 to become a reality. BNAF subscribers are going to be 0:01:38.800 --> 0:01:42.160 able to access this report, twenty twenty four Marine Fuel 0:01:42.200 --> 0:01:45.959 Outlook Methanol set sail at BNAF dot com or at 0:01:45.959 --> 0:01:48.960 BNFO on the Bloomberg terminal. Subscribe to this show for 0:01:49.040 --> 0:01:51.600 updates when we publish future episodes, and give us a 0:01:51.600 --> 0:01:54.040 review to share us with others. But right now, let's 0:01:54.080 --> 0:02:06.920 talk to Mohit about shipping fuels. Mohit, thank you very 0:02:07.000 --> 0:02:08.600 much for joining us on the show today. 0:02:08.800 --> 0:02:10.679 Thank you, Denna. It's a pleasure to join here. 0:02:10.840 --> 0:02:13.639 We're here to talk about shipping and the related emissions, 0:02:13.680 --> 0:02:15.919 something that you think about a lot, and let's start 0:02:16.000 --> 0:02:19.160 with talking about pollution. I mean, really, how polluting is 0:02:19.480 --> 0:02:22.280 the global shipping fleet which we use to get so 0:02:22.400 --> 0:02:25.880 many items around the world, you know, integral part to 0:02:26.360 --> 0:02:28.880 not just the consumer goods that we have, but actually 0:02:28.919 --> 0:02:31.799 to the transition. How much pollution is actually coming from 0:02:31.840 --> 0:02:33.040 this part of the economy. 0:02:33.320 --> 0:02:35.840 Yeah, I think when we look at pollution, it's mostly 0:02:35.840 --> 0:02:38.680 from the fuel that powers this ship. And right now 0:02:38.720 --> 0:02:41.800 most of it is predominantly oil. So it's five percent 0:02:41.840 --> 0:02:44.520 of the global oil demand and that translates around two 0:02:44.600 --> 0:02:48.600 point five percent of global carbon dix have emissions. 0:02:48.240 --> 0:02:50.440 And is this something that's going to be increasing? And 0:02:50.639 --> 0:02:53.880 the question I'm asking really is what's the growth forecast 0:02:54.000 --> 0:02:55.240 in terms of shipping. 0:02:55.480 --> 0:02:58.440 Yeah, I think it's in the very short term for 0:02:58.480 --> 0:03:01.239 the past one hundred years. Anyway. Now it's increasing a 0:03:01.320 --> 0:03:05.079 lot because of all the inefficiencies that come from Russia's 0:03:05.240 --> 0:03:07.440 vision of Ukraine. There's like a lot of trade that's 0:03:07.480 --> 0:03:10.520 being rerouted and now recent attacks in Red Sea, all 0:03:10.520 --> 0:03:12.639 the ships are going around Africa instead of using the 0:03:12.680 --> 0:03:15.560 sewiss Canar route. But like over time, the trade itself, 0:03:15.600 --> 0:03:17.959 we expect a growth of on like twenty percent between 0:03:17.960 --> 0:03:19.920 now and twenty fifty. But when it comes to like 0:03:20.000 --> 0:03:23.359 emissions itself, there are like a lot of efficiency increases 0:03:23.440 --> 0:03:26.079 both from like whether it's a new shape, new engine, 0:03:26.200 --> 0:03:28.239 or new fuel and the various things, and like a 0:03:28.280 --> 0:03:31.280 lot of technology side of things. So while the trade increase, 0:03:31.360 --> 0:03:34.320 but the fuel consumption and the related emissions historically it's 0:03:34.360 --> 0:03:37.240 been like more and less the same correlated with the 0:03:37.280 --> 0:03:39.960 growth in seabond trade itself, but we don't see that 0:03:40.080 --> 0:03:41.280 happening forward from now. 0:03:41.600 --> 0:03:45.640 So better ships, better engines, better fuels can lead us 0:03:45.680 --> 0:03:49.600 to potentially not growing emissions as this industry continues to grow, 0:03:49.760 --> 0:03:52.200 even potentially maybe taking a step back. So then let's 0:03:52.200 --> 0:03:54.840 talk about the fuels. What is the current fuel mix 0:03:54.880 --> 0:03:56.640 and what do you need to move a ship forward? 0:03:56.680 --> 0:03:59.280 Anybody who's listening, who's in the commodity space is probably 0:03:59.320 --> 0:04:01.400 sitting here going, But I mean for those who are not, 0:04:01.720 --> 0:04:04.360 what actually what are the fuels in ships? 0:04:04.800 --> 0:04:06.480 Yeah? I think I would just put it like on 0:04:06.600 --> 0:04:10.160 a high level, it's oil products. But for the oil markets, 0:04:10.200 --> 0:04:12.760 it's mostly like fuel oil that's there. And then there's 0:04:12.800 --> 0:04:15.560 also a mix of diesel that's called marine gas oil, 0:04:15.640 --> 0:04:18.320 that's the diesel equivalant fuel that's being used. So it 0:04:18.400 --> 0:04:20.920 also depends on certain things. Like back in twenty twenty, 0:04:20.920 --> 0:04:24.159 there was this big regulation shift in terms of what 0:04:24.279 --> 0:04:27.359 fuel you can burn in ships internationally, and that was 0:04:27.360 --> 0:04:29.960 a change from like three point five sulfur fuel oil 0:04:30.040 --> 0:04:33.279 to point by sulfur maximum fue oil and then like 0:04:33.320 --> 0:04:36.559 the whole industry mostly moved from that high sulfur fuel 0:04:36.520 --> 0:04:38.279 oil to low surfur fue oil. But then there are 0:04:38.279 --> 0:04:41.880 also something called as ec emission control areas where the 0:04:41.920 --> 0:04:44.640 sulfur emission is much more stricter, so you would have 0:04:44.760 --> 0:04:47.400 like something with a maximum cap of point one sulfur. 0:04:47.480 --> 0:04:49.800 So you see more use of marine gas oil that's 0:04:49.839 --> 0:04:53.280 the diesel equivalent, and also elng G. But LNG is 0:04:53.480 --> 0:04:57.000 predominantly used in just LNG tankers as of now, but 0:04:57.080 --> 0:04:59.560 that's changing a lot. Actually, if you look at all 0:04:59.600 --> 0:05:02.240 the new vessels that are in order that are being 0:05:02.360 --> 0:05:05.240 that has a commercial agreement to build maybe like over 0:05:05.320 --> 0:05:07.599 two years, so those ones, when we check that, we 0:05:07.640 --> 0:05:10.800 see a lot of LNG powered vessels and that's around 0:05:10.839 --> 0:05:13.479 like thirty percent of the total order book right now 0:05:13.560 --> 0:05:16.119 in terms of what's on order, but the dominant fuel 0:05:16.160 --> 0:05:18.880 still remains to be oil. So that's something that can 0:05:18.960 --> 0:05:22.200 run on fuel oil and marine gas oil for instance, 0:05:22.200 --> 0:05:25.080 and that's around fifty eight percent of the total autobook. 0:05:25.120 --> 0:05:29.120 But what's very interesting and very optimistic is also looking 0:05:29.160 --> 0:05:32.400 at how the new alternative fuels which are much cleaner. 0:05:32.520 --> 0:05:35.720 While these fuels are mostly like methanol or ammonia, but 0:05:35.800 --> 0:05:37.960 like in the order book, we just see methanol and 0:05:38.000 --> 0:05:40.200 that's not like ten percent of the total autobook. 0:05:40.520 --> 0:05:43.599 So when you talk about LNG tankers, we're actually talking 0:05:43.640 --> 0:05:47.239 about ships that are transporting LERNG but then also using 0:05:47.360 --> 0:05:50.400 the liquefied natural gas as one of the fuels that 0:05:50.440 --> 0:05:53.960 they're using. And I want to know why LNG is 0:05:53.960 --> 0:05:56.240 not used more widely in other ships. 0:05:56.720 --> 0:05:58.760 Just a bit of context on that. So most of 0:05:58.800 --> 0:06:02.480 these ships are like dual fuel. I mentioned previously about 0:06:02.600 --> 0:06:05.520 various other fuels like methanol in the order book, and 0:06:05.560 --> 0:06:07.520 also most of them are dual fuel as well. So 0:06:07.600 --> 0:06:09.560 because it's a combustion engine, they can also run on 0:06:09.640 --> 0:06:12.359 oil based fuels. And historic like energie started as a 0:06:12.440 --> 0:06:15.880 very niche industry and I would even club LPG tankers 0:06:15.920 --> 0:06:19.080 in that the tankers that carry liquified petroleum gas, and 0:06:19.120 --> 0:06:22.280 that's basically your propane and buttane that's used in cooking 0:06:22.560 --> 0:06:26.200 and also in petrochemicals. LNG is basically methane. And then 0:06:26.360 --> 0:06:29.000 if you want to transport inland, like you just use pipelines, 0:06:29.040 --> 0:06:31.400 but like if you want to transport for a far distance, 0:06:31.680 --> 0:06:34.120 you can't use an oil tanker for this because it 0:06:34.200 --> 0:06:37.159 has to withstand that high pressure. And then because of 0:06:37.200 --> 0:06:39.719 that high pressure, there's also something that's called a boil off, 0:06:39.839 --> 0:06:42.680 So that's basically the allergy that gets the gassified and 0:06:42.800 --> 0:06:44.800 comes out, and they use some of that as a 0:06:44.839 --> 0:06:47.560 fuel in allergy tankers as well. And one of the 0:06:48.040 --> 0:06:51.680 reasons why ellernge is not used elsewhere it's historically being 0:06:51.680 --> 0:06:54.760 in a very small market and now obviously it's very big, 0:06:54.800 --> 0:06:56.839 and even in terms of like growth areas as where 0:06:56.839 --> 0:06:59.080 we see a lot of growth both for LNG use 0:06:59.279 --> 0:07:02.160 demand and also energy shippings, and also you have to 0:07:02.200 --> 0:07:04.800 think about like port infrastructure. So it was initially meant 0:07:04.880 --> 0:07:07.440 just for like llergy tankers, but obviously now we're seeing 0:07:07.440 --> 0:07:10.120 a lot of change in that and what's interesting is 0:07:10.160 --> 0:07:13.119 when you look at LNG use as a shipping fuel. 0:07:13.280 --> 0:07:16.440 Historically it's been only in energy tankers, but now we're 0:07:16.480 --> 0:07:17.440 seeing let's. 0:07:17.200 --> 0:07:18.320 Say a bulk carrier. 0:07:18.640 --> 0:07:23.280 Bulk carriers basically it's a segment that carries all try goods. 0:07:23.320 --> 0:07:24.360 So if it's your. 0:07:24.240 --> 0:07:27.360 Coal, iron ore, all the metals, and even in the grain. 0:07:27.440 --> 0:07:30.240 So these are a majority component of that. So LERG 0:07:30.440 --> 0:07:33.360 is used as a bunker fuel is definitely expanding at 0:07:33.360 --> 0:07:36.520 more and more ship owners they're ordering these lergy vessels. 0:07:36.760 --> 0:07:39.920 So you actually need a different ship and a different 0:07:39.960 --> 0:07:42.000 engine in order to be able to make that work. 0:07:42.040 --> 0:07:44.320 But then how about what we would consider to be 0:07:44.400 --> 0:07:47.840 more drop in fuels? So with then bile fuels and 0:07:47.880 --> 0:07:50.960 then ammonia and methanol, how do those fit into the 0:07:51.080 --> 0:07:54.920 existing infrastructure? And you start with whatever your favorite one is. 0:07:55.520 --> 0:07:58.120 Because you mentioned drop in fuel, I would consider buy 0:07:58.160 --> 0:08:01.360 fuel as a drop in fuel. When we talk about biofuel, 0:08:01.520 --> 0:08:04.280 you're just like blending it with the fossil fuel. Like 0:08:04.360 --> 0:08:06.800 let's say, if you're talking about fuel oil or even 0:08:07.080 --> 0:08:09.800 gas oil, that's the easily equivalent, So you would just. 0:08:09.880 --> 0:08:11.560 Like blend a part of it. 0:08:11.720 --> 0:08:14.200 And I think in Rotterdam, one of the biggest part 0:08:14.240 --> 0:08:17.200 in Europe, so that's where you use a thirty percent blend. 0:08:17.280 --> 0:08:19.560 And lately, over the past few years we are seeing 0:08:19.600 --> 0:08:22.200 a pickup in sales of what we call it bio 0:08:22.320 --> 0:08:25.280 blended fuel oil. And that's one aspect, and you can 0:08:25.320 --> 0:08:28.000 also have like various blends, but in terms of scale, 0:08:28.040 --> 0:08:30.600 most of the current uptake is in Rotterdam and it's 0:08:30.720 --> 0:08:33.320 very promising. A Q four of twenty twenty three, so 0:08:33.400 --> 0:08:36.079 twenty five percent of the loss of for fueil says 0:08:36.240 --> 0:08:39.120 was bio blended, but I guess the actual biofuel volumes 0:08:39.120 --> 0:08:41.240 would be much lower because if it's a thirty percent 0:08:41.320 --> 0:08:43.240 blend or something, then it will be an eight percent thing. 0:08:43.320 --> 0:08:45.400 So if we are seeing le's peak up right now 0:08:45.440 --> 0:08:48.840 today in Europe, musty and also concentrated in all the 0:08:48.920 --> 0:08:50.800 key hubs. So that is something that we'll call it 0:08:50.960 --> 0:08:53.840 drop in fuel because you can use the existing vessels, 0:08:53.840 --> 0:08:56.520 you can use existing infrastructure, you just use it and 0:08:56.880 --> 0:09:00.640 your I guess average intensity carbon intensity would be lower. 0:09:01.040 --> 0:09:03.280 So it's a part way solution for us right now. 0:09:03.880 --> 0:09:04.160 Yeah. 0:09:04.280 --> 0:09:07.600 Yeah, and it's also I think what's really important able 0:09:07.679 --> 0:09:10.400 like these shipping fuels as well it's not stand alone 0:09:10.480 --> 0:09:13.520 where it's shipping is the only sector. They kind of 0:09:13.600 --> 0:09:16.760 interact with other sectors as well. Like we spoke about biofuel, 0:09:16.800 --> 0:09:19.640 biofuels is used. You know, you can put sustainable aviation 0:09:19.760 --> 0:09:22.960 fuel in that, you can have the road biofuels, so 0:09:23.200 --> 0:09:26.880 they interact with all the other sectors. Methanol and ammonia 0:09:27.120 --> 0:09:29.679 is much more complicated, and like I've been having a 0:09:29.679 --> 0:09:33.240 lot of conversations at ending conferences, no one is really 0:09:33.520 --> 0:09:37.160 satisfied with methanol and ammonia itself. One way to look 0:09:37.160 --> 0:09:39.400 at is where is the money flowing, so that shows 0:09:39.400 --> 0:09:41.600 a sign of confidence, and most of it is going 0:09:41.720 --> 0:09:45.080 for methanol, and that's the initial momentum is with methanol. 0:09:45.160 --> 0:09:47.559 But then if you want to talk about what happened 0:09:47.600 --> 0:09:51.199 until twenty fifty, everyone's like, oh, maybe not just methanol 0:09:51.280 --> 0:09:53.640 because they are like other concerns with methanol. They're talking 0:09:53.679 --> 0:09:56.400 about like ammonia, But ammonia has its own issues with 0:09:56.600 --> 0:09:59.920 how do we handle ammonia. It's toxic, there might be in 0:10:00.440 --> 0:10:03.360 it's a lot of crew training, so it's bit complicated. 0:10:03.520 --> 0:10:06.600 But that that's not even like accounting the new engines 0:10:06.640 --> 0:10:08.840 that you have to make to run these fuels because 0:10:08.840 --> 0:10:11.840 they've not been used before. And then even the concept 0:10:11.920 --> 0:10:14.640 of having the whole end to end value chain, the 0:10:14.679 --> 0:10:16.640 bunker infrastructure, it's not easy. 0:10:17.080 --> 0:10:19.120 So moving away from the drop in fuels and then 0:10:19.200 --> 0:10:22.000 to what are essentially coming from hydrogen, where there's a 0:10:22.000 --> 0:10:23.960 lot of attention on at the moment, tell us how 0:10:24.000 --> 0:10:26.760 to think about ammonia and methanol and really just kind 0:10:26.800 --> 0:10:29.360 of well, what the future of this shipping fleet could 0:10:29.360 --> 0:10:30.680 potentially look like. 0:10:31.320 --> 0:10:34.559 Yeah, I think like hydrogen is definitely important for both 0:10:34.559 --> 0:10:37.440 ammonia and methanol as well. Like, yeah, so both of 0:10:37.440 --> 0:10:40.840 them have like a hydrogen atominate, So it's clearly like 0:10:40.840 --> 0:10:43.920 a hydrogen question. So the cost of producing like greene 0:10:43.960 --> 0:10:47.040 hydrogen is also important. That kind of like flows into 0:10:47.120 --> 0:10:50.000 the prices into the cost of producing creen methanol or 0:10:50.120 --> 0:10:53.000 creane ammonia itself. So one of the things that most 0:10:53.040 --> 0:10:55.240 shipowners at least say is they don't want to bet 0:10:55.280 --> 0:10:58.000 on one fuel because what happens is as a shipowner, 0:10:58.240 --> 0:11:01.640 you build a ship for someone else to charter, and 0:11:01.679 --> 0:11:04.520 then if you have a fuel, and if you're committed 0:11:04.559 --> 0:11:06.800 to one fuel, and then there's shortage of the fuel 0:11:06.840 --> 0:11:08.960 in the port that you want, So that kind of 0:11:08.960 --> 0:11:11.800 complicates the whole equation. So everyone's like, Okay, we want 0:11:11.800 --> 0:11:14.920 to try our different fuels, and then there's not clear evidence. 0:11:14.960 --> 0:11:18.079 There are no major like ammonia ships running right now, 0:11:18.120 --> 0:11:21.120 so it's very hard for them to make business decisions 0:11:21.160 --> 0:11:23.040 on fuel that's not being used. 0:11:22.760 --> 0:11:24.439 To run and power these ships. 0:11:24.520 --> 0:11:28.160 So that's something that causing headaches for these ship onwners. 0:11:28.320 --> 0:11:31.520 While we've seen methanol ships in the auto book, most 0:11:31.559 --> 0:11:34.840 of this is being placed by a particular class of 0:11:34.960 --> 0:11:38.200 the shipping so that's container ships. I think these container 0:11:38.240 --> 0:11:40.840 ships are I would say in a well of position 0:11:41.080 --> 0:11:44.959 where the market itself is consolidated, where three to five 0:11:45.000 --> 0:11:47.800 companies control like majority of the market share. So there's 0:11:47.800 --> 0:11:50.680 a consolidation there in terms of companies. Next, when you 0:11:50.720 --> 0:11:52.960 look at what they carry, these are all like finished 0:11:53.000 --> 0:11:56.280 products and they have higher margins for it. So if 0:11:56.320 --> 0:11:59.240 you look at who their clients are, it's probably like Amazon, 0:11:59.400 --> 0:12:02.080 I hear the other companies and they have their own 0:12:02.120 --> 0:12:04.199 needs like oh, we want to clean up our valid chain. 0:12:04.320 --> 0:12:06.959 So in a way, there's pressure on shipping companies to 0:12:07.040 --> 0:12:10.360 provide carbon neutral shipping to retain their clients itself, and 0:12:10.400 --> 0:12:12.080 most of them are like based in Europe and they 0:12:12.160 --> 0:12:15.760 have shareholder pressure, they have exposure to EUTS and all 0:12:15.800 --> 0:12:19.080 the emission schemes that are coming up in Europe itself, 0:12:19.120 --> 0:12:22.040 So that's why they're like relatively well off. And you 0:12:22.160 --> 0:12:26.280 hardly see any orders from the other major vessel categories 0:12:26.360 --> 0:12:29.480 like the bulk carriers or oil tankers like one, it's 0:12:29.520 --> 0:12:33.040 a cost issue as well, but also especially for oil tankers, 0:12:33.120 --> 0:12:36.280 this whole thing is to move away, to decarbonize, to 0:12:36.320 --> 0:12:39.160 move away from oil, that's the core commodity you are 0:12:39.200 --> 0:12:42.760 building a ship to transport, and that makes them very nervous. 0:12:43.240 --> 0:12:45.800 So, as you said, the goal is ultimately to decarbonize. 0:12:45.800 --> 0:12:48.160 So let's talk about some of the targets that are 0:12:48.160 --> 0:12:51.400 out there, and you know, really who is trying to 0:12:51.440 --> 0:12:55.680 reach net zero versus just reducing emissions, because the maritime 0:12:55.720 --> 0:12:58.360 industry is one of the hard to abate spaces where 0:12:58.440 --> 0:13:00.839 there's a degree of innovation that we're going to need 0:13:00.840 --> 0:13:03.880 in order to be able to reach a net zero future. 0:13:04.440 --> 0:13:06.160 So I guess if you look at like who's setting 0:13:06.160 --> 0:13:10.440 the targets, it's the International Maritime Organization also known as IMO. 0:13:10.920 --> 0:13:16.200 So last year they updated their greenhouse gas strategy, finally 0:13:16.240 --> 0:13:20.040 targeting net zero by twenty fifty. Before even the target 0:13:20.160 --> 0:13:22.920 was just fifty percent reduction in twenty fifty compared to 0:13:22.960 --> 0:13:25.960 like the two thousand and eight baseline, So all the 0:13:26.000 --> 0:13:27.920 conversations that we had last year was or even like 0:13:28.000 --> 0:13:31.080 IMO is not targeting net zero, so what but like 0:13:31.160 --> 0:13:33.720 at least now at least the targets are set in place, 0:13:34.240 --> 0:13:37.240 so that's one thing. But they also have a target 0:13:37.280 --> 0:13:41.280 for twenty thirty that's a twenty percent reduction, but that's 0:13:41.280 --> 0:13:44.040 something that I would say, there's consensus that the shipping 0:13:44.080 --> 0:13:46.960 industry is not going to meet those targets. So that's 0:13:47.000 --> 0:13:50.560 a missed opportunity because all of the change, it's mostly 0:13:50.600 --> 0:13:54.120 post twenty thirties, is highly much change, and even like 0:13:54.200 --> 0:13:57.000 these new fuels, we won't see an ammonia vessel up 0:13:57.080 --> 0:14:00.320 until probably twenty twenties. So in terms of targets, obviously 0:14:00.360 --> 0:14:02.480 the main one is the IOMO because that's such the 0:14:02.520 --> 0:14:05.720 targets elsewhere, but I would say the European Union have 0:14:05.960 --> 0:14:10.840 like two schemes they included shipping in EU ets this year. 0:14:11.080 --> 0:14:14.679 In terms of impact itself, right now ideally it should 0:14:14.720 --> 0:14:17.280 be like talk of the town, but it's not that 0:14:17.480 --> 0:14:20.480 significant because of all the near term changes in the 0:14:20.520 --> 0:14:22.520 Red Sea and all the attacks. 0:14:22.880 --> 0:14:26.000 One of the things that you're referring to is that, 0:14:26.240 --> 0:14:29.200 first of all, that's this EU emissions trading system, which 0:14:29.240 --> 0:14:33.240 is essentially a policy intervention, and then there's the International 0:14:33.240 --> 0:14:36.880 Maritime Organization, which is a specialized group that's a part 0:14:36.920 --> 0:14:39.520 of the United Nations. So I'm seeing that these targets 0:14:39.560 --> 0:14:42.680 are really largely coming. We're talking about policy right now. 0:14:43.200 --> 0:14:47.080 Are there also targets coming from some of the companies themselves? 0:14:47.160 --> 0:14:50.320 Who are the ships that are going around the world. 0:14:50.440 --> 0:14:53.440 Are the shipping organizations themselves, Are they ambitious about driving 0:14:53.440 --> 0:14:54.160 down emissions? 0:14:54.440 --> 0:14:57.440 Yeah, definitely. I think most of them are like consolidated 0:14:57.840 --> 0:15:01.720 in the contingent containership vessel class, so we're seeing a 0:15:01.760 --> 0:15:04.480 lot of them have their own net zero targets, as 0:15:04.520 --> 0:15:06.880 I've mentioned, for like various reasons. But then there's also 0:15:06.880 --> 0:15:10.440 a few companies outside, particularly like Costco that's the Chinese 0:15:10.480 --> 0:15:13.560 shipping company, have their target, and shipping companies in Japan 0:15:13.680 --> 0:15:15.640 as well come up. But there's overall, I would say 0:15:15.720 --> 0:15:19.520 the trend is very high in container ship companies, whereas 0:15:19.560 --> 0:15:22.680 in bulk carriers and oil tankers, I think there are 0:15:22.760 --> 0:15:26.320 very few targets from that set. And while that is welcome, 0:15:26.600 --> 0:15:28.960 you need these companies to set up targets so that 0:15:29.080 --> 0:15:32.240 there's a willingness to pay the green premium for the fuels, 0:15:32.280 --> 0:15:36.120 because today probably the green fuels like green methanol like 0:15:36.120 --> 0:15:39.280 I'm on, at least four to five times more expensive. Obviously, 0:15:39.320 --> 0:15:42.640 like all the carbon price from EUTS would not bridge 0:15:42.640 --> 0:15:45.200 that gap. So you just need willingness either from the 0:15:45.240 --> 0:15:47.840 shipping companies to go ahead and do it, or the 0:15:47.880 --> 0:15:50.600 clients of the shipping companies requesting, oh, yes, we need 0:15:50.640 --> 0:15:53.360 carbon neutral shipping for this, So someone has to pray 0:15:53.400 --> 0:15:55.200 the premium, and like you need the willingness to pay, 0:15:55.200 --> 0:15:57.400 and this comes from setting targets themselves. 0:15:57.480 --> 0:15:59.880 So that's on the companies themselves and then the consumer. 0:16:00.160 --> 0:16:02.520 And then you know, just going back one more time 0:16:02.520 --> 0:16:04.840 to the policy end, because I switched you to companies 0:16:04.880 --> 0:16:08.040 before you had an opportunity to talk about the third intervention, 0:16:08.200 --> 0:16:11.120 which is also from the European Union, which is fuel EU. 0:16:11.280 --> 0:16:14.120 Can you talk a little bit about the targets there. 0:16:14.360 --> 0:16:17.520 So the EU has two schemes of the EETs, which 0:16:17.560 --> 0:16:21.560 I mentioned before. So you pay a carbon price based 0:16:21.600 --> 0:16:25.440 on what you emit, but the EU the fuel you 0:16:25.520 --> 0:16:28.800 married time is it sets the targets on the average 0:16:28.880 --> 0:16:33.760 creenouse gas intensity and those targets get stricter over time. 0:16:33.920 --> 0:16:36.360 So right now I think like fuels like LNG is 0:16:36.360 --> 0:16:39.160 still compliant, but you know, they gets like stricter over time, 0:16:39.200 --> 0:16:41.560 and then maybe on late twenty thirties, that's where we 0:16:41.600 --> 0:16:45.080 see energ not being compliant. Fuels like fuel oil and 0:16:45.120 --> 0:16:47.680 all of them won't be compliant starting from next year. 0:16:47.600 --> 0:16:49.840 So they won't be able to be used in Europe. 0:16:50.160 --> 0:16:52.760 Oh no, so you can use them, but it's more like, 0:16:52.880 --> 0:16:55.560 so you pay the differential. So let's say if you 0:16:55.840 --> 0:16:58.960 exceed the target by like five percent, then you pay 0:16:59.080 --> 0:17:00.880 how much of a fuel you consume, and then you've 0:17:00.880 --> 0:17:03.240 paid the five percent in access, so you could still 0:17:03.320 --> 0:17:06.040 use them, but it's just like you start paying for that. 0:17:06.600 --> 0:17:08.600 And does that price fluctuate the same way that the 0:17:08.640 --> 0:17:12.119 carbon price fluctuates the trading scheme or is it different? 0:17:12.359 --> 0:17:14.680 So it doesn't, So there's a penalty that's fixed by 0:17:14.720 --> 0:17:18.040 the EU that doesn't like fluctuate that much. But what 0:17:18.200 --> 0:17:21.680 happens is there's something that's called a pooling mechanism, So 0:17:21.760 --> 0:17:24.440 that's kind of I wouldn't call it necessarily a loophole, 0:17:24.520 --> 0:17:28.000 but you could probably take advantage of that where if 0:17:28.000 --> 0:17:30.240 you have one vessel that has if you use like 0:17:30.280 --> 0:17:32.679 an ammonia like methanol vessel, then you can. 0:17:32.600 --> 0:17:34.480 Pull together as a flea. 0:17:34.680 --> 0:17:37.000 You can have one methanol and then like two three 0:17:37.080 --> 0:17:39.480 oil based fuels, and then you can pull them together 0:17:39.840 --> 0:17:42.800 and then have an average fleet wide intensity and then 0:17:42.880 --> 0:17:45.679 comply with the target as well. So that kind of 0:17:45.800 --> 0:17:48.520 leaves the door open for more and more I guess 0:17:48.520 --> 0:17:51.400 like consolidations, at least the fleet operation side of things. 0:17:51.400 --> 0:17:54.639 They could consolidate them to meet the targets. But I 0:17:54.680 --> 0:17:58.440 would still say, yeah, while Europe is setting up these targets, 0:17:58.440 --> 0:18:01.040 this is very important. But also the emissions that are 0:18:01.119 --> 0:18:04.600 under Europe is still fourteen percent of the global shipping emissions. 0:18:04.800 --> 0:18:08.080 So Europe has aggressive targets, but they actually are not 0:18:08.280 --> 0:18:11.160 the vast majority of these shipping emissions, and so other 0:18:11.200 --> 0:18:13.560 parts of the world need to start kind of either 0:18:13.600 --> 0:18:17.560 adopting these or other other ways in order to I guess, 0:18:17.600 --> 0:18:20.760 get these shipping companies to actually look at adopting these 0:18:20.880 --> 0:18:23.800 newer fuels and newer technologies. And one of the questions 0:18:23.840 --> 0:18:25.760 I have as a follow on to that, and I 0:18:25.760 --> 0:18:29.040 think a parallel would be the automotive market, where you 0:18:29.080 --> 0:18:32.760 look at let's say the United States and the more 0:18:32.840 --> 0:18:36.640 strict emission standards they have in California and the fact 0:18:36.680 --> 0:18:40.120 that certain automotive manufacturers have then had to make less 0:18:40.160 --> 0:18:42.960 polluting vehicles and then ultimately they sold them in other 0:18:43.040 --> 0:18:45.880 parts of the country because they already designed the technology. 0:18:46.000 --> 0:18:49.360 Do you think that even though Europe is a smaller 0:18:49.400 --> 0:18:54.600 portion of the overall shipping industry and total emissions, do 0:18:54.640 --> 0:18:57.440 you still think that the technological advances that are being 0:18:57.520 --> 0:19:01.400 driven by these stricter standard it will have a benefit 0:19:01.440 --> 0:19:02.639 to other parts of the world. 0:19:03.200 --> 0:19:05.320 I think the beauty of the shipping market is it 0:19:05.359 --> 0:19:08.399 connects different regions. So what's happening in Europe is not 0:19:08.480 --> 0:19:10.760 just Europe. Talk about your example, like if there's a 0:19:10.800 --> 0:19:13.720 car that's driving in California, then it'll probably remain most 0:19:13.760 --> 0:19:15.879 likely in US where when you talk about like a ship, 0:19:15.920 --> 0:19:18.480 and if it's even like exporting oil from Houston to 0:19:18.640 --> 0:19:21.399 somewhere in Europe, so that still pays like even though 0:19:21.440 --> 0:19:23.960 it's fifty percent, that still pays a carbon price based 0:19:23.960 --> 0:19:26.520 on its emissions even something come from China to Europe 0:19:26.680 --> 0:19:28.920 foot page. So that's a good start. There's a lot 0:19:29.000 --> 0:19:31.240 more visibility. Over the past four years, there was like 0:19:31.240 --> 0:19:33.240 a lot more data on an individual vessel, like how 0:19:33.320 --> 0:19:35.760 much they emit, how much they consume. Once the data 0:19:35.840 --> 0:19:38.159 is there, that's very important as well. Last week I 0:19:38.280 --> 0:19:40.320 was in Stamford, Connecticut, and this was one of the 0:19:40.359 --> 0:19:43.440 panel discussions, like what's going to be your US response 0:19:43.560 --> 0:19:46.159 to the EU ets and what they did with shipping, 0:19:46.320 --> 0:19:48.679 And I think like some of the discussion points was 0:19:48.760 --> 0:19:51.240