Maersk pledges to cut emissions

The world’s largest container shipping company has pledged to cut net carbon emissions to zero by 2050.

Maersk’s decision will drastically change an industry that is both the largest transporter and the biggest polluter at present.

Background

A.P. Moller–Maersk Group is a Danish business conglomerate with activities in the transport, logistics and energy sectors. Maersk has been the largest container ship and supply vessel operator in the world since 1996. The company is based in Copenhagen, Denmark, with subsidiaries and offices across 130 countries and around 88,000 employees. In September 2016, Maersk Group announced splitting into two separate divisions: transport & logistics and energy. The company's 2017 annual revenue was US$35 billion (2017).

Maersk Line is best known for its coverage across the globe. Other than its main trade lanes of Asia-Europe and Trans-Atlantic trades, Maersk Line also offers extensive coverage between South America and Europe as well as to Africa.

The company also pioneered the innovative concept of Daily Maersk in 2011 which provided a premium guaranteed service between supply ports of China and European base ports. Despite support from the trade, Maersk Line was forced to cut down services due to oversupply. Recent restructuring of its product has included upgrades to their Asia - Australia, India to West Africa, and China to America routes.

Analysis

AP Moller Maersk, the Danish group that transports nearly one in five seaborne containers, said it needed its entire supply chain - from engine makers and shipbuilders to new technology providers - to come up with carbon-free ships by 2030 to meet the goal.

“We will have to abandon fossil fuels. We will have to find a different type of fuel or a different way to power our assets. This is not just another cost-cutting exercise. It’s far from that. It’s an existential exercise, where we as a company need to set ourselves apart,” Soren Toft, Maersk’s chief operating officer, told the Financial Times.

Maersk’ s target, although distant, is one of the most ambitious from a global industrial group promising to end carbon emissions altogether. Container ships carry about 80 per cent of global trade and currently use bunker fuel, a residue from crude oil that is cheaper but dirtier than petrol and diesel, which means they contribute about 3 per cent of the world’s emissions.

Maersk is not pushing one technology — ideas such as biofuels, hydrogen, electricity or even wind or solar power have been mooted — but is stressing the urgency as most vessels have a life of 20-25 years, meaning that viable solutions need to be found soon.

“To reach the target by 2050, in the next 10 years we need some big breakthroughs,” Mr. Toft said.  One challenge will be that container ships often need to travel several thousand kilometres at a stretch, appearing to rule out solutions open to other types of transport such as electric cars and lorries.

Maersk currently emits about 36m tonnes of CO2 equivalent in greenhouse gases, with container ships accounting for about 98 per cent of the group total. Mr. Toft said the company had been able to keep emissions stable for a decade despite significant growth, meaning that on a per container basis carbon emissions had fallen by 46 per cent since 2007.

Container shipping has long been in the sights of environmentalists due to the dirty nature of bunker fuel - but the industry has often resisted more radical change, arguing it could disrupt global trade or make it more expensive. Regulations coming in 2020 will cut the high levels of sulphur in bunker fuel and the International Maritime Organization, the UN regulator, has agreed that emissions should be cut in half by 2050 but Mr. Toft and others argue that more is needed.

Assessment

Our assessment is that Maersk’s decision to cut down on emission will be an industry-changer due to its market share and expansive supply chain network. We believe that companies like Maersk should take the lead in integrating next generation green technologies which are sustainable. We also feel that industry disrupting decisions should be taken in consultation with key stakeholders.