Maersk green ships have first mover disadvantage

LONDON, August 26 (Reuters Breakingviews) – AP Moller-Maersk’s (MAERSKb.CO) commendable environmental haste could land the Danish shipping giant at a first-mover disadvantage. The $53 billion company is spending $1.4 billion on eight “carbon neutral” methanol-powered container ships. Customers like Amazon.com (AMZN.O) might well absorb the high costs, but waiting rivals might walk away with cheaper, greener halos.

CEO Soren Skou’s initiative is undeniably brave – the eight ships in question cost up to 15% more than normal ships, and the methanol costs at least twice the price of the gloopy bunker oil that currently carries the world’s maritime fleet. But it is necessary. Shipping accounts for almost 3% of global emissions, about the same as aviation, and Maersk is its biggest player. Last year, it released 34 million tonnes of climate-warming gases like carbon dioxide.

On the first point, Skou has a safety net. If Maersk’s entire fleet had run on methanol in 2019, its $4.5 billion EBITDA would have been zero. However, customers like Amazon and Unilever (ULVR.L) are probably happy to shell out the extra to reduce the carbon footprint of the things they whip up. And the premium is indeed light. The Hydrogen Council estimates that a $60 pair of jeans made in Southeast Asia and shipped to the United States on a methanol-powered ship would cost just 29 cents more.

On the second point, Skou could probably go further. When afloat in the middle of this decade, the new ships will save just 1 million tonnes of carbon dioxide equivalent per year, a fraction of Maersk’s total. And burning methanol still produces carbon dioxide, the saving grace being that it is recycled from plants, rather than being “new” carbon from deep underground.

A better solution is a carbon-free fuel like hydrogen or ammonia. The former remains prohibitively expensive – the Hydrogen Council says it will only make commercial sense by 2030 with carbon dioxide taxed at $335 a ton. But the equivalent figure for ammonia is only $85, barely above its current price in Europe and half the estimated break-even cost for methanol.

Ammonia toxicity is certainly an issue, and engines that burn the compound are still under development. However, the technology may only be a few years away from commercial viability. Skou’s rivals, if they can wait that long, could reap a greener and cheaper crop.

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BACKGROUND NEWS

– AP Moller-Maersk said Aug. 24 it has ordered eight ships capable of running on carbon-neutral methanol in a bid to reduce the carbon footprint of its containership fleet.

– The Danish firm said the ships, which will be designed to run on both green methanol and regular heavy fuel oil, will cost $175 million, or 10-15% more than normal ships.

– Once in service, the ships would prevent an additional 1 million tonnes of carbon dioxide, or around 3% of Maersk’s annual emissions, from entering the atmosphere, the company said.

Editing by George Hay and Oliver Taslic

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