Decarbonising our domestic shipping fleet: The Pacific Blue Shipping Partnership

Peter Nuttall
Micronesia Centre for Sustainable Transport

This article was written in February 2020, a year ago since appearing on this blogsite

The critical importance of sea transport to Pacific countries and its interrelationship to all levels of socio-economic development are widely recognised and documented. The sector currently has a range of challenges including the prevalence of old, inefficient and undermaintained vessels, and a lack of supporting modern infrastructure including ports, facilities for bunkering, ship building, maintenance, and repair. Existing vessels service and underpin micro-economies at the end of long and narrow operating routes, with the consequence that sea transport within and between Pacific countries is the most expensive per unit distance and per capita in the world. Transportation and mobility is a cross-cutting issue central to the sustainable development of Pacific Island countries.

In the Pacific we do not have fast rail, concrete freeways and big bridges. Shipping is the essential lifeline that connects our scattered island communities on this, the world’s greatest Ocean. 200 years ago, Fiji did not have a shipping problem. Fleets of large drua, at that time the fastest, most efficient ships in the world, underpinned a vibrant trading economy within Fiji and with its neighbours. There was constant commerce between our islands. Early Europeans described the Pacific as ‘an Ocean of Sails’. Fiji’s shipping then was entirely locally built, owned and operated. It was sustainable, affordable and carbon neutral.

Fast forward to 2020. Today it is the reverse. Ever increasing fuel and operational costs, marginal returns and high infrastructure investment needs leaves us with a domestic fleet that is more often than not old and at the end of its service life, expensive for both operators and consumers and requiring heavy government subsidies to ensure even basic connectivity.

There are not many silver linings to the climate crisis that now threatens to engulf us all. But the opportunity to transition from our current fossil fuel dependant and inadequate shipping using climate financing is one. If, and it’s a big if, we can get our governments, local industry and international development partners all working from the same page we have the chance to transition to a new generation of cleaner, more affordable, more appropriate and accessible shipping solutions. It’s a big ask, but it is achievable. To be successful it needs to be well-planned and coordinated. It needs a group of willing Pacific countries to work together. It needs dedicated and committed support from international partners, researchers and big shipping. And above all, it needs an immediate serious financial investment. We estimate $500million in a package of grants, concessionary loans and R&D funding is needed to get 6-8 Pacific countries moving in the right direction.

This is what the Pacific Blue Shipping Partnership, announced last year by Fiji’s PM Bainimarama and Marshall Islands President Heine, is designed to achieve. A country-led coordinated programme of work to allow the Pacific to join the international revolution happening right now in big scale shipping to move away from fossil fuels. Almost daily, news reports are flooding in of shipping being built in Norway, UK, Holland, Denmark that runs on batteries, wind, solar, hydrogen and ammonia. The world’s biggest shippers are planning to have commercial vessels operating at scale on zero emissions fuel by 2030. If the Pacific does not match step, we will be left behind paying ever increasing cost penalties for diesel and carbon levies.

The Pacific Blue Shipping Partnership is a pro-active and ambitious plan led by Pacific governments to avoid this trap. We know the solutions being developed for large, developed trading nations are unlikely to a clean drop-in fit here. We need to design and implement bespoke Pacific scale solutions. There are an increasing number of technology tools available to us. Wind hybrids. Ships fitted with auxiliary sails, were being trialled in Fiji in the 1980s of government ships. Back then they easily achieved 30% fuel savings. Colleagues are working in Marshall islands on similar innovations today – they are projecting savings closer to 50%. Solar for axillary power systems, new efficient hull designs, smarter operating procedures, new fuels. All these are now available for us to assess and adapt to local operating conditions. USP is very fortunate to be working with some of the leading researchers internationally on such solutions.

But this is not really a technology issue – there are numerous solutions, the science is there, we just need to apply it. It is fundamentally a financing problem. Because of our situation – long routes, dangerous conditions, poor infrastructure, marginal economic returns – we simply lack access to affordable maritime financing and insurance underwriting. Today, the inability to borrow at affordable rates to invest in new shipping and to insure those assets at reasonable prices is what keeps us trapped in this “old ship replaced by old ship” scenario. But if we could change this we would move to a new era where it is economically attractive to invest in the purchase of new generation vessels, knowing the operational cost over the lifetime of the ship will be so much lower. Imagine a shipping line serving Fiji with a new vessel that only used 20% of the fuel of a current vessels, and had motors with only a few moving parts to service.

The Pacific Blue Shipping Partnership is primarily a financing mechanism to overcome these barriers. We have a lot of work to make this a reality. We need to bring banks, financiers and development partners onboard. The Pacific has earnt major kudos for its sustained principled stand in the IMO calling for shipping decarbonisation. In this we have the support of major nations in Europe, NZ, Canada. We need to leverage that to now address our chronic domestic shipping needs. Fiji and Marshall Islands are positioning for this at the UN Oceans Summit in Lisbon in June. There we will share a stage with other leading programmes to decarbonise world shipping.

So, is $500 milion a lot to invest in this sector? It sounds a lot but let’s put that in context. There is currently more than US$ 2 billion being poured into renewable electricity projects across she Pacific. There is less than $20 million invested so far in decarbonising Pacific island shipping. At a global scale Shell Oil reported more than $1billion in profits in one year from moving to low sulphur ship fuels. Australia is investing $2 billion in 20-odd small navy patrol vessels. And there is a fake news story just this week that Bill Gates is spending £500 million on a new hydrogen powered luxury superyacht. So yes, it sounds a lot. But in reality, it is the bare minimum needed.

The Pacific Blue Shipping Partnership is a major opportunity to turn around our current shipping and prepare the Pacific for a new, low carbon future. The trick is going to be getting all onboard the same canoe and sailing in the same direction. History proves Fiji did this in the past – now Fiji needs to do it for the tomorrow.