Green Corridors, MPV Opportunities

By Jeremy Bowden

Container lines are dominating green decarbonization corridors, leaving MPV operators in the cold. In a feature story from Issue 5 of Breakbulk Magazine, we look at how breakbulk could enhance its influence by demand side coalitions with competitors to “green” routes.


With July 2023 registering as the warmest month ever globally and sea surface temperatures also hitting record highs, attention is increasingly focused on reducing greenhouse gas emissions in all fields of life, including shipping. For breakbulk and heavy-lift shippers, one of the main areas of early decarbonization efforts has been on establishing and using “green corridors” – specific trade routes between major port hubs where zero-emission solutions are supported.

The approach is a gradual process, with corridors initially focusing on container vessels between ports in wealthier countries that can afford to make the investments required and are aware of the urgent need to act.

Jesse Fahnestock of the Global Maritime Forum, or GMF, said there was no master plan, just voluntary initiatives from partners including ports, governments, third sector research groups – such as the GMF – and others. “Each [green corridor] is a bottom-up voluntary initiative taken by stakeholders themselves,” he said to Breakbulk.

GMF provides advice and guidance and some initiatives, setting out objectives. “It’s all voluntary at this stage – there are governing agreements, but even within that it is voluntary – green corridors are all about coordinating the parts of the value chain that want to get involved, rather than a hard and fast framework.”

But he said that this could change – “[the GMF] would welcome national governments taking action – creating incentives, providing regulatory guidance, rather than just setting target dates.”

Most of the announced corridors are container focused – but that doesn’t mean that multipurpose and heavy-lift ships won’t be impacted or be able to benefit from the green fuel and infrastructure available, as long as they have switched to vessels that can use the green fuels required.

Matthias Olafsson of the Methanol Institute said that the deepwater/ocean breakbulk segment would have similar needs to container shipping, “mostly looking at energy dense fuels (liquified natural gas) or liquid energy carriers (methanol) in the near and mid-term and ammonia in the long run.”

He said that alternative marine fuels such as biofuels, LNG and methanol were already available at major bunkering centers, but further infrastructure deployment was likely to depend on vessel uptake.

Susana Germino, general manager, sustainability and decarbonization at Swire, said breakbulk carriers had the same options when it came to fuel as other segments, “and we are likely to see a multifuel future, where trade patterns and geographical availability will play a very significant role.”

However, Fahnestock noted that green corridors only applied to the use of fuels that require a different engine, and not to drop-in fuels like biofuels, or LNG. “Biofuels and LNG can fit into existing routes, so no need for a green corridor, although for biofuels it’s difficult to get hold of enough supply.”

He said that green corridors involve coordinating vessels with engines specifically adapted to a particular green fuel, alongside the supply of that fuel. This would be mostly ammonia but also some methanol, and hydrogen near shore – all three require new bunkering and new engines.


Getting Onboard

So far, a variety of entities have been involved in setting up green corridors, ranging from ports and shipping lines to major shipping customers. Breakbulk logistics providers have tended to play a less prominent role, but this could be expanded, according to Olafsson. “Breakbulk representatives should engage ports via key routes to establish partnerships on green corridors,” he said. “Breakbulk companies can secure access to green fuels for their vessels by investing in the fuel supply chain and in infrastructure projects.”

Fahnestock said the breakbulk sector could enhance its influence by forming demand side coalitions with competitors, as long as it’s within competition law. This group can then discuss what’s needed to green a route, and then spread the message to all ports and others involved. “If shippers could get together first and bring in a consolidated demand voice, this would be very constructive.” He noted it made sense to involve the ports early, as they were able to act as facilitators, and often provided a good connection with government that can also be brought into play.

Green corridors work better when journeys are regular – “the more regular the better,” according to Fahnestock. He noted the variety often present in breakbulk and heavy-lift requirements could be a disadvantage, and that regional trade might be the best initial option. He said that, so far, Wallenius and Swire were among the most ambitious breakbulk green corridor developers. Both were contacted for comment, but Wallenius was unable to due to summer absences.

Swire’s Germino said green corridors were an industry effort: “While much of the focus has been on the container segment, this is due in large part to trade patterns and the certainty of bunkering ports. Developing a green corridor requires the aggregation of all stakeholders in the value chain, from port owners, terminal operators and fuel producers to shipowners and operators, bunkering companies, and cargo interests.”

Notably, Swire is working on green corridors as a partner in the Maersk McKinney Moeller Centre for Zero Carbon Shipping.


Regulatory Risk Falling

The risks of moving ahead with green corridors are falling, even if costs may still initially be higher, according to Fahnestock. “Voluntary agreements assume participants have some reason to move quickly – including taking leadership positions, or meeting customer requirements.” In some cases, there will be competition with other companies that are not cutting carbon, but while they may be cheaper short term, this will change as regulations tighten – which could soon happen at both the IMO and EU level.

First movers are relying on wider and deeper regulation being implemented, and until that happens, they are not sure about passing on costs to all charterers, shippers or consumers. “Some are waiting to have some confidence over regulatory signal – there’s a risky period until regulations set in,” he said.

Customer demand is also moving, according to Fahnestock, although this is more container-focused currently, and early days for breakbulk, but will grow. “Shippers/charterers now have Scope 3 Emission Trading Scheme targets, and this puts pressure on the vessel owners. We’re all preparing for tougher EU regulations, as well as regulations from the IMO, now it has set a net zero target.

“These corridors can be ways for companies that want to get out ahead of regulation before it starts to bite – to have their business models and tech options ready, and secure clean fuel offtake, which is easier to do for specific routes.” Green corridors can also provide an arena for testing various options while regulations are being developed.

“So, there are strategic reasons to take the risk, but the period after 2028- 30 must be covered by IMO and others with penalties, giving early adopters an advantage. Charterers and shippers are now surer about this signal,” he added.


Europe Leads the Field

In Europe there is added pressure to cut emissions from upcoming penalties and incentives under the Emissions Trading Scheme, or ETS, and FuelEU maritime schemes, as well as on shippers through Scope 3 emissions reporting. The aim of the regulations is to encourage owners and charterers to switch to more expensive green fuels and vessels that can run on them. But these incentives and penalties can also offer wide scope for profit for those that understand them fully, according to a report by Lloyd’s Register.

Briefly, from 2024, CO2 emissions from European ships over 5,000 gross tonnes will be included in the regional ETS. Emissions covered will rise from 40 percent up to 100 percent by 2027. In 2026, shippers will also be required to report CH4 (methane) and N2O (nitrous oxide), with EU Allowances to be paid on 100 percent of the CO2 equivalent of those emissions, in addition to CO2, within the ETS from 2027. The FuelEU Maritime will come into effect in 2025 and sets targets for reducing the yearly average greenhouse gas intensity of the energy used by a ship (or, crucially, by a fleet or pool of ships) from -2 percent in 2025 (compared to a 2020 baseline), reaching -6 percent in 2030 and -14.5 percent in 2035, through to -80 percent by 2050.

Fahnestock noted that while the new EU laws had yet to take effect, “the whole Fitfor55 EU program has had an encouraging effect on decarbonizing shipping – although it doesn’t focus on any particular routes.” He said green corridors target routes that have an advantage, and that the FuelEU specifications on low carbon fuels in fleets would first be realized along these green corridors, “where the industry can meet the requirements in a coordinated and advantageous basis.”


Main Routes

The main green corridors routes, according to the Methanol Institute’s Olafsson, are between the U.S. and Europe, between the port of Rotterdam and the port of Singapore, although these are mostly container-focused, as well as the Japan-Australia route, which includes iron ore and other cargoes.

Fahnestock said that iron ore shipping from Australia to all Asian ports, starting with Japan, was a top candidate for a breakbulk green corridor, especially given the plans to ship green ammonia along the route – which would provide a ready green fuel. “It makes sense to look at a certain cargo type because each has a set business model and can aggregate demand from similar profiles.”

Swire’s Germino said Swire in Singapore was an active participant in the East Australia/New Zealand Green Corridor pre-feasibility study, “analyzing which routes within this geographical area have the potential and commercial viability to become green corridors.”

Other possible routes discussed by contributors included a regional breakbulk green corridor in the Mediterranean anchored to green bunkering hubs in Spain, along with routes in northern Europe such as Bergen–Rotterdam, focusing on the offshore oil and gas sector. Fahnestock said the auto part-focused Gothenburg-Ghent route was an early mover in this region. He noted that a small number of customers made it easier to organize.

Ocean Installer’s spokesperson said that “as a shipper with a limited volume being shipped deep sea, we appreciate the main trade lanes will have to be given priority. That being said, if the green corridors are being implemented on busy trades such as Asia-Europe, Asia-U.S. and U.S.-Europe, it will become easier for the carriers to offer low emission sailings within our main trades, such as intra-Europe. Carriers with a low emission propulsion will automatically become more attractive during our evaluation process.”


Spreading the Costs

Olafsson said costs would be spread across all those involved in the sector. “It will be partly authorities, through their support schemes and subsidy programs in the fuel and vessel supply chain. And from shipping companies themselves in the form of smaller profit margins and consumers, in the form of higher fees for transport. But who benefits? The Earth and all its inhabitants,” he said.

From the shipper’s perspective, Ocean Installer said there was a high level of uncertainty from carriers as to how costs for the upcoming Carbon Intensity Index and ETS regulations would be charged on. “As a shipper, we would like to avoid a situation where too many additional charges beyond the vessel’s day rate become the new normal. We have previously seen examples of carriers pushing addons, such as bill of lading fees, various documentation fees, as well as various engineering related fees. Some are easy to justify, others seem creative.”

Shippers and cargo owners are being asked to contribute towards those carriers currently investing in greener propulsion systems. “At the same time, MPV and heavy-lift owners should aim to be in the forefront of the green transition due to the nature of their main transport activities,” Ocean Installer’s spokesperson said. “The requirement for low emission vessels will keep increasing, and at some point, become an inevitable part of the ship-owning business.”


Green shipping corridors for breakbulk will be one of the talking points in a mainstage panel session at Breakbulk Americas 2023. “The Journey Towards Decarbonization: Progress, Challenges and Opportunities”, moderated by Maersk Project Logistics’ Dennis Devlin and featuring expert speakers from the American Transportation Research Institute, Swire Projects and the US Maritime Administration, will take place on September 27 from 4:00pm–4:45pm.

Check out the full main stage agenda for this year’s event, happening on 26-28 September at the George R. Brown Convention Center in Houston, Texas.