The shipping sector, responsible for 2% to 3% of annual global greenhouse gas emissions, has been seen as not doing enough to reduce its share of emissions. Since last year, the International Maritime Organization (IMO) has introduced a goal to cut greenhouse gas emissions by at least 50% from 2008 levels by 2050 and enact more stringent rules on sulphur emissions as of January 2020 as part of regulatory steps to clean up the sector’s environmental footprint.
In addition to the IMO’s efforts, the European Commission has expressed a need for more ambitious targets in the new European Green Deal, which, among all the suggestions foreseen include setting up a Carbon Border Tax, revising the Energy Taxation Directive and extending the Emissions Trading System to the maritime sector. The International Renewable Energy Agency (IRENA) concluded in a recent report that reaching these targets will require a combination of approaches, including alternative fuels, upgrading onshore infrastructure and improving operational performance.
Policy and legislative framework
Adopted in 2014, the Alternative Fuels Infrastructure Directive requires EU member states to put in place “an appropriate number” of LNG refuelling stations for ships in ports - by the end of 2025 for maritime ports belonging to the TEN-T Core Network, and by the end of 2030 for inland ports (also from the TEN-T Core Network). A Delegated Regulation supplementing the Directive, with the aim of specifying some technical requirements for LNG refuelling stations for sea-going ships, was published on 22 October 2019.
In accordance with Article 3 of the Directive, member states had to notify the Commission by 18 November 2016 about their National Policy Frameworks (NPFs) for the development of the alternative fuels market in the transport sector (incl. LNG for shipping) and deployment of the relevant infrastructure. According to the European Commission’s assessment (published in February 2019), 20 member states have not yet defined alternative fuels infrastructure targets for all mandatory fuels/modes or do not meet the requirements of Art.3 of the Directive. The Commission warns that six NPFs do not contain targets for LNG refuelling points in maritime ports, and four do not contain targets for LNG refuelling points in inland ports.
A Commission Communication from November 2017 titled “Towards the broadest use of alternative fuels - an Action Plan on Alternative Fuels Infrastructure" underlined that, in order to achieve the EU’s commitments to the Paris Climate Agreement, decarbonisation of the transport sector must be accelerated to ensure that greenhouse gases and air pollutant emissions are firmly on the path towards zero-emission by mid-century. Overall, the document acknowledged that the number of vessels running on alternative energy in the EU is too low and that persistent problems create market barriers to their use - including a lack of infrastructure for refuelling.
To further foster the decarbonisation and energy diversification of the EU transport sector, the revised Renewable Energy Directive introduces an obligation for an increasing share of renewable and low-carbon fuels such as advanced biofuels, hydrogen, biogas and renewable electricity.
The use of LNG
Throughout the 2014-2017 period, thirteen projects were funded under the Motorways of the Sea programme that specifically dealt with LNG. Out of these projects, eleven are still ongoing, while two of them (ReaLNG and HEKLA) were completed - in September 2017 and June 2018, respectively. ReaLNG and HEKLA mainly aimed at ensuring the further deployment of LNG in the North Sea–Baltic Sea regions.
The main objectives of the 13 LNG-related projects are to ensure the deployment and use of alternative fuels, efficient energy sources, and reduction of air pollution from maritime transport. However, most of this funding went to North Sea and Baltic Sea countries - as opposed to the Mediterranean region. A situation that is progressively changing in order to ensure a balanced deployment of LNG infrastructure and technology throughout the European Union.
Future-proofing the LNG sector
A growing interest in LNG over the last couple of years has influenced world market prices significantly and on the energy basis LNG production is expected to reach 10% of global crude natural gas production by 2020. However, as the global pressure to address climate change is increasing, biogas is significantly increasing in importance. Biogas production has seen significant growth in the last years in Europe, mainly driven by the support schemes in place in several European Union member states. A major challenge for the liquefaction process for biogas is its scale, as biogas rarely is produced in large quantities. A great opportunity provided by biogas, on the other hand, is the fact that it can be used in existing (and coming) natural gas pipelines and LNG infrastructure. In technical terms, the raw material used to produce the transport fuel makes no difference. As such, biogas can be injected into the national gas grid and from there a blend of biomethane and fossil methane can be liquefied. This provides a convenient way of gradually using an increasing amount of a renewable fuel.
Biogas production could increase from the extended use of various organic waste streams, such as food waste, crop residue, sewage sludge from wastewater treatment or algae. It can also contribute to the development of rural areas and even result in negative GHG emissions when biogas is produced from feedstocks (e.g. manure) which otherwise would emit methane during decomposition. Despite this, biogas production is low in many member states and its potential is largely unused.
Blending hydrogen into the natural gas pipeline network has also been proposed as a means to reduce greenhouse gas emissions whilst using existing infrastructure. Experts say that it currently is possible at low concentrations, however, a full swap is not feasible due to the durability of existing pipelines. This is not to say it would be impossible, they say. European developers are in fact leading in developing the technology that could be used in existing gas infrastructure.
In the framework of the European Green Deal, the new EU Executive has indicated its willingness to put the EU on the path to carbon neutrality (net-zero emissions) by 2050. This increased climate ambition can be expected to further raise the momentum around the need to switch from conventional to alternative shipping fuels. However, there is mounting concern about a potential mismatch between the EU’s climate ambition and the continuous allocation of EU funding to LNG and gas infrastructure projects – which are still fossil fuel based. The European Parliament’s reaction to a recently published 4th list of energy infrastructure Projects of Common Interest (PCIs) is illustrative of the pressure to decrease the emphasis on gas. While the share of gas projects (versus electricity projects) in those lists has decreased over the years, the proposed 4th list still includes too many gas projects, it is claimed. The recent decision by the European Investment Bank (EIB) to terminate financing to unabated fossil fuel energy projects (including gas) from the end of 2021 onwards is widely seen as a strong signal sent to the market.
 For refuelling points for inland waterway vessels or sea-going ships, referred to in point 3.1 of Annex II to Directive 2014/94/EU, the following technical specifications shall apply: For seagoing ships, which are not covered by the International Code of the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code), the refuelling points for LNG shall comply with standard EN ISO 20519. For inland navigation vessels, the refuelling points for LNG shall comply with standard EN ISO 20519 (parts 5.3 to 5.7) for interoperability purposes only.
 Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Greece, Spain, Croatia, Hungary, Ireland, Lithuania, Luxembourg, Latvia, Malta, Poland, Portugal, Romania, Sweden, Slovenia and Slovakia.
 Cyprus, Denmark, Ireland, Latvia, Malta and Sweden.
 The Czech Republic, Luxembourg, Portugal, and Sweden.
 PCIs are energy infrastructure projects considered of strategic importance for the completion of the EU’s single energy market. These include electricity interconnectors, smart grids, gas pipelines, and carbon capture and storage (CCS) /CO2 transport networks. The 4th PCIs list features 151 projects; it is available here
 In the proposed 4th PCIs list, electricity and smart grids account for more than 70% of the projects, mirroring the increasing role of renewable electricity in the energy system and the need for network reinforcements enabling the integration of renewables and more cross-border trade. Meanwhile, the number of gas projects decreased from 53 (in the 3rd PCIs list published two years ago) to 32, or 21% of all projects on the new list. The gas projects include new LNG terminals in Greece, Cyprus and Poland, as well as two particularly controversial terminals in Krk in Croatia and Shannon in Ireland, where natural gas produced by hydraulic fracturing is expected to be imported from the US to Europe.
 See EIB press release of 14 November 2019 on the Bank’s new energy lending policy