OPIS Insights

Adrian Tolson, a marine energy expert and owner of 2050 Marine Energy, shares his thoughts with OPIS on the shipping industry’s journey toward net-zero emissions by 2050.

Tolson is the owner of 2050 Marine Energy, which was formed in late 2022 to provide commercial insight to all stakeholders in the marine fuel supply chain. With more than 35 years of experience, he has both detailed knowledge and unique insight into the bunker supply chain and its many related infrastructure developments. Adrian’s experience spans leadership roles with some of the industry’s largest marine fuel suppliers, including Chemoil Energy, where he was responsible for successfully driving the company to going public through an IPO, and as vice president and general manager of OW Bunker, where he established its physical supply operation in the United States.

OPIS: In July 2023, the International Maritime Organization (IMO) adopted the Revised Greenhouse Gas (GHG) Strategy that sets a sectoral target of net-zero emissions by or around 2050. Just where are we on this journey?

TOLSON: I think it’s fair to say that the initial agreement around IMO’s net-zero framework at April’s Marine Environment Protection Committee, 83rd session (MEPC 83) has been essential to this journey. There are some who have concerns about the agreement not going far enough, but if they/we had failed, then this could have been disastrous and would have underlined and exacerbated a negative shift in the decarbonization momentum that has been going on for some months. Over the last year or so, we have seen national governments and international bodies slowing down progress on decarbonization as a result of economic and geopolitical challenges, and for this and commercial reasons, we have seen major decarbonization projects failing to get to Final Investment Decision (FID). These headwinds have not gone away; the world’s economies are still disrupted, but at least IMO has set a clear policy that looks more achievable in the current world climate than more aggressive ideas.

So, assuming the framework is fully agreed in October, we are now on the IMO’s journey, although there is still a lot of work needed to detail the regulation and ensure its wide implementation and acceptance. Of some considerable concern for stakeholders in the U.S. was that the current U.S. administration was absent from these discussions. I hope their “bark will be worse than their bite” and that a policy that sees a long-term role for LNG and biofuels (two fuels in which the U.S. has potential to dominate) will allay the administration’s concerns.

OPIS: If the shipping industry does not achieve net-zero by 2050, in your view, what is a reasonable reduction level by 2050 that we can say the industry “did pretty well”?

TOLSON: Post MEPC83 it seems that the consensus is that we will be challenged to be on track for the 2050 targets. It needs to be remembered that these are only mid-term measures and can be revised later to alter trajectory. Will we ultimately get to net zero by 2050? I have been in doubt about this for some time and I feel even with a strong IMO policy well enforced, it may still be a challenge. We may have to accept 2060 as a more realistic goal. Having said this, a target is a target and even if we fail to meet it there will be lots of positive forward progress on the way.

OPIS: We have the EU ETS and UK ETS carbon pricing on emissions, how does an IMO global carbon price figure into the already established ETS systems?

TOLSON: I think it’s pretty universal in the shipping community that they don’t want multiple regulatory regimes to deal with emissions. Ideally the MEPC83 framework will satisfy different national jurisdictions and unify the regulatory control under IMO. Also, will it be enough the satisfy the EU? FuelEU Maritime and ETS are a good deal more aggressive than IMO’s framework in the early stages (although IMO catches up as time progresses). This probably depends on European politics, and we can only hope for a unified or near unified regulation.

OPIS: Several “future fuels” have the potential to replace traditional bunker fuel. Is there one fuel that has the edge in the near term? And how about looking forward 10-15 years?

TOLSON: Near-term the leader is undoubtedly biofuels for traditional ICE powered vessels and of course LNG powered engines will work for those that have built vessels powered that way. Fifteen years into the future I think we can see methanol and ammonia play their part (although this will be early days for ammonia). Having said this, I also think penetration of these two fuels may be less than expected with carbon capture from traditional fossil fuels playing a role, along with increased amounts of LNG supported by more renewable LNG.

OPIS: How might a traditional bunker fuel supplier adapt to alternative bunker fuels?

TOLSON: There is a real challenge here. These are generally very different fuels, with the exception of biofuel, which will require enhanced skill sets not needed or common in the people who sell, operate, manage and deliver bunkers in today’s supply chain. Can the industry adapt? It’s possible, but there is a need for enormous amounts of retraining and such, as well as a heavy need for different skills and new personnel to enter the labor pool.

Alternative fuels will also require major capital investment. Many of today’s suppliers who own or operate their own storage terminals or barges will be challenged to step up and invest in very expensive infrastructure development. Having said this, I think new market entrants will need the existing logistics providers (suppliers) to help them navigate this new market and will need to create an alliance, but I think it’s unlikely that the largest bunker suppliers of today’s world will be the same 10-15 years into the future.

Existing suppliers will also struggle for working capital. Alternative fuels are forecasted to be anywhere between five and 10 times more expensive than existing liquid fossil fuels. At the moment it’s beyond the current supply chain to carry the burden of this additional capital need. Perhaps infrastructure development will be controlled by “new” entrants into the supplier equation, or even by financial institutions, with the traditional supplier earning a small margin to control operations and help with logistics. When it comes to the actual sales, it would be hard to imagine that all existing suppliers could easily adapt their cash flow to expensive multi-year contracts with long credit terms. Alternative transaction financing is needed otherwise the bigger companies will take control.

OPIS: Paying for emissions and/or switching to more expensive alternative fuels is expensive. Will we see further consolidation in shipping?

TOLSON: It’s hard to argue that this trend will not continue, and it is not only driven by alternative fuel adoption. There are clear advantages for larger shipping companies with greater financial strength to be able to address the challenges of modern shipping, which put decarbonization, digitalization and transparency front and center. We will see fewer small operators, but I am not sure they will entirely disappear. Shipping has a unique ability to surprise us and perhaps this is one of those times as the market adapts to allow the small investor/owner a role in shipping.

OPIS: If you had a crystal ball, what are the shipping and bunker industries going to look like in 2050?

TOLSON: I am sure we will see a trend for larger shipping companies operating ships running on an array of alternative fuels and utilizing carbon capture technologies. Smaller ships, within reason, may be better suited to near shoring supply chains and shorter voyages might suit vessels that require more frequent fueling of alternative fuel and disposing of CO2 from carbon capture.

Near shoring will work for some aspects of international trade, but my guess is that globalization is not done and will still see bigger and bigger container ships crossing the oceans, probably mostly autonomous and possibly nuclear powered.

You would surmise that bunkering will be dominated by an array of large chemical manufacturers, large energy companies and large commodity traders selling mostly expensive alternative fuels on long-term contracts to large shipping companies.

Most of the quality issues and quantity disputes we deal with today will be long gone and the greater issue will be for suppliers to certify well-to-wake supply chains after some fraudulent activity was discovered. Most of this certification will be done by a sophisticated “blockchained” supply chain where the digital world gives little opportunity for fraud to occur anymore.

Credit will also have ceased to be a major challenge as global trade will operate on the blockchain, and risks will be minimized with larger financially strong counterparties. I suppose we will see AI enter our lives and materially impact the need for suppliers to have large numbers of employees except probably at the point of delivery where automation will still be uncomfortable. Land-based bunker employees will be more about science and tech than today’s generalists. Delivery-focused personnel will be better trained and paid!

A very different bunker industry from today, but on the other hand I am also ready to believe that not all remnants of 2025 will have gone. Many traditional bunker suppliers will adapt to becoming the logistics providers of the future as the new entrants into the market recognize that they don’t want to deal with the complexity of selling, delivering, certifying and collecting payment for hundreds or thousands of deliveries per month. Equally so, the specialist bunker trader intermediary will hopefully still be acting in its role as aggregators of both demand and supply, incredibly essential as sellers and buyers move away from multi-year, long-term contracts into transacting in a growing spot market for alternative fuels in most major ports.