Greener shipping: China can bolster global climate change fight by using biofuel in ships instead of exporting it, Dutch start-up 123Carbon says

China, a major biofuel exporter, can do more to fight climate change by using low-carbon fuel in Chinese ocean-going vessels instead of exporting it, according to Holland-based 123Carbon.

Doing so would allow the global shipping industry to cut the emissions and costs arising from the shipping of biofuels, said Jeroen van Heiningen, managing director and co-founder of the transport carbon emissions reduction registry operator. Cargo owners could use digital technology to account and pay for carbon emission reduction benefits, he added.

The company, formed in 2021, launched a digital registry in January for marine, air and road transport carbon reduction initiatives. Its platform aims to allow low-carbon fuel suppliers and shipping companies to issue, manage and sell externally verified emissions reduction certificates, which can be used by cargo owners and freight forwarders to make reduction claims on their supply-chain emissions.

“We are working on appointing an agent to bring knowledge to the China market, because we see strong opportunities here,” van Heiningen told the Post. “China has strong capacity in biofuel production, and it can deliver biomethanol.”

Biomethanol, or renewable methanol, is produced from biomass, such as forestry and agricultural waste and municipal wastes. Its combustion carbon footprint is up to 95 per cent lower than that of conventional fossil fuels, according to trade body the Methanol Institute.

China’s biodiesel production rose by a third to 2.4 billion litres last year from 2021, according to the US Department of Agriculture. It was almost entirely exported to the European Union, especially Holland, which imposed an emissions cap-and-trade system on its road transport sector.

123Carbon’s Jeroen van Heiningen at Exchange Square in Hong Kong. Photo: Jonathan Wong

Last Thursday, 123Carbon beat five other finalists and won the top prize at this year’s Captain’s Table shipping and logistics innovation ideas pitching competition, held as part of last week’s Hong Kong Maritime Week event.

Biofuel demand is expected to grow, as more companies try to deliver on their targets and slash supply-chain carbon emissions, including those of their logistics suppliers.

Last September, a coalition of more than 20 companies, including big consumer goods brands Idea, Philips, Levi’s and Amazon, made requests for proposals to decarbonise sea-freight containers equivalent to about 600,000 twenty-foot equivalent units from 2025.

They will pay a “green premium” on shipping costs and contribute towards the higher costs of low-carbon fuels.

Currently, due to the lack of a commonly recognised mechanism to account for climate mitigation benefits, it is difficult for container vessel owners and operators to charge cargo owners extra for using lower carbon fuels, or other energy-saving technology such as wind-assisted propulsion.

It is often impossible to physically trace how much carbon reduction was achieved by using biofuel to move a particular cargo in a vessel, Van Heiningen said.

Even if a cargo owner wants to pay extra for its cargo to be shipped by a biofuel-fuelled vessel, it is not always possible due to the unavailability of biofuel, he added.

“The vast majority of cargo owners are reluctant to pay for biofuel, so we need an allocation mechanism for the climate mitigation benefit from biofuels to be passed on to cargo owners,” he said.

123Carbon’s platform uses blockchain technology to collect and store verifiable, auditable and immutable information related to greenhouse gas emissions reduction activities in the logistics sector. The information is assured by verification, auditing and certification providers Verifavia and Bureau Veritas.

However, this method of tracking, accounting and trading of emissions mitigation benefits has not yet been endorsed by Greenhouse Gas Protocol and Science Based Targets initiative (SBTi), which are key international standard setters for tracking corporate decarbonisation initiatives.

Such so-called book-and-claim instruments are a topic that requires further research and clarification from greenhouse gas accounting standards, according to SBTi.

“SBTi acknowledges that book-and-claim instruments are not well-defined in the market … SBTi is following up and participating in multiple discussion groups working on this topic,” it said in May.