Decarbonising India's Shipping Industry, Waterways & Maritime Sector

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Decarbonising Shipping Vessels in Indian Waterways through Clean Fuel

14 March, 2023 | Sustainable Mobility

Nilanshu Ghosh, Abhinav Soman, Harsimran Kaur, and Himani Jain

Suggested citation: Ghosh, Nilanshu, Abhinav Soman, Harsimran Kaur, and Himani Jain. 2023. Decarbonising Shipping Vessels in Indian Waterways through Clean Fuel. New Delhi: Council on Energy, Environment and Water.

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Overview

In India, the waterways sector comprising coastal shipping and inland waterways is a crucial economic contributor, adding up to USD 1.6 billion (INR 13,007 crore) as gross value added (GVA) in FY20. In this study, we assess the potential of two clean technologies – LNG and solar-assisted electric boats – in reducing emissions from the Inland Water Transport (IWT) sector and coastal shipping. Further, we explore the market potential that may arise from a transition to these clean fuel technologies by 2030.

Key Findings

Given the availability and maturity, the potential of two clean technologies – LNG and solar-assisted electric boats can be utilised to reduce emissions from the IWT and coastal shipping sector.
In the IWT passenger segment, a transition to solar-assisted electric boats by 2030 will result in an emission reduction of about 52 per cent and an increase of about 30 per cent in market size, as compared to the 2030 business-as-usual (BAU) scenario.
A transition of IWT cargo vessels to LNG will realise a reduction of approximately 27 per cent in annual emissions and a 25 per cent increase in market size as compared to the 2030 BAU scenario.
Retrofitment of coastal shipping vessels with LNG systems can result in an emission reduction of around 13 per cent and a 30 per cent increase in market size when compared to the 2030 BAU scenario.
Existing government policies can be leveraged to mobilise the uptake of low-carbon fuels in water transport as it has in road transport.

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Nilanshu Ghosh

Research Analyst

[email protected]

“The envisioned growth of India’s waterways sector creates a unique opportunity to implement, farsighted and well-designed policies to promote clean fuel technologies. To catalyse this transition, it will be critical to develop a robust shipbuilding ecosystem and deploy strategic economic instruments.”

Executive Summary

The waterways sector in India, which comprises coastal shipping and inland waterways transport, is a crucial economic contributor, adding up to USD 1.6 billion (INR 13,007 crore) as gross value added (GVA) in FY20. The government has implemented various initiatives like the Sagarmala Programme, National Waterways Act, and Inland Vessels Bill to develop the waterways sector and enable a modal shift. However, these policies have a limited focus on the clean fuel transition.

In India, around 2,000 vessels cater to passenger demand and 1,600 vessels enable cargo movement on inland waterways, consuming about 1,200 lakh litres of fuel as of 2019. The estimated emissions of the inland waterways transport (IWT) sector stand at about 277,000 tonnes of CO₂ (tCO₂) as of 2019. Around 970 coastal shipping vessels operate as of 2019 in India, accounting for 1.6 million tonnes of fuel oil consumption and 5.1 million tonnes of CO₂ (MtCO₂) of emissions.

Government policies envision the annual cargo movement and the passenger movement to increase by almost three times between 2019 and 2030. The subsequent growth in fuel consumption and emissions will counteract the growth, necessitating adequate measures to avert these negative externalities.

Globally, measures have been taken to reduce emissions from shipping, with the International Maritime Organization (IMO) announcing the ambitious target of reducing emissions by 50 per cent by 2050 compared to 2008. In accordance with this target, alternate fuels, namely, ammonia, hydrogen, liquefied natural gas (LNG), liquid biofuel, methanol, and electricity are being actively explored by the shipping industry.

In this study, we assess the potential of two clean technologies - LNG and solar-assisted electric boats – in reducing emissions from the IWT sector and coastal shipping. We consider the target of retrofitting 100 per cent of cargo vessels operating on both coastal and inland waterways with LNG systems by 2030, to estimate the maximum potential of a clean fuel transition. For the passenger ferries operating on inland waterways, we assume a 100 per cent transition to solar-assisted electric boats.

Key findings

IWT passenger and cargo segment: To abate a threefold increase in fuel consumption and, consequently, in emissions, we review the potential impacts of transitioning to LNG in the cargo segment and electric boats in ferries.

If 100 per cent of IWT cargo vessels are transitioned to LNG, it will be possible to realise an approximate reduction of 27 per cent in annual emissions and a 25 per cent increase in market size by 2030 as compared to the 2030 business as usual (BAU) scenario.
In the IWT passenger segment, a transition to solar-assisted electric boats by 2030 will result in an emissions reduction of almost 13 per cent and a market size increase of 30 per cent, as compared to the 2030 BAU scenario.

Figure ES 1 Transitioning to LNG and solar-assisted electric boats can reduce emissions and increase the market size for the IWT segment

Source: Authors’ analysis

Coastal shipping vessels: To reduce the estimated 1.2 - fold growth in residual and distillate oil consumption in coastal shipping vessels by 2030, we review the impact of a potential LNG transition. Assuming 100 per cent of ships are retrofitted with LNG systems by 2030, an emissions reduction of around 13 per cent and a 30 per cent market size increase can be achieved when compared to the 2030 BAU scenario.

Figure ES 2 Retrofitting cargo ships with LNG system by 2030 can increase market size by 30 per cent and reduce the emissions by 13 per cent

Source: Authors’ analysis

Key Recommendations

We found a systemic gap and lack of cohesive policy support in adopting alternative fuels:

The current literature lacks detailed techno-economic analyses to compare nascent alternatives, including methanol, biofuels, and ammonia, in the Indian waterways sector. The Government of India may consider clean fuel and technology-based investments, incentives, and commercial pilots involving global experts and local entrepreneurs.
A critical review of the research on low-carbon fuels points to LNG being a promising alternative in coastal shipping and the IWT cargo segment. Electricity emerges as a promising alternative in the IWT passenger segment. However, current policies lack strategies to ensure ecosystem readiness, the availability of new fuels, robust technological alternatives, and retrofitting options.
India’s shipbuilding and ship repair industries are abysmal compared to global capacity. The current policy framework does not provide support schemes and incentives to manage the industry’s over-reliance on government orders and limits competitiveness against global players. Moreover, poorly developed ancillary services have stymied the growth of the shipbuilding and ship repair industries.
High financing costs, a significant tax burden, and limited ship spares availability plague the ship repair industry. Revamping fiscal and collaboration strategies can address such challenges while nudging the industry toward new technologies and low-carbon fuels to further economic development and job creation.

This brief identifies several criteria that need to be considered when choosing an appropriate fuel mix and the consequent impact on emissions. However, a detailed techno-economic analysis is required to compare more nascent alternatives, including methanol, biofuels, and ammonia. The momentum built in transitioning to low-carbon fuels in road transport should be leveraged through cohesive policies to decarbonise the waterways sector in India.