Greener aviation and shipping fuels 'absolutely critical' for S'pore: Sustainability conference

Singapore will have a role to play in developing the infrastructure needed for greener shipping fuels. PHOTO: ST FILE

SINGAPORE - Temasek is working with regulators and companies to explore greener fuels for the aviation and maritime industries as they are one of the key drivers for reducing carbon emissions.

Developing sustainable fuels is "absolutely critical" for Singapore given the Republic's status as a maritime and aviation hub, said Temasek head of transportation and logistics Juliet Teo on Tuesday (Sept 28) during a panel discussion at Ecosperity Week, a three-day hybrid sustainability conference organised by the state investor.

Temasek is working with the Maritime and Port Authority of Singapore to explore decarbonisation solutions for the shipping and port industry, and has collaborated with the Government to study sustainable aviation fuels and how to scale them up, she added.

Mr Peter Vanacker, chief executive of Finnish biofuel producer and oil refiner Neste, said his firm is in "intensive discussions" with Temasek, the Singapore Government, Singapore Airlines and Changi Airport to use sustainable aviation fuels so that flights coming out of Singapore have a lower greenhouse gas emission impact.

Noting that four billion tonnes of crude oil was consumed across different industries last year, even amid a global pandemic, Mr Vanacker urged countries and regulators not to wait for a global consensus on which solutions to adopt.

"The clock is ticking and the climate crisis is here. And if we return to a normal mode then people will, of course, start flying again," he said during the discussion.

"We need to have sustainable aviation fuels in the airports, in the planes, make the capacity available, and hit the ground running."

Neste's investments in Singapore and Europe to increase sustainable aviation fuel production capacity demonstrate that it is possible, Mr Vanacker added.

Neste's plant here will be the firm's largest once a €1.4 billion (S$2.2 billion) expansion plan is completed in 2023.

But to accelerate adoption of greener fuels, there needs to be the right regulations in place, Mr Vanacker said, citing ongoing discussions in the United States over an incentives mechanism, as well as proposals to mandate planes leaving airports in Europe run on a blend of sustainable and traditional fuels.

Regulation must be consistent, with a clear road map, given the size of the investments involved. They should also be less restrictive on sustainable fuels and take into account how different solutions will be needed, he added.

Businesses will also have to adopt new models, he said.

Mr Soren Skou, chief executive of Danish shipping giant AP Moller-Maersk, said the shipping industry is regulated globally by the International Maritime Organisation (IMO), which helps level the playing field.

But while the IMO needs to move faster in terms of adopting future fuels such as green methanol and potentially green ammonia, the bigger issue is the need to massively scale up the production of these new fuels, he added.

The decision by AP Moller-Maersk to order eight new container vessels capable of running on greener methanol is to create a market for such greener fuels, he said.

As one of the world's largest bunkering ports, Singapore will also have a role to play in developing the infrastructure needed for greener shipping fuels, he said.

Greener fuels will also cost much more, and Temasek's Ms Teo said the whole transportation industry will need to factor in the real cost of climate change, as the sector has had a poor record of getting its customers to pay for additional fuel costs.

It is hard for transportation companies to pass on the "green premium" to end customers, who have other alternatives, she added.

Mr Skou was more optimistic, citing how big global brands and retailers have been willing to pay the premium for greener transportation, but agreed there will be a need for some form of a carbon tax to help nudge customers towards green fuels.

However, he also said that the increase in fuel costs might not matter to the end user.

For example, greener shipping fuels are expected to cost thrice as much as existing fuels, and with AP Moller-Maersk spending $400 for fuel per container it ships, this would mean an additional $800 per container, he said.

But a container shipping sneakers would typically have about 8,000 pairs of shoes.

This means an added fuel cost of just 10 cents per pair of sneakers.

"I think the world can actually afford to pay for the decarbonisation," Mr Skou said.

"We can afford this if we want to."

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