Op-ed: Indonesia at the center of international shipping’s decarbonization journey

With its proximity to several of the world’s major shipping lanes, a deep national connection to maritime activities and access to renewable energy resources, Indonesia can establish itself at the center of the future global maritime ecosystem.

President Jokowi has consistently highlighted the importance of the maritime industry for Indonesia, announcing his intention to further Indonesia’s position as a Global Maritime Fulcrum boosting maritime culture nationally, and expanding Indonesia’s ability to benefit economically from maritime activities.

With Indonesia hosting the 2022 G20 meetings in Bali, there is a clear opportunity to consider the role of international shipping in addressing  the Presidency’s priority issues, namely furthering efforts on the sustainable energy transition and promoting international investment. Efforts around the G20 can further help to promote high-level engagement of many of the world’s largest shipping nations with these issues, recognizing that zero emission shipping cannot be achieved alone, and needs to be addressed collectively by countries across various policy making fora.

Maritime decarbonization

In 2018, the International Maritime Organization (IMO) committed to halve these GHG emissions by 2050, which is not in alignment with the 1.5°C temperature goals of Paris Agreement. There is, however, a growing support among IMO Member States to move towards a higher level of ambition at meetings next year, with many calling for the alignment of the Initial IMO GHG Strategy with the Paris Agreement and highlighting the importance of ensuring a just, fair, and equitable transition.

Currently, international shipping uses around 300 million tons of fossil fuels every year, representing around 5% of global oil production and accounting for close to 3% of global emissions. Over the coming decades, maritime decarbonization will mean transitioning to fuels based on green hydrogen, such as ammonia and methanol, increasingly driving a high level of demand for these future green fuels. This transition has the potential to create huge opportunities for countries able to supply and facilitate the distribution of these fuels.

Specifically, assuming that 5% of the global fleet transitions to Scalable Zero Emission Fuels by 2030, the green energy demanded from visiting international and domestic vessels would represent about 8.3 TWh/y, representing around 0.9% of Indonesia’s total renewable potential. Following 2030, there will then be a rapid uptake of SZEFs throughout the 2030s and 40s, representing a huge future demand and opportunity to supply these fuels.

Opportunities

Being part of the transition for shipping would allow Indonesia to engage in, for example, green fuel production, exports, and bunkering; support a just and equitable job transition and create green hubs and green ports. This could help to develop Indonesia’s renewable capacity, in addition to supporting the development of new technologies like floating solar.

Through targeting progress in these areas, Indonesia can expect to enhance efforts on several wider national ambitions:

Decarbonize national industry

• Supporting efforts to advance maritime decarbonization will offer the potential to support sector coupling and develop synergies with other sectors like mining and agriculture, particularly in the context of aggregating demand for green hydrogen.

Boost imports and exports

• Establishing a green maritime hub in Indonesia will help to improve energy security by reducing reliance on fossil fuels in addition to increasing the number of vessels calling at Indonesian ports, hence enhancing the volume of Indonesia’s imports and exports.

International investment

• Development of related onshore infrastructure could help to attract Rp 46 – 65 trillion IDR to Indonesia by 2030.

Job creation

• Studies from the Institute for Essential Services Reform (IESR) estimate that by 2050 at least 3.2 million new jobs could be created should Indonesia transition its energy system. International shipping can help contribute towards this development.

From opportunity to reality

To ensure that Indonesia can realize the opportunities presented by maritime decarbonization, there will need to be coordinated action across stakeholder groups, with Governments, industry and civil society needing to work together to ensure that these opportunities can be realized for the future benefit of Indonesia.

To further these efforts, the following steps should be considered:

Prepare to source or produce renewable electricity & SZEF for bunkering & port use

• Preparing to source or produce renewable energy and green fuels can help the country stay abreast with sector developments as well as prepare to service these new vessels.

Develop a clear strategy for national actions to pursue maritime decarbonization

• Developing a national strategy to pursue maritime decarbonization based on comprehensive cost-benefit analysis, providing a clear and needed policy signal to support further action towards this agenda.
• Actions to improve energy efficiency, such as addressing biofouling, will help to reduce overall energy consumption, lowering costs and making the transition to SZEFs less burdensome.

Collaborate to secure effective GHG policy at the International Maritime Organization (IMO)

• Through the G20, raise awareness around the imperative to decarbonize shipping and the opportunities related to that transition, so that G20-countries can support an ambitious outcome at the IMO.
• This would help set a clear target supported by effective policy measures, including market-based measures, and ensure a just and equitable transition.

Leverage international development finance to prioritize funding of strategic projects

• Indonesia already has experience in accessing and implementing development bank assistance, which can be used for the benefit of its maritime and land-based industries in scaling SZEF production.

Engage in & initiate public-private collaborations

• The need for public and private actors to come together and form partnerships is an important way to set a direction of travel and coordinate efforts.

Signatories:

Indah Budiani – Executive Director, IBCSD (Indonesia Business Council for Sustainable Development)
Saifuddin Suaib – Business Development Manager, HDF Energy
Ingrid Sidenvall Jegou – Project Director, Global Maritime Forum

For any questions or more information, reach out to comms@globalmaritimeforum.org.