Decarbonising the global supply chain: The vital role of ports

Ports are uniquely positioned to lead and facilitate collaboration between companies in the global supply chain towards decarbonisation. This is because of their:

Visibility across the supply chain – Ports have a holistic view of the dynamics in international trade. They can identify shipping trends and access valuable data such as freight movement and energy consumption to calculate and communicate the benefits of decarbonisation through an economic and ESG perspective.

Custodianship over port users’ emissions – Scope three emissions make up more than 70 per cent of a business’ carbon footprint. Ports can directly influence the emissions of cargo trucks and ships using their spaces by enforcing compliance to regulatory policies.

Connections to energy stakeholders – Ports connect energy producers to domestic and international users. Ports also enable renewable energy such as solar and wind, facilitating the construction and shipping of key parts such as turbines and panels.

Role as energy hubs – Vessels refuel and recharge at ports. Whether it is a cargo ship in need of oil or a fleet of electric trucks that need their batteries charged, they all rely on ports and their connections to major power grids. Ports can also potentially sell the energy they generate from developing their own microgrids.

One example of how ports can act as energy brokers is the Port of Rotterdam in the Netherlands, which has looked to upscale its alternative bunker fuels, such as ammonia, hydrogen, methanol and biofuels, to better service their users. The port authority works with its industrial tenants to build an offtake portfolio for renewable fuels like hydrogen and undertakes market assessment for the procurement of fuel at the lowest cost.

Changing market conditions, government policies and regulations are fundamental forces compelling ports to decarbonise the supply chain. How ports respond to the issue can be broadly categorised through international, regional and local drivers.

The Paris Agreement is the primary policy that drives the global movement to mitigate climate change impact, with its goal of limiting global warming to 1.5 degrees Celsius compared to pre-industrial levels. The International Maritime Organisation’s sustainable development goals include a commitment to strive for 30 per cent reduction in greenhouse gas emissions (GHG) by 2030. This represents at least 5 per cent striving for 10 per cent of energy supplied to international shipping from alternative zero and near zero GHG fuels.

Another major international driver is the natural capital market, the world’s stock of natural resources such as soil, water and biodiversity. International drivers enable regional and local drivers to be formulated, allowing them to have specific targets for ports to achieve. Australia can look to the UK as a model to follow for domestic ports looking to decarbonise.

In 2019, the UK Government rolled out the Maritime 2050 policy, outlining their methods to reduce shipping emissions with the Clean Maritime Plan. The Port of Southampton started trialling hydrotreated vegetable oil (HVO) to fuel forklift trucks, generators and straddle carriers in 2021. By 2022, they eliminated diesel from their operations and transitioned completely to HVO. The Port of London has also started trialling and retrofitting their existing vessels with low carbon fuels, and based on that success, they are looking to adopt it across their fleets between 2030 and 2050.

In Australia, terminal operators are driving towards net zero with the electrification of their equipment and improvements in efficiency to reduce emissions. Patrick Terminals are leading the decarbonisation charge through the implementation of electric terminal trucks, the use of autonomous vehicles, and a commitment to transition equipment across the terminal to zero emissions. 

While there are successful examples of ports finding pathways to decarbonisation, there are still considerations to make before the entire industry goes full steam ahead in decarbonising its port infrastructure.

Dependability and resiliency of local power

Electrification is one way of decarbonising the supply chain, but it raises important questions on dependability and resiliency. Can a local electricity grid keep up with the demand to power ports and cargo vessels, especially during peak energy use? What are the potential supply and profitability implications in Australia?

Unlike Europe where wind turbines on port land augment power supply, in Australia port land is often constrained and behind the meter options are unlikely. Can the grid deal with extreme weather events due to climate change such as wildfires and flooding? How do ports respond to geopolitical conflicts that may lead to energy sanctions and cut off producers from users?

Trade-offs in alternative fuels

Ammonia, methanol and hydrogen can be effective carbon-zero fuels for shipping. However, there are health and safety considerations to understand when it comes to production and storage, such as explosion risks and the potential for toxic gas leaks.

Infrastructure development

The transition will require ports to accommodate traditional diesel equipment, with additional space to develop the necessary infrastructure for new decarbonisation technologies such as EV charging spots and alternative fuel storage. Automation and the Internet-of-Things can unlock the potential of these new technologies, but they also expose ports to cyber attacks.

Social and labour implications

Ports will have to upskill their current labour force to operate and maintain the new infrastructure and tools in the transition to net zero, which will take time. Changing perceptions and behaviours regarding decarbonisation within affected parties may also prove challenging. Recent trials of electric heavy vehicles have seen a positive response towards quieter technology but also demonstrate the need for training.

Ports are extremely complex and multi-stratified landscapes, involving shareholders, investors, lessees, terminal operators and the ports themselves. All parties must find collective consensus to harness the opportunities that lower cost renewable energy can offer. To achieve this consensus, all parties must cooperate, coordinate, and collaborate.

Examples of ports finding consensus through compulsory and voluntary agreements include the Tokyo Port Terminal Cooperation, where they added terms in their operator agreements to reduce GHG emissions, and the Green Flag Environmental Program, where ships coming to the Port of Long Beach within a 20 nautical mile radius are required to decrease their speed to save on fuel consumption and reduce emissions.

Information sharing can help optimise freight movement and refuelling, reducing emissions in the process. It also helps prevent ports from making similar mistakes, especially for smaller ports that may not have the finances to switch to less evidence-based decarbonisation approaches. Not all ports are the same, so each one must conduct feasibility studies to identify the best path forward to decarbonisation.

Ultimately, ports have a vital role to play in decarbonising the supply chain. They have the resources, connections and influence to act as energy brokers. When ports work together, they can lead and facilitate collaboration between stakeholders, helping manage risks and find opportunities that come with decarbonisation.