Trucks Maersk Bets Big On Zero Carbon. Will it pay off? : NPR

The Danish company Maersk has been shipping goods around the world since the steam hall. Now it wants to launch a new era, with carbon neutral transport.

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The Danish company Maersk has transported goods around the world since the steam hall. Now it will usher in a new era, with carbon neutral transport.

David Hecker / Getty Images

Maersk – the world's largest container shipping company – has an amazing goal. In 2050, the company promises to ship goods – everything from electronics to soybeans to sneakers – around the world without CO2 emissions.

The environmental logic behind such a promise is fair: Freight contributes significantly to global climate change.

But the business case is not so obvious.

The goal, announced last year, will cost Maersk billions to develop new technology. Meanwhile, it will compete in a crowded, competitive market against rivals who do not bear that burden. And there is no guaranteed financial payout if the engineers' work succeeds.

So why does it?

The question is not unique to Maersk, or the freight sector. An increasing number of companies pay serious attention to the risk of climate change. But at the same time, they meet shareholders who expect returns.

According to both Maersk and outside analysts, this ambitious promise hangs on the answer to three questions:

• Will consumers pay more to cut their carbon footprint?
• Will new technology eventually become cheaper than oil?
• Will the world actually decide to cope with climate change and impose rules with teeth?

Much on the line

Maersk operates 750 vessels, with a call to a port somewhere around the world every 15 minutes. Some of the ships are as long as the Empire State Building is high.

The Danish company has transported goods worldwide since the steam hall is old. Now it will launch a new era, with carbon transport.

It's easy to make a promise of decades in the future, but for all accounts, Maersk is serious about its engagement. The company has already cut emissions significantly, to the cost of $ 1 billion so far. And it has an intermediate target to reduce emissions by 60% (compared to 2008 levels) by 2030. It is challenging enough – especially since it is easy to find cost-effective alternatives such as efficiency improvements at Maersk. And then there is the zero-carbon deadline of 2050.

Calling this ambitious is an understatement.

"The technology to get there doesn't exist," says Alisdair Pettigrew, a marine energy consultant. "There are millionaires who will be made to come up with the right solutions, but they are not there yet."

Today's ships rely on fuel oil – and a particularly dirty variety of it – or liquid natural gas. Zero carbon options, including hydrogen and biofuels, are currently not working on the scale required for large ships.

And there's not much time to come up with alternatives. While 2050 can be heard far away, ships are built to last for 20 to 30 years. This means that container ships that will be in use in 2050 will hit the oceans in just a few years. Meanwhile – as if that wasn't enough – new technology would also require a brand new supply chain to keep the ships up and running in ports around the world.

Oskar Grasen Jakobsen, Maersk's fleet technology, says that some people call the goal unfeasible is exactly why an ambitious goal is needed.

"We will accelerate the development of solutions to get there and not just sit on the fence and wait for someone [to do] something," he says. [19659008] But he emphasizes that Maersk will achieve its goal in a "business-viable" way.

"An easy way to become carbon neutral … would be to make non-smart business decisions," Jakobsen deadpans. "Then we would very quickly be out of service and do not emit carbon."

Freight containers at the canal port of Dortmund, Germany.

Ina Fassbender / AFP / Getty Images

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Ina Fassbender / AFP / Getty Images

Freight containers at the canal port of Dortmund, Germany.

Ina Fassbender / AFP / Getty Images

Save the world and stay in business

There are three arrows to the company's plan, he says: customers, cost reductions and regulations.

Perhaps customers – the big companies that pay for freight goods around the world – are interested in promoting a zero-carbon system. Maersk is already marketing a carbon-neutral alternative, with biofuels, to customers like H & M.

But how many customers are on board and how much extra will they be willing to pay? Will it be enough to justify the expense?

Probably not.

"We are not as naive as we think … that all customers will pay a lot to get carbon neutral solutions," says Jakobsen. 19659008] The second option: Cost-effectiveness. Maersk says it is important to reduce the costs involved in these alternatives to fossil fuels.

And some analysts say the future technology may be cheaper than oil – in the end.

Freight consultant Lars Jensen says that it is now very difficult to beat oil on price, but the technology of the future can change the mathematics considerably.

"I'm not necessarily assuming that the oil suddenly becomes incredibly expensive," he says. "I argue more that alternative energy sources over time will be incredibly cheap."

He points to what happened to power plants: the cost of wind and solar energy has declined dramatically. At the moment, it does not help Maersk, but perhaps similar transformations can be shipped.

Then there is the third opportunity: Coordinated, global government. [19659008] Say that over the next decades, the world agrees to fight climate change with serious rules. Consider a price of carbon, high fees for burning fossil fuels, strictly enforced emission capsules.

If that happens, a company starting to go carbon neutral will be ahead of the game, while its competitors are struggling to adapt.

Helen Dewhurst, an analyst with Bloomberg New Energy Finance who focuses on sustainability, points out that the International Maritime Organization – the body that governs the global shipping industry – is taking serious air quality measures. New limits on sulfur emissions are kicked in early next year, after many years of discussion.

Some companies have been considered. "They didn't think the IMO would have the backbone to do it," she says. "And they did."

IMO also has targets for carbon. But there is no system to enforce them yet, and the goals fall well out of Maersk's goals. But if it changes dramatically in the coming years, Maersk's efforts can pay off.

But many analysts are skeptical and note the latest story of passivity on climate change. They also say it is difficult to enforce regulations in the maritime sector, which operate across jurisdictions and often far from the eyes of the regulator.

Gambling on humanity

Given the uncertainty about the future of the climaxing action, why would a company such as Maersk make a huge effort on the world change direction so dramatically?

"I've tried to think of it as Pascal's efforts," says Ned Molloy, a shipping consultant who focuses on regulations.

Blaise Pascal was an 18th century mathematician, physicist and theologian.

His famous effort was about life after life. He claimed that if you are not sure of God's existence, you can also be a believer and act accordingly.

If you are right, you go to heaven – you win everything. If you're wrong, well, you're dead if you thought or not. What does it really mean?

Molloy's climate version has nothing to do with whether climate change is real. It is not in doubt. The question is whether you believe in the ability of mankind to stop carbon emissions.

If you bet we can do that, invest according to it, and you're right, then you have a competitive edge – a business win

And if you're wrong?

"If … governments don't want to do anything to get climate change under control, then at least it's not according to what I've read from climate scientists much of the foundation of a global container shipping industry to exist," he says.

Several extreme weather patterns are already causing disturbances in the ports, adding potential disturbances to global food production, world economic upheaval, the possibility of flooding or drought closing the Panama Canal. Molloy.

Deciding to invest in walking zero-carbon is a business calculation, to be sure, but the bottom line can become a little existential.