How can carbon insetting help the maritime industry meet its climate targets?

The pressure is on to cut emissions drastically in the coming years, both in the maritime industry and further afield. However, shipping struggles with the fact that alternative, low-carbon fuels are generally much more expensive than traditional fossil fuels. To help bridge this price gap, carbon insetting has been gaining traction in the industry.

Although lower-carbon fuels are expected to continue scaling up and becoming more widely accessible, the price difference compared to traditional fossil fuels is likely to persist. This is a problem, as low-cost shipping is vital to the transport of essential goods for a large portion of the global population. However, some consumers and companies are willing to pay a premium to reduce their carbon footprint.

What is carbon insetting?

Carbon offsetting has already been in place across industries for a number of years. This is the process by which a company compensates for its greenhouse gases by investing in projects outside their supply chain – think planting trees or clean cookstove projects.

In contrast, insetting focuses on investing on initiatives to decarbonize their own supply chains. Imagine a cargo owner who decides to transport their cargo by a ship that uses biodiesel instead of conventional fossil fuels. The problem is that biodiesel may not be available where it is needed, and they may not control the fuel that the ships transporting their cargo will use. 

Luckily, companies can rely on a book and claim approach to still invest in fuel switching projects and reduce their value chain emissions. This approach involves the issuing of digital credits, known as “insets.” Insets document a given emissions reduction achieved through the use of renewable or low-carbon fuels, compared to conventional fossil fuels.

Companies can then exchange these insets using a registry. That means that companies can claim the sustainability attributes of fuels that they do not actually use themselves. Instead, they are paying for someone somewhere else to use that sustainable fuel. This decoupling of the sustainability claim from the physical fuel helps optimize the use of these low-carbon fuels. 

Carbon insetting has already successfully taken off in electricity markets, wherein consumers of electricity – from large corporations down to private individuals – can pay for sustainable electricity credits. These credits mean that the renewable energy does not need to be generated in the place where the credit is bought. Instead, the buyer is paying for renewable energy to be generated somewhere on the energy grid where it makes sense. This way someone in cloudy northern Germany can pay for renewable solar electricity in southern Spain – without needing to rely on local renewable energy options that may be lacking.

How can insetting play a role in decarbonizing the maritime sector?

As companies across industries look to decarbonize, a premium can be put on the shipment of goods using sustainable fuel. That means that customers could pay more to guarantee that their goods are shipped in a sustainable manner. 

For some vessel types – such as container ships – that are highly publicly scrutinized and are therefore at the forefront of decarbonization measures, insetting could be particularly suitable. Since there are currently no regulatory incentives for carbon insetting in the maritime industry, the practice is strictly voluntary. As a result, consumer pressure is one of the best tools available to encourage the uptake of insetting practices.

Insetting can also help spur further development of alternative fuels by providing a way around sourcing barriers across supply chains. For fuels like biofuels, where the scale is still quite limited, production sites may be far away from the main markets looking to consume this fuel. Insetting provides a practical approach to ensure that this fuel is used in the most sensible way – close to the site of production rather than halfway around the world.

Bureau Veritas is helping pave the way for insetting

At Bureau Veritas, we are helping to de-risk the decarbonization solutions of tomorrow. As part of that aim, we are supporting the uptake of carbon insetting across the maritime industry, as a trusted third-party verifier. In one such example, we are shaping trust in insetting projects in our collaboration with 123Carbon and Unifeeder’s GreenBox, acting as a third-party verifier for their solution platforms. Essentially, this involves verifying each insetting credit for accuracy, transparency and compliance with relevant standards. By doing this, we help ensure that each claim can be trusted and mitigate the risk of double counting, providing genuine transparency for companies and their customers.

We were one of the earliest class societies to get involved with insetting projects and we are continually working to stay at the forefront of future developments.

Carbon insetting is an effective tool to allow companies to cut emissions throughout their supply chain, both in the maritime sector and elsewhere. However, there are many other actions that the industry can also take to further decarbonize its operations. Our Decarbonization Trajectories report dives deep into the different pathways to net zero.