A recent survey of up to 50 respondents from various sectors has highlighted significant barriers to decarbonisation, with over a third identifying cost, sustainable energy, and inadequate infrastructure as the primary challenges. The respondents, who included specialists from maritime, aviation, logistics, manufacturing, utilities, and environmental services, also expressed concerns about understanding and complying with complex new environmental regulations.
The uncertainty surrounding these regulations was evident in the survey results, where nearly half of the participants named biofuel and green hydrogen as the sustainable fuels with the most potential. This preference underscores the complexity and evolving nature of regulatory frameworks affecting decarbonisation efforts.
Thor Maalouf, a partner at Reed Smith specializing in commercial shipping and maritime law, commented on the survey findings: “It is unsurprising that our respondents had more confidence in green biomass-derived fuels rather than ‘blue’ fuels. The outlook for likely future regulatory treatment of ‘blue’ fuels, which are created artificially using electricity or other power generated from sustainable sources, is less clear than treatment for green or biomass-derived fuels which have a clearer low-carbon footprint.”
Nick Austin, another partner at Reed Smith focused on transportation, highlighted the significant impact of cost and regulatory restrictions on the adoption of sustainable fuels. “This reflects our experience in maritime decarbonisation, where companies are facing new costs, such as the EU Emissions Trading System (ETS), and a range of other initiatives such as the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) which impose both an administrative and economic burden on vessels to reduce emissions,” Austin explained. He emphasized that any fundamental change in marine fuels will inevitably involve higher costs and new regulations.
The lack of infrastructure to support new fuels was another major concern among respondents. Austin pointed out that Reed Smith clients believe substantial investments are needed to develop the necessary infrastructure for these new fuels. However, there appears to be a “lack of commitment from global governments” to make these investments, which is crucial for supporting the energy transition.
Antonia Panayides, another transportation partner at Reed Smith, discussed the complexities of identifying the best solutions for decarbonisation. “Identifying the best solution, taking into account factors such as cost, safety, storage, and scalability, poses a significant challenge. Therefore, we decided to engage directly with our clients, who are deeply immersed in these issues, to gain insights into their forecasts, perspectives, and to understand the biggest challenges they face,” Panayides said.
Survey Reveals Key Obstacles to Achieving Environmental Goals
The survey results reflect a broader industry sentiment that while there is a clear recognition of the need for decarbonisation, practical challenges remain formidable. The costs associated with transitioning to sustainable fuels, along with the need for new regulatory frameworks and significant infrastructure investments, are seen as major hurdles.
Maalouf’s observation about the regulatory treatment of different types of sustainable fuels highlights a critical aspect of the decarbonisation debate. Green biomass-derived fuels are perceived to have a more straightforward regulatory path due to their clear low-carbon footprint, whereas ‘blue’ fuels, which are produced using electricity from sustainable sources, face a more uncertain regulatory future.
Austin’s insights into the economic and administrative burdens imposed by initiatives such as the EU ETS and IMO’s CII shed light on the practical challenges companies face. These initiatives, while essential for driving down emissions, add layers of complexity and cost that companies must navigate. This dual burden of administrative and economic impact underscores the need for a balanced approach to regulation that supports decarbonisation without unduly hindering business operations.
The issue of infrastructure is equally critical. Without the necessary infrastructure to support the production, storage, and distribution of new sustainable fuels, efforts to decarbonise will be significantly hampered. The perceived lack of governmental commitment to making these investments is a major concern for industry stakeholders, who see this as essential for enabling the energy transition.
Panayides’ comments about the challenges of identifying the best solutions highlight the need for a comprehensive approach to decarbonisation. This includes considering a wide range of factors and engaging with industry stakeholders to understand their perspectives and challenges. This approach is vital for developing effective strategies that can address the multifaceted nature of decarbonisation.
The survey conducted by Reed Smith underscores the significant barriers to decarbonisation, including costs, regulatory complexity, and inadequate infrastructure. While there is optimism about the potential of sustainable fuels like biofuel and green hydrogen, practical challenges remain. Addressing these challenges will require coordinated efforts from industry stakeholders, regulatory bodies, and governments worldwide to create an enabling environment for the energy transition.
