Carbon insetting can help close the new fuel price gap

Fossil fuels will remain cheaper than renewable fuels for some time, but carbon insetting is an effective remedy that can expedite the energy transition in shipping, says Tom De Ruyter, business developer of renewable and low-carbon fuels at Titan.

What is carbon insetting, and why is it important? Carbon insetting refers to the financing of climate protection projects within a company’s own value chain.

In the bunkering industry, tokens are purchased to prove that low or zero-carbon fuel was used by the carrier. Emissions reduction benefits can then be attached to the products being shipped even if it was not that specific voyage or ship that used the fuel. The money from the tokens flows back into the shipping sector to ensure the continuing promotion and uptake of this clean fuel.

This is different from carbon offsetting, which has come under question due to a lack of transparency on which carbon is offset where, how, and for how long. With carbon offsetting, there’s no mechanism to ensure the money stays within the sector to deliver improvements, and some argue it is just an excuse to continue emitting as usual.

Insetting, and particularly its role within voluntary carbon markets, is receiving growing interest as many businesses look to reduce their scope three emissions. Most of the big retailers (IKEA, for example) would like to sell their products as low carbon or carbon neutral. They would like to state that their products are also zero carbon shipped, so they are concerned about their scope 3 emissions.

This means that emissions relating to transport have an unexploited financial value. Making these carbon reductions tradable enables more money to flow into low carbon intervention, thereby essentially self-promoting itself and creating a self-fulfilling market mechanism. Carbon insetting can therefore help close the price gap between current and alternative fuels. It reduces or sequesters emissions, thereby achieving a positive impact on communities, landscapes, and ecosystems associated with the shipping value chain.

There are many carriers that want to level their carbon accounting system and would like to use carbon insetting to do this. However, it is important to avoid the problems of carbon offsetting by proving that carbon insetting tokens are a way of genuinely reducing carbon emissions. The tokens must be traceable, scalable, transparent, and easily transferred from one bookkeeping system to another.

To do this, the tokens could be published on a blockchain platform – for example, the one provided by 123Carbon. The platform ensures there is no double counting (i.e. when the token has been used it is ‘destroyed’) and that all the tokens are linked to codes that can be accessed online.

The challenge today is to raise awareness of this idea and create a framework for implementing it in a way that works effectively for energy providers, carriers, forwarders, and shippers. Titan is currently developing a model that is as close to reality as possible, aligns with all relevant standards, is compliant with the most stringent frameworks, and is also usable.

Implemented effectively, such a system presents a practical approach to decarbonisation, as it allows the transfer of environmental benefits by decoupling carbon reduction from specific transport activity and building demand for new fuels at scales that will help reduce upstream costs.