Kazura Koda On Decarbonizing The Shipping Industry

Introduction

Eugene Zamastsyanin (00:00):

How can you become the adopter of engineered solutions as an early adopter? When people just starting to learn about it, you already are acquiring this.

Kazura Koda (00:09):

Hard-to-abate sector is the one who will need CDR the most. And we thought “You know, we have to we have to start working for supporting CDR market to grow.” Rather than being a free rider, just to wait and buy the cheap DAC credit in 2050.

Eugene Zamastsyanin (00:40):

Good day. I am Eugene Zamastsyanin, Director Commercial for 1PointFive. And today we're joined by Miss Kazura Koda, General Manager of Mitsui O.S.K Lines, Carbon Desk.

Kazura Koda (00:52):

I've been working for MOL for over 12 years now, and the majority of my career has been focused on shipping and transporting our energy, focusing on liquefied natural gas.

Carbon Challenges in Shipping

Eugene Zamastsyanin (01:05):

When people think about shipping, I guess if I remember correctly, it's 3 to 4% roughly of total emissions globally. So not something to sneeze at. So this is a big number. And it's notoriously infamous for being very slow to decarbonize. It’s a big ship, no pun intended. What are the key challenges here?

Kazura Koda (01:27):

So there are around 50,000 ships engaged in international maritime trade, which emit around 7 million tonnes of CO2 annually. This is almost equivalent to 2% emissions. 3-4, but currently 2%. And this is almost the same size as the emission of Germany. And we have a huge emission even now. But due to the growth of international commerce, we expect the international maritime trade could be triple in 2050 compared to the level of 2019.

Kazura Koda (02:04):

So we still see ambitious decarbonization. I think, you know, our emission from international shipping could undermine the global effort to meet the Paris Agreement target. So we need really, really ambitious decarbonization actions.

Reaching Net Zero

Eugene Zamastsyanin (02:24):

So maybe in this spirit of talking about changes and challenges, maybe you can touch on—IMO had a watershed moment, I think. When was that, June? Early July. So MEPC 80 (Marine Environment Protection Committee). It is not a policy, it is a strategy and it's a guiding principle right now. But maybe a simple question: does it give you great expectation that something is going to happen soon, and the growth that you expect then will be matched with a growing ambition in decarbonization of the industry?

Kazura Koda (03:05):

The shipping industry has been somehow lagging behind in terms of climate action for a long time because we have a lot of stakeholders, and really hard to agree on something. But this summer we have IMO’s revised strategy for emission reduction and now we have their industry wide target to achieve net zero.

Kazura Koda (03:30):

So we, MOL, we have net-zero 2050 target already set two years ago. And we also have short-to-midterm milestones that are already in line with the industry's new target. So we are, you know, the industry’s somehow catching up to our activities and I think we are going in a right direction.

MOL’s CDR Strategy

Eugene Zamastsyanin (03:56):

Well, it's a great position to be a leader in the industry. So maybe just pivoting a little bit from the industry to MOL itself: I believe May, this year, late May, you published the MOL Group’s Environmental Strategy 2.2. What were the major evolution steps in the strategy from 1.0 to where you are right now with 2.2?

Eugene Zamastsyanin (04:21):

And by the way, like, stellar document, I love to show it to other people as an example of what the strategy looks like, especially page 28, I think, that’s about the CDRs.

Kazura Koda (04:32):

When we started our journey, we were just actually following the industrial regulation, meaning we are just aiming to achieve net zero within this century. But after the Paris Agreement agreed, in the Paris Agreement alliances, our customer is moving gradually towards decarbonization. At the time, shipping was outside of the Paris strategy. But we are aware unless we cope with the higher ambition of Paris targets, we will not be chosen by our customers.

Kazura Koda (05:07):

So, with that recognition, we set net-zero 2050 target in 2021. So due to the hard-to-abate nature of the industry, we expect there may be some residual emission. Around 10% of the current level, even in 2050. So, we need CDR. But when we started our journey, we didn't know what kind of solution we could seek, but at least we decided, you know, we will not wait for 2050, someone to sell CDR, but we have to work with our stakeholders to create this market itself.

Kazura Koda (05:46):

So, in this, you know, updated version, Environmental Vision 2.2, we didn't change our net zero target year, but we put additional milestones, including CDR commitment. So, we now target to retire 2.2 million tons of CDR credit by 2030, in hope we are sending a proper demand signal to the market.

Why Take Action

Eugene Zamastsyanin (06:12):

Right now, we see a lot of companies that we talk to who are afraid to take action. They don't know what the solution is and they're just kind of paralyzed by this fear that whatever they pick is going to be maybe deemed wrong at some point in time. And so they just pause and step back without doing anything.

Eugene Zamastsyanin (06:29):

So ,when somebody kind of steps up and says, “we don't know what exactly the answer is, but we're going to do at least something, we're going to start moving things forward,” you take a lot of risk with that.

Kazura Koda (06:40):

We thought we have to do, you know, more ambitious action, not only reducing our emission, but also, we have to contribute to the societal, you know, mitigation actions. Then we thought, you know, our focus on CDR could fit into that purpose. You know, supporting CDR can be, you know, part of our beyond value chain mitigation, which is a new norm for sustainability agenda.

Kazura Koda (07:11):

So somehow, we are taking risks, but at the same time we are sure this is the right path companies have to take.

The Future of Carbon Reduction

Eugene Zamastsyanin (07:20):

So de-risking by taking a risk. This is great. I really appreciate this, this is a really great answer. What are you looking at? What are the decarbonization pathways that you're kind of following or maybe highlighting here? And so that's through 2050. And then maybe just kind of as a snippet of that, what does it look like in the next several years?

Kazura Koda (07:43):

We actually have a net zero pathway, and the majority of our reduction come from the introduction of energy efficiency measures. We are highly focusing on the usage of wind power, and another large part come from switching to cleaner fuels. In the long term, we will completely switch to ammonia or hydrogen or any other net zero fuels.

Kazura Koda (08:11):

So for the short term, we have several milestones such as introducing liquefied natural gas fueled vessels. And we also have absolute GHG emission reduction targets as well. We also commit to use net-zero fuel, among at least 5% of whole energy usages. So, those are really ambitious targets.

Kazura Koda (08:44):

But as a company we have 2035 target, since that is the more realistic timing. We can have cleaner fuels, ammonia or hydrogen. Towards that pathway, we cannot force the supplier to produce clean fuel, but we have to proactively create the supply chain to scale up the clean fuel, which will be the majority of our decarbonization action.

Kazura Koda (09:18):

So, we are actually working closely with suppliers to create the supply chain and expand our value chain sales. So, this can be a challenge, but can be our business opportunities as well.

Using Innovative Green Technology

Eugene Zamastsyanin (09:35):

You mentioned the wind power. I think I read recently you're running a trial on Lake Biwa. I was passing, I was looking, I didn’t see it unfortunately—

Kazura Koda (09:44):

It’s actually our hydrogen production.

Eugene Zamastsyanin (09:46):

Is it hydrogen? Ah, okay.

Kazura Koda (09:47):

So now we are using wind power for reducing the emission from our existing vessels. Using that mechanism, we are actually creating the hydrogen on ship, without using any real powers.

Eugene Zamastsyanin (10:01):

So eventually you are thinking potentially it is going to be a vessel that will be traveling on the fuel created as it travels on that same vessel.

Kazura Koda (10:09):

Yeah, it's a very ambitious target, but we are doing that.

Why Become An Early Adopter

Eugene Zamastsyanin (10:13):

That’s really creative. A very important question for us, really, is that how can you become the adopter of engineered solutions? As, like, an early adopter. When people are just starting to learn about it, you already are acquiring this.

Kazura Koda (10:28):

When we started the journey for CDR, we firstly focus on nature-based solutions and participated in the Blue Carbon Project, which is to restore mangrove ecosystem in Indonesia. We think nature-based solution is really important and we wish to support more for the sake of creating societal co-benefits, such as protecting biodiversity and improving the livelihood for the local people.

Kazura Koda (10:56):

But the more we study about CDR, the more we recognize the importance. So tech-based solutions fell, because according to IPCC, we need CDR, around 10 gigatonnes as a median target. And I don't think nature-based solutions alone can satisfy such demand. And for that purpose, take risk solutions have to go to fill the gap.

Kazura Koda (11:29):

Then, you know, the hard-to-abate sector is the one who needs CDR the most. And we thought, you know, we have to start working for supporting CDR market to grow rather than being a free rider just to wait and buy the cheap DAC credit in 2050.

Advice On CDR Adoption

Eugene Zamastsyanin (11:51):

It very much aligns with how we think about it and why tech-based removals are actually critical for the industry. And it's really great to see that people are not waiting on the sidelines until it develops, but rather just go in early on and support that industry growth. So that's… thank you very much for that, for sure. If you were approached right now by a company, Japanese or otherwise, keen to get going in the decarbonization towards like CDR space, what would be the recommendation or advice that you would give them?

Kazura Koda (12:26):

Yeah. So aim high is a very important thing. But saying that is very easy. How to incorporate the strategy into, you know, us, how do we incorporate that ambition into the strategy is the most difficult part, I guess. But net-zero target itself is the industry alone, and you cannot distinguish if you need CDR in the future, unless you start building the relationship with stakeholders in this space, you cannot just enter into the market in 2050 and just buy.

Kazura Koda (13:09):

So you have to nurture that relationship with players and stakeholders and build trust. In that way you can have a great presence in this market that can be really significant impact in the future from it as well.

What Motivates You?

Eugene Zamastsyanin (13:28):

I love what I do, and I love talking about this. So maybe if you can share something, like, what really motivates you in this space?

Kazura Koda (13:36):

Yeah. I'm also passionate about the CDR field, especially because I love solving a very, very difficult problem. We need CDR not only for 2050 but also for this century to remove the historical emission. And I do really care about the future generations thinking about my future kids. And we have to take action now.

Kazura Koda (14:01):

Otherwise they will suffer a lot in the future. So working for CDR is really exciting now only because this is difficult, but this can be doable with a lot of collective action.