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Accelerating the Energy Transition Episode 3 | Oystein Kalleklev, CEO, Flex LNG

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CHAPTER

The Challenges of Decarbonization

The shipping industry is essentially, in a way, mering the underlying lan g industry. And now layer own to that, we have the de carbonization issue, which is a new challenge for the industry. The problem has been that sistespin price on c o two emissions. So i do think it's possible to get the mission stone, but it has to be done through of market incentives like the carbon tax.

00:00
Speaker 2
Well, thank you for that. We talked a lot about lan g shipping, which was great. And, ah, it's interesting to me that the shipping industry is essentially, in a way, mering the underlying lan g industry, which makes sense. But, and it's been great tus to get your perspective of the last 15 years, how lan g has sort of headed down the path of commoditization. It's still not a commodity, not traded quite like oil, but it's getting further and further along the commoditization path with a lot of issues. And now layer own to that, we have the de carbonization issue, which is a new challenge for the industry. You know, i'll ask you, it sounds like i think i know what you're going to say. You know, my question is, you know, will the industry meet the challenges of decarbonization and continue to thrive? The
Speaker 1
problem has been that sistespin price on c o two emissions. So of course, nobody's bother doing anything with it. Heren no, wherenow they are talking about increasing the c o two tax to around 200 uros per ton, or that, i guess, translateto, let's say 230 dollars per ton. So once you're getting into those kinds of prices, it makes economic sense to do something with it. So they builtalang factory 20 years ago in herry, norway, with carbon capture on the upstream side. They ave had the oyl project for more than 20 yearsarbon capturing the carbon. So the problem has been that doesn't be no price. In europe now, with 60, or let's say, 70 dollars per ton of amission cost, then, you know, you know, smart people are starting to look at this as a business unity rather than a business cost. And and, you know, we do see that there are more people starting to look into carbon capture ona natural gas plant, either through post combustion capture or actually during the combustion face, like the alam felvit cycle. So i do think it's possible to get the mission stone, but it has to be done through of market incentives like the carbon tax. And er, i think sometimes if you're just saying that by 20 50 we need to get our mission stone to cero, what will happen then is the fact that, in relation to shipping, if you're a shipowner, then the easiest way to kind of comply with this requirement is just to stop ordering any more ships. Because, you know, when you're doing a hundred million dollar investment in ships with a technical life of forty years, and you know that this will not comply with asiro missions in 20 50, you're not going o ordering ship. And what you will end up with then is a lot of older, less efficient ship in the market, which would be good for the shipping companies, because less ships in the market means high rates. But i don't think it's a very good way of running it. I think, you know, you need have a predictable carbon tax, maybe, which is increasing every year, in kind of conjunction with the the learning effects from some of these carbon capture projects. So i think it's veasible. But, you know, it's a energy transition. It's not energy switch. So we can't do it just overnight, because shipping is, its a very hard sector to de carbonize, a given kind of the dynamics offa ship.

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