Breaking the bottleneck
The Rhine is a microcosm of the climate challenges facing Europe and other parts of the world.
The river is a crucial 800-mile transport artery stretching through the centre of Germany from the Alps to the North Sea. The world’s largest integrated industrial complexes depend on the Rhine, to feed their factories with energy and raw materials, and to ferry away finished products to end markets throughout northwest Europe.
Two of Germany’s thermal coal plants (accounting for ~4% of the country’s thermal coal generation capacity) are also situated on the Rhine and rely on the river for deliveries. Overall, between 20% and 30% of fossil fuels and refined products transported in Germany are shipped on it’s inland waterways, of which over 80% takes place on the Rhine (see High and dry: Drought threatens Germany's plan to burn more coal).
In recent years the waterway has suffered severe droughts, culminating in frequent restrictions on the barges that carry the raw materials, and even the closure of the transit route at times. Industries that rely on the Rhine are seeking to mitigate the impact on their operations, yet simultaneously they must also invest in the technology necessary to decarbonise the waterway. Adding to the uncertainty many firms are questioning their long-term future in the Rhine-Ruhr, Germany’s industrial heartland, as high energy prices and overburdensome regulations curb their ability to compete with global competitors.
The critical section of the Rhine is a place called Kaub. Here the river snakes through much of Germany’s industrial heartland, and where the most important water measuring station is located. The Rhine typically sees its lowest water levels during October and November. This year, the navigation channel depth at Kaub is forecast to reach the 1.9cm critical level over the next couple of weeks. A lack of normal autumnal rainfall means that water levels are well below levels seen last year, or indeed the 5-year average.
The last time this level was breached decisively was in July/August 2022, towards the end of a prolonged drought. If the water level declines too much then barges may have to lighten their load to prevent the propellers from hitting the river bottom. In an extreme scenario, one that is becoming more frequent, shipping at this crucial section of the waterway can come to a stop completely.
Low water levels on the Rhine can have a significant adverse impact on the German economy. Research published in 2020 by the Kiel Institute for the World Economy revealed that 30 days of low water levels led to a 25% decline in transportation volume on the river and a 1% fall in German industrial production. Overall, the analysts estimated that a 1% decline in shipping volume along the Rhine has historically led to a 0.04% drop in German industrial production. The results also need to be considered in the context that European supply chains are often tightly woven into Germany’s industrial heartland. Disruption in the Rhine can often spiral into delays elsewhere on the continent.1
The research was carried out in response to the 2018 drought in which low water levels on the Rhine severely disrupted shipping volumes, shaving 0.4% from Germany’s GDP. In the aftermath, industries located along the Rhine sought to mitigate the risk of future disruption, including relying on road and rail transport, while also ensuring that inventories can cover a longer period of disruption. These measures do not come cheap. Transporting bulk products by road or rail is costly and also results in higher emissions - one barge is roughly equivalent to 100 extra trucks on the road. There’s also no guarantee that road and rail transport will be free of disruption either. Shortages of lorry drivers, and strikes by railway operators may also result in delays.
Companies are experimenting with options that enable them to continue to use the Rhine, while mitigating the risk of disruption in the event that water levels drop too low. Smaller boats able to traverse the river, even when water levels are very low, have been employed by some companies. However, these typically suffer from poor economies of scale relative to traditional barges that can carry much larger freight volumes.
Technological solutions are also coming to the rescue, but they take time to enter the marketplace, and even then will only be available to those companies most willing to pay for them. In May 2023, BASF launched the Stolt Ludwigshafen. Costing over €10 million, the vessel is about 50% broader than conventional barges, enabling it to navigate low water levels of the kind often seen near Kaub. Using a combination of electric and diesel engines, the barge and others like it using the same propulsion technology, emits around one-third less carbon dioxide than a conventional barge.
Longer-term the aim is to cut shipping emissions to zero using hydrogen powered barges. For example, Covestro and NPRC, a logistics service provider plan to convert the salt transport fleet (salt is one of Covestro’s most important raw materials) from diesel to hydrogen. Initially each vessel will be fuelled by hydrogen produced as a by-product of Covestro’s operations, before eventually being powered by green hydrogen, saving up to 1,000 tonnes of carbon versus diesel fuelled barges. The project is part of the RH2INE Initiative (Rhine Hydrogen Integration Network of Excellence), founded on the idea of using hydrogen to establish a net zero transport route along the inland waterways of central Europe. The partnership aim to have two vessels in operation by 2024, with plans to expand it to 280 by 2030 (see A volatile gas: Hydrogen's latest hype cycle still suffers from overinflated expectations).2
In the same way that Germany’s industrial heartland is a prisoner of its natural geography, manufacturers are also captive to past geopolitical and economic decisions. In particular, the one to locate their factories next to a network of natural gas pipelines stretching to Russia in the east. In the aftermath of last years energy crisis, and when the future of Germany’s energy intensive industrial base continues to be uncertain, it is difficult to justify the expense involved in rolling out these vessels. Even senior management of BASF itself have expressed that they want to reorientate their business towards those countries where energy prices are cheaper, where less onerous regulations exist, and towards those economies still experiencing rapid growth in chemical demand (see Is permanent deindustrialisation of Europe still a tail risk?).
Water scarcity is often the point at which climate change hits home. The Rhine is a prime example of where the ‘energy-carbon-water’ nexus is now colliding. Resolving it is vital if net zero is to be achieved, not just for the industries located next to the river, but for the whole of Europe too.
https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/Saskia_Moesle/KWP_2155_low_water_econ_activity.pdf
Inland water transport is unlikely to come under the EU ETS (due to start in 2024), or FuelEU Maritime (due to start in 2025), as both sets of legislation only apply to vessels over 5,000 gross tonnes. The average loading capacity or deadweight of a vessel in the Rhine fleet was around 1,500 tonnes in 2020 https://inland-navigation-market.org/chapitre/6-cargo-fleets/?lang=en