Tuesday, December 1, 2015

Women in Shipping Address the Cost of Ocean Freight Emissions

Forum Debates Retrofit Technology and More
Shipping News Feature
UK – WORLDWIDE – With pollution and climate change firmly on the agenda at the moment as we see Paris hosting COP21, the 2015 United Nations Climate Change Conference, one freight transport associated group has been looking closely at shipping emissions, from cause and effect to solutions. The Women in Shipping and Trade Association (WISTA) forum last week called upon three different, highly informative speakers to set the scene for a debate on what is a tricky topic, but one which needs continual observation and reaction from the maritime cargo community.

The opening speaker was David Donnelly, a partner at accountancy firm Mazars who drew on his experience in the field of energy efficiency in buildings and addressed how techniques could be transferred across into the maritime sector. He concentrated on the necessity for retrofitting of more advanced technology to be cost effective, pointing out that whereas in systems such as insulation and lighting the cost and ease of retrofitting might automatically justify this, fitting and monitoring the value in the maritime environment might be much more tricky.

Donnelly said that, similar to real estate, it may be difficult for the maritime sector to make a financial case for some energy-efficiency technologies as the shipowner usually has to pay for the retrofit but it is the charterer that makes all the savings. This means that the relationship between the owner and charterer will need to change, with a revision to charter rates and charter party agreements the likely way forward if the industry is to fully embrace clean shipping.

Whilst there is often a corporate social responsibility or corporate goodwill element involved in making the effort to generate worthwhile change, Donnelly insisted that for real change to happen there need to be financial incentives or a legal obligation to progress.

Phoebe Lewis spoke for the Carbon War Room and emphasised the significant energy-efficient technologies available to the shipping industry, which could give real financial savings to both charterers and shipowners. She also explained that adapting the ESCO (Energy Service Company) or MESA (Managed Energy Service Agreement) model could offer an innovative way to finance ship retrofits.

The Carbon War Room, co-founded by Richard Branson amongst others, dedicates its efforts toward reducing carbon emissions through business solutions and its ‘Self-Financing Fuel-Saving Mechanism’ (SFFSM) also allows financiers take on the upfront cost of a group of technologies with repayment coming via fuel savings. By reducing stoppage to just one dry docking per vessel and arranging several technical retrofits simultaneously, collectively worth 10-15% savings, the financer can recoup their consequently lower upfront expenses more quickly.

The industry itself has undertaken some great initiatives with the RightShip Greenhouse Gas (GHG) Emissions Rating scheme, a systematic and transparent framework for comparing the relative efficiency of the world's existing shipping fleet. Based on this rating, charterers representing 20% of global shipped tonnage have implemented policies in which they refuse to charter inefficient vessels, commonly F and G rated vessels.

Other financial incentives are entering the industry. The Port of Prince Rupert and Port Metro Vancouver became the first ports in the world to offer discounted harbour dues to the most efficient vessels calling on their ports based on various environmental ratings. Port of Rotterdam has also expressed interest in looking at this.

Krispen Atkinson, Principal Maritime Analyst at IHS then addressed the subject from an industry perspective. The key forces behind the changes, he said, are being driven by the UN on the IMO. The growth of Emission Control Areas (ECAs) will force more ships to comply with fines for transgressors set to grow. There is conjecture as to whether the global sulphur cap of 0.5% will happen in 2020 or if it will be delayed. Atkinson felt there was a shelf life for the bespoke retrofits with inbuilt technology for newbuilds incorporated in the original designs. He ended by asking the meeting to consider future fuels with methanol, biofuels, hydrogen and batteries all being talked about.

The forum ended with questions from the floor on subjects ranging from mandatory versus voluntary requirements and incentives and the adaptation of industry finance models. As the Carbon War Room recently pointed out, if international shipping were a country, it would sit between Japan and Germany as the 6th largest contributor to global CO2 emissions.