Shipping Industry and Decarbonisation

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Climate Stability and the gradual neutralization of the global economy carbon footprint is considered the greatest challenge of all times. The repercussions of not acting effectively in this front can be catastrophic while any impact to the global economy is expected to be detrimental, irrespective of the prevailing scenario. No sector can be left out of this struggle despite any difficulties and particularities. This evidently applies to Shipping and even though and the International Maritime Organization (IMO), has already developed and agreed on a strategy to reduce Greenhouse Gas (GHG) emissions from vessels serving the global trades. According to findings in the Fourth GHG Study: “The greenhouse gas emissions of shipping increased from 977 million tonnes (Mt) in 2012 to 1,076 Mt in 2018, a 9.6% rise. Over this period the carbon intensity of shipping operations improved by about 11%, but these efficiency gains were outstripped by growth in activity”.

Within this decade shipping will need to tangibly face this challenge in the context of quite ambitious regulatory action already crystallized to the Fourth IMO GHG study,  along with a set of measures approved by MPEC 75, pending adoption by MEPC 76. Those measures, especially the amended EEDI, as well as Energy Efficiency Existing Ship Index (EEXI), Carbon Intensity Indicator rating (CII) and the enhanced Ship Energy Efficiency Management Plan (SEEMP) will be implemented within the forthcoming years.  However, further unilateral action on different geographies like the amendment of the EU Monitoring, Reporting, Verification (MRV) Directive and the introduction of Emissions Trading Schemes are to follow…

Immediate, decisive action and response will be critical to a smoother transition and much will depend on the uptake of technology for new vessels, but also the degree of compliance that the existing fleet will be in a position to attain.

Governments and regulators globally, realize the magnitude of the challenge and have already inclined their policies to the support of this effort with financial and other incentives being put in place. The nature and size of this require the blend of private, institutional and public efforts. In this context informed and targeted private initiatives will be key to the swift roll out of the global transition.

Such an initiative could comprise the formation of climate shipping funds. Such funds will aim to produce positive cashflows from three main sources. Energy efficiency and the resulting saving stemming from the wider application of proven technologies, carbon taxation and savings which will come as result of horizontal pricing of carbon emissions and finally the element of asset value, which is linked to the climate profile and forward expectations.

It seems essential to underline in this instance that shipping has been unable to attract capital for more than a decade. A number of factors like unstable markets, new financing regulation and the environmental regulatory landscape add to this uncertainty. Unfortunately, the situation will further aggravate before any improvement can be expected, when more unstable factors will be crystallizing. It is however added that investment in shipping technology solutions retrofit or incremental environmental performance have traditionally presented return on investment substantially higher than shipping itself. The uptake of scrubber retrofits as well as efficiency solutions support this claim.

In an environment where leverage of private funds will be combined with public investment, but also compensating measures on carbon emissions, presenting a comprehensive, credible advantageous proposition to financial players will be fundamental in attracting funding.

In depth understanding of the shipping particularities, but also the opportunities and similarities of shipping projects, marine technology expertise integrated with scale could unlock potential of added value and returns.

Watermelon Consulting works to form a holistic holistic turnkey solution. It will entail the integration of scale and synergy in the shipping climate endeavor and will include all relevant stakeholders.