Where has the need to decarbonise shipping come from?
CO2 emissions, Carbon Footprints, Global Warming are not new phrases; they have been part of our vocabulary for some time. But now, more than ever, this topic is dominating headlines and influencing consumer and business activity, thanks to changes in social attitudes, shifts in government policy and global economic forums. So as the topic of cleaner shipping and ESG rises up board room agendas, we take the opportunity to provide a summary of the when, who and how across this transformational topic, and how it impacts shipping.
International shipping emits 2-3 percent of global GHG emissions, transporting close to 90% of global trade by volume. To curb the emissions from shipping, The International Maritime Organisation (IMO) have policies and ambitions for greenhouse gas emissions to peak as soon as possible, and to reduce shipping’s total annual GHG emissions by at least 50% by 2050 (compared to 2008 levels). To meet this directive, there are a number of initiatives, both voluntary and regulatory that have been set up to start shifting behaviours.
Several initiatives have been set up to help accelerate and ensure commitment to the GHG reduction targets. Becoming a signatory of any of these initiatives is completely voluntary. For businesses that have taken this step, there are plenty of benefits:
- It demonstrates your business’s commitment to the environmental agenda.
- It evidences that you are actively looking to decarbonise.
- It reassures customers, investors and other stakeholders of your desire to be proactive over and above the enforced regulation.
- It provides the opportunity to get ahead of the approaching regulation and settle into new working routines, rather than having to implement enforced changes at the point where options are running out.
- As a business, you can be part of shaping the solutions that will have global impact.
Sea Cargo Charter (Responsible chartering)
In their own words, The Sea Cargo Charter, or SCC, provides a global framework for aligning chartering activities with responsible environmental behaviour to promote international shipping’s decarbonisation. You can read more about it here. As a signatory, it commits you to assessing and disclosing the climate alignment of ship chartering activities and sets a benchmark for what it means to be a responsible charterer in the maritime sector. Importantly, it also provides actionable guidance on how to achieve them.
Signatories thus far include the likes of Norden, Trafigura, Cargil, ADM, Anglo-America, Bunge, Equinor and Louis Dreyfus amongst others.
Poseidon Principles (Responsible investment lending)
This global framework exists to ensure climate considerations are integrated into financial lending decisions. The principles enable assessing and disclosing the climate alignment of ship finance portfolios, setting a benchmark for what it means to be a responsible bank in the maritime sector. As a result, it enables financial institutions to align their ship finance portfolios with responsible environmental behaviour and incentivise decarbonisation of the industry. You can read more about it here.
Signatories include ABN Amro, Amsterdam Trade Bank, BNP Paribas, Bpifrance, Citi, Credit Suisse, Societe Generale and many more.
Getting to Zero (Responsible next-generation technology)
The ‘Getting to Zero’ Coalition is a powerful alliance made up of maritime, energy, infrastructure and finance sectors, supported by governments and IGOs. It is committed to getting commercially viable deep sea zero emission vessels powered by zero emission fuels into operation by 2030. To make full decarbonisation possible, these new vessels need to start entering the global fleet by 2030, with their numbers to be radically scaled up through the 2030’s and 2040’s. This is also known as maritime’s moon-shot ambition. You can read more about it here.
If the technology doesn’t yet exist, how can the industry start to decarbonise today?
There are a number of short-term measures that can be considered to start lowering your GHG footprint. The Energy Efficiency Design Index (EEDI) looks at the energy efficiency requirements for existing ships, such as speed (or slow steaming) and other technical and operational measures that will help to downturn carbon output. A 10% reduction of in ship speed will lead to a 27% reduction of a ship’s emissions, but that also reduces vessel availability and can impact on the supply/demand balance in the chartering market. The additional emissions of building and operating new ships means that the 27% reduction in emissions, decreases to overall CO2 savings of 19%. In short, this method alone will not be enough to meet the 2030 targets. You can read more on this topic from TransportEnvironment.org.
In July 2021, we are expecting further clarity to emerge around where the accountability lies and what carbon exposure could look like and this will provoke more discussion and debate and the potentially another wave of strategies and initiatives.
The SeaCarbon/ end-to-end digital toolkit enables charterers, vessel owners, analysts and brokers to understand, capture, monitor and report on the carbon output across shipping activity. With the right technology, embedded into your day-to-day operations, you will have the tools you need to make cleaner shipping decisions and ensure the IMO targets can be met. You can read more about the SeaCarbon offering here.
If you are ready to talk to a member of our team about how a digital calculation and reporting tool could work for you, then please submit and complete the form below. Alternatively, if you are needing more guidance on your wider shipping strategy then we are pleased to direct you towards the Clarksons Green Transition team who can provide a consultative service across the full group offering.