The Problems
The problems our clients and the world in general faces - UNDER DEVELOPMENT
Summary - The world is demanding change, faster than some shipowners might believe. The maritime industry is responsible for about 3% of all greenhouse gasses emitted in the world, a portion which is equal to Germany. Something that might be worse than greenhouse gases however, is the burning of Heavy Fuel Oil (HFO) by the industry. This is one of the biggest pollutant known to man and is basically heated tar with - sometimes - chemical waste added which is burned in international waters. Why do we do this? Because it is the cheapest way to move our ships around and get rid of what otherwise be a refining waste product.
Some shipowners (and cargo owners) recognize this issue and are tackling it head on. Most however put their head in the sand and wait for a solution to come by, or for it all to blow over. Why is this? This article dives into the economic, societal and technical issues that we currently face in the maritime industry, but also more general in our quest to make the world a more sustainable place.
The problems the world (and especially maritime industry) faces
Burning that bunker oil ensures that international shipping annually pumps as many greenhouse gases into the air as the whole of Germany. The sector accounts for about 3 percent of global emissions – more than one billion tons of CO2 per year. The Swiss container shipping company MSC is in the top ten of European companies with the highest emissions, along with eight coal-fired power stations and Ryanair.
But while many countries are reducing their emissions in a variety of sectors – and are making stricter agreements again this week at the climate summit in Glasgow to achieve that – it is expected that the emissions from international shipping will at best remain the same or in the worst case scenario. worst-case scenario, hold on, will increase by 50 percent over the next thirty years.
90 percent of all our stuff is brought to us by sea container. There would be no mass consumption without container shipping.
But international shipping, like aviation, is not explicitly mentioned in the agreement. That in itself is not so surprising, when you consider that the agreement obliges countries to reduce their emissions. The cross-border sectors of aviation and shipping are difficult to fit into that model. For example, in which country do you 'count' the emissions of a Panamanian container ship that transports goods from Shanghai to Rotterdam? Are those emissions accounted for by China? The Netherlands? Panama?
The IMO aims for a CO2 reduction of 50 percent by 2050.
Another thing: the IMO has made an energy label for ships mandatory. If you have a C-label, your ship is efficient enough to meet the IMO guidelines for 2030. If you get a D, E, or F, you need to make a plan to make your ship more energy efficient. Only: there are no consequences if you fail again the following year. Then you just make another plan. Whether you do it or not, no rooster crows at it. Asked about this, the IMO says it "encourages governments, port authorities and other stakeholders to reward ships with an A or B rating."
In total, a quarter of the delegation members in the IMO come from the shipping industry. Not only the Head of Delegation is allowed to speak in IMO meetings – all members are allowed to do so. In this way, the industry can also speak on behalf of a country. About a third of the countries are represented in this way by shipping interests. Extreme example: the Cook Islands. For years they have been represented in the IMO by Captain Ian Finley. A Briton, who simply lives in England and has little to do with the Pacific archipelago, but who was paid at least $700,000 in the past decade by an American shipping lobby group. Critics say he has frustrated more ambitious climate plans for decades.
As a ship owner you are free to register your ship under any flag you want. As a Dutch owner of a ship that was built in the Philippines and sails up and down between China and the US, you can choose to register your ship in, say, Panama. Why would you do that? Because a number of countries, including Panama, have a lot less requirements and lower taxes on ships that sail under their flag. This is called flags of convenience: countries make money by registering ships under their flag, in exchange for lax regulations. For example, 50 percent of the global fleet is on paper owned by just five flag states: Panama, the Marshall Islands, Liberia, Hong Kong and Singapore.
Shipping is the mainstay of our economy – the engine that drives world trade. And that is precisely why it is perhaps not so surprising that shipping is emerging from the climate dance. Because nobody wants to mess up that engine.
It's too simple to dismiss the shipping companies as the bad guys who just don't feel like contributing anything to the livability of the planet. They are part of a system in which everyone – including in the Netherlands – participates. A system in which clothing has become a disposable product, in which fish from the North Sea in China is filleted before it ends up in Dutch supermarkets, in which we can eat mangoes all year round, and in which we buy things because they are 'only a euro' . If shipping is always seen only as a cost center, the euro will rule in all decisions of these companies. All this is only possible if transport by sea is dirt cheap. And in recent years, shipping companies have faced cutthroat competition, razor-thin margins and huge debts to build larger ships. A race to the bottom for the benefit of the western consumer who wants to buy a lot and especially cheap. How often do you buy something with free shipping yourself because you don't feel like paying extra for transport? If shipping is always seen only as a cost center, the euro will rule in all decisions of these companies.
This mindset is reflected in the IMO's climate decisions. The measures that do come through are measures that benefit the climate and the wallet of the sector – so that our consumer society can continue to run at full speed. In a system where consumers and businesses have each other in a deadly hold for the planet, there is only one solution: policy. And if the IMO doesn't, then the EU. This summer, the European Commission presented a package of new legislative proposals to make shipping more sustainable, for example through an emissions trading system and a tax on bunker oil. There is much to criticize about that package – and we will do that in upcoming articles – but the fact is: the EU is doing something at least.
In addition the EU, since Biden’s administration the US is now also actively seeking to diminish emissions for shipping (add link).
But that is not enough. The low level of ambition of the IMO has consequences for all of us. If we want to keep global warming below 2 degrees, it cannot be the case that this sector will be out of the woods. Imagine the year 2050. The EU is zero-emission and fully circular. In the Dutch household book, our greenhouse gas emissions are virtually zero. And 30,000 sea-going vessels moor in the port of Rotterdam every year, which supply 90 percent of our equipment and together emit a billion tons of CO2.
The problems shipowners face
Shipowners are facing many challenges at the moment. Clients, employees, the entire world is demanding them to become more ‘sustainable’. But what impact will this have on ship operations? Even for those working on the problem - like us - this is unclear.
Shipowners struggle with new rules and regulations on emissions, which are complex and hard to understand. Fit for 55. Carbon Tax. Determining how this will impact operations is difficult if not impossible for most shipowners. Help is usually extremely costly, and still takes up a lot of a shipowner’s time.
Shipowners (and companies) struggle with all the technology options and measures available to reduce emissions. Alternative Fuels. Hydrogen. Batteries. The list goes on. To determine which one is most cost-effective and has the least amount of risk is hard to determine, and takes up a lot of a shipowner’s time. Determining how this will impact operations is difficult if not impossible for most shipowners. Help is usually extremely costly, and still takes up a lot of a shipowner’s time. The potential and the best business case is hard to quantify.
Client requires further carbon emission reduction measures. It is clients asking for further emissions reduction measures and young talent demanding for your company to become more sustainable. Client says he needs to become more sustainable. He has no advisor and no clue on how to do that.
Young talent demand more sustainability and are not attracted to company.
Individuals inside certain companies looking for a connection to a sustainable community.
Shipowners simply want to focus on their work. For most, sustainability is not top of mind. Most of them lack time, resources, the manpower or an expensive sustainability advisor. They just want to focus on their operational tasks and not worry about sustainability. The bottom lime? Most shipowners have no money, no time, no clarity for all matters related to sustainability.
How this makes shipowners feel
Angry
Frustrated
Confused
Powerless
Sad
Individuals inside certain companies looking for a connection to a sustainable community
The moral issue
Good vs. Evil - sustainable is good, polluting is evil.
We have the moral obligation to act, the world is going to hell in a handbasket.
Am I as a shipowner still doing the good thing?
Trying to make the world a better place, The impact of the offshore industry is bad on the Earth
References
Impact Investor - Why investors are increasingly betting on greening the maritime fleet
De Correspondent - Deze ronkende motor van de wereldeconomie ontbreekt in alle klimaatplannen
McKinsey - Green corridors: A lane for zero-carbon shipping
DNV - Fit for 55 new EU GHG regulations for ships coming soon