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The shipping industry has been set some tough sustainability targets. Can it achieve them?
Shipping accounts for about 3% of total global emissions and 10% of transport emissions. That’s roughly equivalent to aviation.
But, big difference, shipping transports some 80% of global goods.
The most polluting by-product is sulfur oxide (SOX), a greenhouse gas that results from the burning of bunker fuel in merchant vessels, which in turn represents 7% of all global oil consumption.
The 15 largest vessels produce more SOX than all the world’s cars combined.
The International Maritime Organisation (IMO), the UN body responsible for governing the global shipping industry, has pledged to cut emissions in half by 2050. A huge challenge.
IMO 2020 also challenges the industry to comply with a reduced SOX emission cap, from the current 3.5% to 0.5% by 2020. Shipping companies are now under huge pressure to aim for compliance, but this will not be easy.
Green technology is advancing and more pressure will come from the shipping banks under the recent Poseidon Principles*. These provide a framework for integrating climate considerations into the lending decisions of the ship finance community.
Paul Butterworth, Head of Odgers Berndtson’s Maritime & Shipping Practice, based in London, puts all these pressures into context. “The shipping industry is still to recover from the global financial crisis of 2008. Reduced demand, an oversupply of vessels and a high oil price forced much change and consolidation, particularly in the container shipping market.
“Now, having addressed the problem of oversupply and cargo demand is slowly increasing.”
“Today the biggest challenge facing the industry is emission control.”
“Ships owners will need to comply very quickly with new regulations and also respond to the effect of the Poseidon Principles which will impact upon chartering decisions fairly rapidly”.
Moving to a low-sulfur fuel will add significant costs to vessel operations, which will need to be paid for by someone. That is likely to be the consumer. So, the technology is there to reduce emissions and benefit the planet, but it will come at great cost.
*The Poseidon Principles establish a framework for assessing and disclosing the climate alignment of ship finance portfolios. They set a benchmark for what it means to be a responsible bank in the maritime sector and provide actionable guidance on how to achieve this. poseidonprinciples.org
