New ways for shipping ready for 2030

Are cargo owners doing enough to drive change?

Prototype of new vessels

As we contemplate the impending changes in the maritime industry, the critical question emerges: Who will steer the transformation? In this analysis, Splash delves into the actions taken by customers, shedding light on the forces driving change.

Khalid Hashim, the seasoned managing director of Thai-listed dry bulk owner Precious Shipping, advocates a multifaceted approach to accelerate the green transition in shipping. He proposes three key regulations: first, the implementation of a carbon tax; second, an abrupt halt to the construction of fuel-burning ships by shipyards on or after January 1, 2030; and lastly, a stringent deadline for the scrapping of ships aged 20 years or older by January 1, 2035. This regulatory trifecta, Hashim argues, would provide much-needed clarity for shipyards, owners, charterers, and end consumers, establishing firm and unequivocal deadlines. It would also incentivize charterers to enter into long-term contracts with owners who have invested in zero-emission vessels (ZEVs). Moreover, it would encourage cargo users to incorporate the cost of “green” shipping services into their operations and pass it on to their end consumers.

While a handful of charterers in 2023 are taking noteworthy steps, such as investing in vessels with wind-assisted propulsion or alternative fuels, the scale of such green investments remains insufficient to meet the heightened environmental objectives of the shipping industry.

The magnitude of the challenge becomes evident when examining the latest annual report from signatories to the Sea Cargo Charter, a global framework for assessing and disclosing the climate alignment of chartering activities. Major shippers like Cargill, Trafigura, Bunge, and Shell are among its members. The report, published in June and covering data for 2022, revealed that emissions showed no improvement compared to the figures for 2021.

Mikael Skov, CEO of Hafnia, the world’s largest product tanker owner, emphasizes the urgency of the situation: “Time is running out, and 2050 is approaching rapidly, but the required actions are incredibly complex to overcome.”

According to new analysis from a UK consultancy, even under the lowest ambition interpretation of the International Maritime Organization’s new greenhouse gas (GHG) strategy, the GHG intensity of an average ship will need to be reduced by 86% by 2040.

Skov underscores the pivotal role played by charterers in making the economics work. He points out that without long-term contracts to support the costs of new fuel technologies, most owners would be reluctant to take on the financial risk associated with adopting future fuel technology, especially given the already high costs of vessels.

Patrick Ryan, Chief Technology Officer at ABS, asserts that economic factors and societal pressures to reduce emissions will be the driving forces behind change. For consumer-facing trades, shippers will lead the transformation due to pressure from their customers. In contrast, for bulk commodity shippers, the impetus will come from investors and stakeholders, as they will need to meet ESG (Environmental, Social, and Governance) requirements to secure financing.

Heidi Heseltine, CEO of Halcyon Recruitment, echoes this perspective, noting that major retail chains like Amazon and Ikea, under increasing pressure to demonstrate commitment to environmental and human sustainability, are setting a precedent for the broader shipping industry.

Yeontae Kim, Executive Vice President of Korean Register’s technical division, emphasizes that cargo owners are increasingly inclined to enhance their ESG management, triggering a ripple effect throughout the industry. Consumer concerns about global warming are also exerting a significant influence.

Peter Jameson from Boston Consulting Group argues that establishing new chartering and ownership frameworks can democratize access to green assets and create a level playing field for organizations of all sizes. He also contends that supply-demand partnerships related to fuel sourcing are essential to distribute the risk associated with establishing green fuel production across the value chain.

In conclusion, all stakeholders in the value chain have crucial roles to play in achieving the estimated $2.3 trillion needed to decarbonize shipping by 2050. Addressing the challenges and opportunities ahead, it becomes evident that comprehensive participation and collaboration are essential for a successful transition.

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