Climate change challenge conference, Kastrup, November 22, 2017 How can low carbon shipping become highly profitable? René Taudal Poulsen
Green technologies are available but where is the business case? Shin-Aitoku Maru, 1980 2
Why should a ship-owner care about CO 2? Cost driver Reducing bunker costs Complying with regulation Shipper The shipping industry is doing what society expects from it Society s expectations Port Investor NGO Transparency can strenghten the green business case 3
Today s focus Cost driver Reducing bunker costs Complying with regulation Shipper The shipping industry is doing what society expects from it Society s expectations Port Investor NGO Transparency can strenghten the green business case 4
Learning from the history of shipping
Annual quantity of oil spills, 1970-2011 Source: IMO 2012, International Shipping Facts and Figures Information Resources on Trade, Safety, Security, Environment Note: Oil spills over 7 tons 6
Transparency and green business case Branded cargo-owners reputational concerns can be a significant driver for environmental upgrading in shipping --------------- Transparency on environmental performance will strenghten the green shipping business case Exxon Valdez grounding, Alaska, 1989 7
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Society s expectations Port Investor NGO 8
Mandatory SEEMP IMO Ship Energy Efficiency Management Plan (SEEMP) the ideal: Real-time energy consumption data Extensive energy sub-metering Long time series on consumption Continuity in terms of organizational and human resources Planning Implementing Evaluating Monitoring 9
Information on ships fuel consumption is lacking Data reporting to shore Crew incentives for misreporting of consumption data Communication between ship and shore over long distances is difficult Lack of trust between ship and shore regarding data quality Onboard data collection Lack of real-time data Lack of sub-metering Uncertainty in manual data collection procedures Lack of crew training for data collection Uncertainty re. crew engagement in data collection Uncertainty re. bunker supplies Feedback to ship Little or no feedback from shore to ship Shore staff incentives for data misreporting Training seminars not for crews employed by third party managers Low crew retention causes discontinuities Onshore data analysis Considerable noise in data Difficulties identifying best practice due to data quality concerns Lack of resources and competencies for data analysis Lack of baselines for vessels on short term charters Source: René Taudal Poulsen and Hannes Johnson, 2016. The logic of business vs. the logic of energy management practice: understanding the choices and effects of energy consumption monitoring systems in shipping companies, Journal of Cleaner Production, 112 (5), 3785-3797
Pressures to improve Cost driver Reducing bunker costs Complying with regulation SEEMP is not effective MRV might improve transparency Shipper Society s expectations Port Investor NGO 11
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Society s expectations Port Investor NGO 12
Different shipper Dry bulk Tanker Container Source: René Taudal Poulsen, Stefano Ponte and Jane Lister, 2016. Buyer-driven greening? Cargo-owners and environmental upgrading in maritime shipping, Geoforum, 68 (January), 57-68 13
Shipping eco-rating schemes Clean Shipping Index (Clean Shipping Initiative) Clean Cargo Working Group Environmental Ship Index (World Ports Climate Initiative) Green Award (Green Award Foundation) Existing Vessel Design Index (Rightship and shippingefficiency.org) BetterFleet (Shippingefficiency.org) 14
Eco-ratings can enhance transparency and strengthen the green business case Ideals for eco-rating schemes Dimension Criteria An eco-rating scheme shall be universally recognized and avoid overlaps with Design Universality other schemes Transparency allow for environmental benchmarking of a service Governance Legitimacy enjoy widespread stakeholder support Credibility be subject to third party data verification Source: René Taudal Poulsen, Roberto Rivas Hermann and Carla K. Smink, 2018. Do eco-rating schemes improve the environmental performance of ships?, Marine Policy. 87 (January): 94-103. 15
Four examples of eco-rated vessels Name of vessel BW Lioness Gijon Knutsen Maran Arete Kazimah III IMO number 9675509 9313527 9776547 9329693 Ship type Chemical tanker Shuttle tanker Very large crude carrier Very large crude carrier DWT 49,999 35,144 319,398 317,250 Built 2014 2006 2016 2006 ESI score (on a scale from 0 to 100) 47,5 0 Not rated 36,1 BetterFleet score (on a scale from 1 to 10) 8 8 Not rated 4 Green Award certification Not certified Certified Certified Certified EVDI score (on a scale from G to A) C F G E CCWG score CSI score (on a five step scale) Only container ships are rated Unknown (no data publicly available) Only container ships are rated Unknown (no data publicly available) Only container ships are rated Unknown (no data publicly available) Source: René Taudal Poulsen, Roberto Rivas Hermann and Carla K. Smink, 2018. Do eco-rating schemes improve the environmental performance of ships?, Marine Policy. 87 (January): 94-103. Only container ships are rated Unknown (no data publicly available) 16
Eco-ratings in shipping do not follow best practices Ideals for eco-rating schemes Dimension Criteria An eco-rating scheme shall be universally recognized and avoid overlaps with Design Universality other schemes Transparency allow for environmental benchmarking of a service Governance Legitimacy enjoy widespread stakeholder support Credibility be subject to third party data verification Source: René Taudal Poulsen, Roberto Rivas Hermann and Carla K. Smink, 2018. Do eco-rating schemes improve the environmental performance of ships?, Marine Policy. 87 (January): 94-103. doi: 10.1016/j.marpol.2017.10.006 17
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Some branded consumer goods companies start to care about CO2 Society s expectations Port Investor NGO 18
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Society s expectations Port Investor NGO 19
Air pollution but not CO 2 - threathens ports social licences to operate 20
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Society s expectations Port Investor Largely absent at the moment NGO 21
Pressures to improve Cost driver Reducing bunker costs Complying with regulation Shipper Society s expectations Port Investor NGO Largely absent at the moment 22
Pressures to improve Cost driver Reducing bunker costs Society s expectations Complying with regulation Shipper Port Investor SEEMP is not effective MRV might improve transparency Some branded consumer goods companies start to care about CO2 Ports social licence to operate is threathened by high local air pollution Largely absent at the moment NGO Largely absent at the moment 23
How to enhance transparency Improve eco-rating schemes Convince more cargo-owners to come onboard Get investors onboard Join forces with ports Get NGOs onboard See MRV as a chance to strenghten the green business case The more information, the better 24
Conclusion Shin-Aitoku Maru, 1980 Ship-owners can make the green business case stronger by supporting transparency 25