Green Pressure Continues to Mount for the Shipping Sector
The shipping industry offered a collective applause when the International Maritime Organization set its ambitious goal of halving carbon emissions by 2050. Behind the scenes, however, the reception was mixed. While some large operators such as Maersk plan on having a carbon-neutral fleet by 2040, others are beginning to question the viability of such ambition in the face of troubling inflation and elevated operating costs.
The price tag for new ships, alternative infrastructure, and fuel production needed to lower emissions over the coming decades is roughly $3 trillion (per shipping-services provider Clarksons). Ocean shipping is responsible for approximately 3% of global greenhouse-gas emissions and methanol has emerged as a potential long-term contender to replace fuel oil. A.P. Møller-Maersk A/S ordered 19 ships late last year that can run on a mix of methanol and traditional fuel. Cosco Shipping, China’s state entity, committed to spending $2.9 billion for a dozen methanol-fueled box ships, while France’s CMA CGM SA is set to put into motion six methanol-powered ships.
While this would appear to be a significant step forward, not every player is on board. The people who work in procurement departments are compensated on their ability to get the best deal possible. Heavier-polluting fuels remain cheaper than their more environmentally friendly alternatives, and this is not going to change anytime soon. According to a survey by the Boston Consulting Group, 82% of firms are willing to pay more for sustainable shipping solutions. Yet, the willingness to pay more falls short of what is needed to reduce emissions in a concrete way.
One firm that is testing an alternative model is Tapestry, Inc. The owner of the popular Kate Spade and Coach brands has partnered with GoodShipping BV, a Netherlands-based company to test out an emissions-reduction fuel purchase program. Tapestry will continue to book cargo shipments on regular container ships, but in parallel will pay additional fees for biofuels to be implemented in other ships. The company is seeking to reduce its emissions by 42.5% over the coming seven years and these additional fees to non-cargo related ships appear to be a better bet (financially speaking).
Meanwhile, regulators are expected to pick up the pressure. California has preliminary plans in place to phase out diesel-powered trucks at the golden state’s ports, and a determined proposal of equipping 100% of its docks with battery-electric and hydrogen trucks by 2035. The European Union is moving on the introduction of carbon-emission taxes in 2024 while President Biden has proposed some onerous new standards on heavy-truck emissions.
A growing fear is too much regulation will invariably squeeze the competition leaving the larger shipping industry in the hands of even fewer firms. This is welcome news for some, but not the greater majority.