Peter Döhle Schiffahrts-KG and OceanScore highlight both the challenges and how to comply with Europe’s ETS regulation
The container segment is expected to bear the brunt of the cost of the phase-in of Europe’s ETS regulation.
The total cost to shipping at today’s prices is expected to be €6.5Bn (US$7.1Bn), with container shipping expected to fork out the most, at 28%, says maritime data technology firm OceanScore.
At a press briefing in London in December, the company clubbed together with its client Peter Döhle Schiffahrts-KG to look at the challenges facing the shipping industry and to highlight some solutions.
Döhle Group controls the world’s largest tramp-owned fleet of container ships, (comprising around 415 modern vessels), with 600 ships overall under management.
The ETS regulation came into play in January this year. Peter Döhle Schiffahrts-KG director corporate development Matthias Bloete says, “We face a huge challenge; the ETS is a very prominent topic, everyone in the German shipping network is discussing it, and all our departments and management are discussing this.”
He adds, “Why is it a challenge? It is important and it is starting this month. But we have vessels affected today whose voyages run into next year.”
Underlining the challenges, he says it has a relatively complex framework that needs to be understood. “We are shipping people; we have the capability to understand complex structures, but it is a new dimension, and we need to ensure we comply with all our processes and both technical and commercial departments.
“We need to build the infrastructure and systems, not only the processes; we need to be able to purchase and source the certificates, ensure we administrate and report them and have the right data.”
The company is well prepared, having had many discussions, workshops and training sessions for its people, but as Mr Bloete points out, there are still uncertainties in the regulation itself.
He continues, “That comes together with a very complex shipping industry; we are international with different ships and different ownership structures and have tried to prepare for all kinds of different scenarios.
“That is why we are with OceanScore. They have helped us set up processes and software…it is all around data handling and making sure we measure the certificates and how many are needed correctly.”
OceanScore managing director Albrecht Grell introduced the company’s solution at the briefing. His presentation highlighted that ETS Manager offers a strong partner network; automatic workflows of operational vessel data ingest via AP; the assessment of EU Allowances (EUA) needed (a type of carbon allowance that allows companies covered by the EU ETS to emit a certain amount of CO2e); allocation of EUAs to owner or charterer, considering charty party off hires; generating EUA requests; managing the request process; disputes and EUA account management. It can also monitor operational data flows and financial exposure.
Its manual interventions cover review and comment EUA requests and access to Union Registry, account management and trade EUAs on an integrated trading solution. Its customer service offers ETS Manager support and registry account management.
Delving into the financial implications of ETS on shipping, Mr Grell says the cost per individual vessel will be on average €400,000 (US$437,000). Meanwhile, 40% of all EUAs will be provided by non-European owners and managers. China and Singapore both have more than 5M EUAs, UK and Norway have more than 3M EUAs. The biggest recipients will Greece and Germany with some “surprise winners” being the Netherlands and Cyprus.
Mr Grell says the cost will be passed on. “Given shipping’s efficiency, there will be no impact on trade volumes. Less efficient tonnage will see reduced secondhand values and charter rates,” he says.
In terms of deployment, patterns will change. So far, there has been no “substantial evasive behavior visible so far”. Another aspect is the “Business case for retrofits and operation improvements will be enhanced”.
There are major challenges when it comes to ETS: transparency and control, the complexity of shipping and organisational risks.
Singling out the issues within transparency and control, Mr Grell highlights the major questions being the EUAs needed; are exemptions reflected? Discounts considered? What happens with transhipment ports and is it down to the owner or manager?
Questions raised within the complexities of shipping are different charter parties, different roles of owners, the request periods, prepayments, cash, funds or EUAs, and considering disputes and collateral.
In terms of organisational risks, Mr Grell says, “Tools are needed to maintain transparency and control, with specialists to operate tools.”
Holidays, sickness and staff turnover should also be among the considerations.
Perhaps one of the biggest challenges is regulatory ambiguity is still not resolved. Mr Grell spent time highlighting this aspect in his presentation. He points out the ETS responsibility implementation act Union Registry has a backlog in opening trading accounts, overregulated processes and interfaces that are not “state of the art”.
Challenges when it comes to charter parties are it is not yet agreed in most cases and the BIMCO clause for voyage charter parties is not yet published.
Mr Grell says, “The complexity of the regulation and institutional interfaces is making it hard, especially for smaller players not residing in Europe.
“The biggest risk is not to overpay EUAs – it is to not receive enough EUAs from charterers. Stable processes, transparency and control are vital.”
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