One thing bound to grab the attention of shipping executives is when some of the world’s largest charterers – their customers – get together and throw their collective weight behind an issue.
This was the case on 7 October when 16 of some of the largest energy, agriculture, mining and commodity trading companies signed on to the Sea Cargo Charter, a global framework that puts shipping’s decarbonisation drive front and centre. Under the Sea Cargo Charter, charterers agree to climate transparency by reporting their global emissions related to shipping their goods using a standard greenhouse gas (GHG) emissions reporting scheme. Just as important, the Sea Cargo Charter also allows for the integration of climate considerations into chartering decisions, tipping the balance towards low-emissions shipping.
This means that those shipping companies that have been leading the pack in terms of the green energy transition will be the clear winners of the Sea Cargo Charter.
The move by charterers could be the impetus needed to accelerate investment in the propulsion and alternative fuel technologies that will be critical in slashing GHG emissions.
Let’s hope that charterers also recognise the need to properly reward shipping companies – perhaps through longer charter agreements.
Charterers clearly recognise their influence to help decarbonisation shipping. When the Sea Cargo Charter was announced, Shell Shipping & Maritime global head Grahaeme Henderson called it, “an important step in laying the foundations for a net-zero emissions shipping.” He added: “Collaboration such as this, from across the sector, is vital to scale-up customer demand for low- or zero-emissions shipping. This same spirit of collaboration is also vital in the pursuit of technological advances needed to unlock decarbonisation solutions, and in building industry support for regulation which can create an ambitious but level playing field under which to invest.”
“The Sea Cargo Charter integrates climate considerations into chartering decisions”
Banks, financial institutions and investors are exerting more of their influence on shipping by committing to the Poseidon Principles. Signatories to the Poseidon Principles represent about US$140Bn in loans to international shipping – about 30% of the total ship finance portfolio.
More shipping companies are also committing to Environmental, Society and Governance (ESG) reporting, providing more transparency about their sustainable initiatives, employee relations and safety and business ethics to investors and stakeholders
Such broad transparency and collaboration will be critical if shipping is going to meet IMO’s ambitious targets of reducing greenhouse gas emissions by 40% by 2030 and 70% by 2050, as compared to 2008 base levels.
There is a clear and growing sense of urgency. GHG levels from shipping have not yet peaked and continue to rise, as revealed in the Fourth IMO GHG Study. From 2012 to 2018, shipping’s total CO2 emissions rose 9.3%, growing from 962M tonnes to 1,056M tonnes. Factoring total GHG emissions – including CO2, methane, and NOx – the study reports a 9.6% rise in pollutants, jumping from 977M tonnes in 2012 to 1,076M tonnes in 2018.
As a result, shipping’s share of global human-made emissions also increased, from 2.76% in 2012 to 2.89% in 2018 – meaning that the industry is not keeping pace with the advancements made by other transport and industrial sectors.
Under IMO’s initial strategy, once ship GHG emissions have peaked, international shipping can work towards cutting total annual GHG emissions in half by 2050, while at the same time, pursuing efforts towards phasing them out entirely. That can’t happen soon enough.