Bloomberg: Global Shipping Industry Fails To Clean Up Its Environmental Footprint


According to Bloomberg’s William Ralston, he proposes that Regulation forcing value chain actors to share information and optimize would help the shipping industry clean up its environmental footprint.

The first example is Singapore-based BW LPG, which goes about its business differently from many shipowners. If it becomes clear during a vessel’s passage that a berth will not be free when it arrives at port, the vessel will simply slow down to appear when there is room.

Not being forced to wait for days or weeks at a time saves fuel and prevents emissions as these huge ships cannot be turned off while at anchor. Last year, the strategy equated to more than 500 metric tons of unburned fuel, according to BW vice president and chief operating officer Prodyut Banerjee.

Known as “virtual arrivals,” this smarter shipping method has been around for a while. But as the climate crisis accelerates and sectors that depend on fossil fuels, such as airlines and shipping, struggle to reduce their carbon footprint, their popularity, as well as that of other greener strategies, is increasing.

International freight and container transport is responsible for 3% of global greenhouse gas emissions, approximately one billion metric tons of carbon dioxide per year, which is equivalent to all of Japan’s emissions. Despite this, the industry has made little progress towards decarbonisation, a fact often attributed to the difficulty of finding alternative ways to power large ships.

The International Maritime Organization (IMO), the agency responsible for regulating shipping, has set ambitious targets, aiming to cut emissions by at least half by 2050 (using 2008 as a reference). But with increased trade, shipping volumes are expected to triple by then. In fact, the IMO reckons that emissions could be 30% higher by 2050 if nothing is done. “To reduce emissions,” said Grant Hunter of the Baltic and International Maritime Council, the world’s largest international shipping association, “we have to rethink the way we do our business.”

But in many ways, the industry is looking to rethink all but its biggest, dirtiest problem of all.

Traditionally, when a shipowner is chartered to transport cargo, the contract requires that the ship reach its destination as quickly as possible, regardless of the traffic in the port. The client will even commit to indemnify the owner for waiting at the anchorage, which is known as demurrage.

Given the incentive, shipowners have traditionally rushed across oceans, burning more fuel at higher speeds just to wait to reach their destination. According to a 2020 report, tankers and bulk carriers spend up to 10% of their time waiting to arrive at a port. While they wait, they burn more fuel, but earn more money.

Although this practice of “flying, then waiting” is inherently wasteful, attempts to stamp it out have failed in part because of the complexities of reaching contractual terms that satisfy all parties (and, of course, the incentive of Profits).

An apparently similar strategy is “just in time” arrival, or JIT. Rather than a contract between an owner and a charterer, ports coordinate their resources with all incoming vessels to ensure they optimize speed to arrive when a berth is available.

High fuel costs have made JIT and virtual arrivals more acceptable to the shipping industry. But what really drives its appeal is a regulation the IMO has been enforcing since January, the Carbon Intensity Indicator, which requires shipowners to improve the carbon emissions of their vessels.

“These operational measures are relatively straightforward and can be implemented today without major investment in technology and infrastructure,” said Minglee Hoe, an IMO technical analyst. “Even a small, large-scale optimization can lead to big savings in emissions.”

A 2022 report found that container ships can reduce fuel consumption and CO2 emissions by 14% per voyage if they optimize speed in this way. Studies suggest that eliminating waiting times at anchorage can reduce global emissions from shipping by around 20%.

But it is doubtful that virtual arrivals and JIT can be implemented at scale. With virtual arrivals, the problem is the number of parties involved with each vessel, where everyone must agree to a contract that allows the vessel to slow down, BW’s Banerjee said. In 2022, the company implemented a virtual arrival on just seven trips out of hundreds completed.

“It is not a systemic solution; it’s a unique solution for a unique journey,” Haris Zografakis, a London-based lawyer at Stephenson Harwood LLP who specializes in maritime law, said of the virtual arrivals.

Which leaves JIT arrivals, where the problem is ports. Coordinating customs, tugboats, pilots, trains and stevedores, all of whom work independently, is difficult. For this reason, JIT has only been implemented in a few places.

One is Newcastle, Australia, where a bespoke ship arrival system is said to require incoming vessels to contact the port 14 days in advance of their intended arrival. The port authorities, in consultation with the terminal operators, advise them to change speed to arrive when a berth is available. Two thirds of the ships arriving at Newcastle no longer need to drop anchor. And for those that do, the average anchor time has been reduced from 11 days to three.

At its Porvoo refinery in southern Finland, Neste, a producer of sustainable aviation fuel, is also using JIT. It helps that Neste controls the ships, the cargo and the terminal, but it also works because the docking information is shared among all interested parties.

“There is a lot of potential for savings,” said René Taudal Poulsen, a professor of shipping and international trade at the Copenhagen Business School in Denmark. “But it’s much more complex than the airline industry, where you have a control tower that basically orchestrates the entire operation.”

Since 2014, the International Taskforce Port Call Optimization, a coalition of shipping companies, has been working to standardize the exchange of nautical, administrative and operational data between ships and the shoreline. In September, the Maritime and Port Authority of Singapore signed a memorandum with Voyager Worldwide, a leading provider of maritime navigation and shipping management technologies, to design its own system.

“We are only working on the exchange of information between the port operator and the ships to more accurately predict their arrival times. That’s the first step,” said Kent Lee, Voyager’s chief executive officer. “So it’s about having the entire supporting infrastructure and supply chain ecosystem behind them when the ships come into port.”

Some industry watchers are not optimistic that any of this will make a dent in emissions. “Just-in-time docking would be fantastic,” said shipping lawyer Zografakis. “But it hasn’t happened for decades, and it won’t happen on a large scale for decades.”

Zografakis is working with NAPA, a Helsinki-based maritime digital technology provider, to develop something called the Blue Visby Solution. Blue Visby leaves out the complicated ballet of getting boats from anchorage to berth. Instead, it focuses on the voyage itself, predicting how quickly ships turn around in a particular port, and therefore when berths tend to be available. Based on that information, it optimizes ship arrival times accordingly.

Looking at 150,000 bulk carrier voyages in 2019 (the last “normal” year before the pandemic), Blue Visby concluded that speed could have been reduced for around 87% of them. If all those trips had used Blue Visby’s technology, there would have been a 16% reduction in carbon emissions, slightly less than if they had achieved perfect JIT arrivals. The makers of Blue Visby argue that it has the potential to reduce the carbon footprint of global bulk shipping by more than 60 million metric tons of CO2 per year, which is greater than Norway’s total emissions.

But it’s still a drop in the bucket when it comes to total industry emissions. That’s why some companies are trying to make ocean-going ships more fuel-efficient.

Some install energy-saving devices such as drag-reducing hull liners. Others are building rotor sails, tall cylinders that harness the force of the wind to propel ships. Denmark-based Norsepower claims its rotor sails can reduce ships’ emissions by up to 20% over their lifetime.

“With our technology alone, it is possible to reduce emissions from global shipping by about 80 megatonnes a year,” said CEO Tuomas Riski, “representing about 8% of total global shipping emissions.” Meanwhile, with its air-lubricated system, Silverstream Technologies claims it can save 7% on a boat’s fuel consumption. The technology, installed on 28 vessels around the world, coats the bottom of a boat with tiny air bubbles to reduce friction.

While all of these ideas could lead to emissions reductions, the inescapable truth, as is the case with air travel, is that nothing major will happen until fossil fuels are replaced as a means of propulsion.

The industry is beginning to explore various green alternatives, including methanol, hydrogen, and ammonia, but they are difficult to scale. Ships that run on these fuels are more expensive because they require advanced engines and huge fuel tanks. Green fuels have a lower energy density than heavy fuel oil and consequently more volume is needed to generate the same energy.

As part of a broader plan to be net zero greenhouse gas emissions by 2040, shipping giant A.P. Denmark’s Moller-Maersk has ordered 19 ships that it says will run on carbon-neutral methanol. CMA CGM, a French operator, ordered 12, as did COSCO Shipping, the Chinese container ship company. But again, fewer than 50 ships out of the nearly 55,000 container ships worldwide is a very small start.

“We burn a lot of fuel in our fleet, but the volumes of these green fuels are very small,” said Morten Bo Christiansen, Maersk’s Head of Energy Transition. “We need to build infrastructure and then we need to reduce costs.”

Tristan Smith, associate professor of energy and transport at University College London, said that to decarbonise shipping, “we need to work on fuel substitution in parallel with operational efficiencies.” For that to happen, he said, tougher legislative intervention is needed.

“If the industry is properly regulated,” Smith said, “that will really push the value chain to talk to each other in a more serious way.” – BLOOMBERG

Source: William Ralston, Bloomberg

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