The coronavirus pandemic is dealing a serious blow to investments aimed at cutting shipping emissions.
The European Community Shipowners’ Associations, an umbrella trade body of vessel owners that control nearly half of the global commercial oceangoing fleet, says an industry survey in May found that three-quarters of its members would either halt or reduce investments in cleaner ships.
“While 26% of the respondents think their investment in greenhouse-gas emissions reduction would not be hit by Covid-19 once the crisis recedes, 30% said they would reduce investments,” the group said. “Some 44% suggested putting money into decarbonisation would no longer be possible.”
Members of the International Maritime Organization, the United Nations’ marine regulator, have agreed to improve fuel efficiency by 30% by 2025 and slash greenhouse-gas emissions by half by 2050 from 2008 levels.
That effort is starting to reset the fundamentals of how ships get their power. Most ships have long run on a thick, high-polluting oil byproduct known as bunker fuel.
But time is short as switching would involve fuels that are yet to be tested, new engines that have yet to be produced and new designs for ship hulls needed to adapt to the new equipment.
With the global economy and trade spiraling downward this year and prospects for a recovery deeply uncertain, the priority for many shipowners will be staying in business, leaving climate-change considerations on the back burner.
“We’ve got four chartered ships returned in June and another two will come back in July,” due to coronavirus restrictions, said a European owner of 14 dry-bulk and general cargo vessels who asked not to be named. “We all care about the environment, but right now I’m trying to persuade my bankers to extend repayments of existing loans. Business is tanking and renewing our fleet is unthinkable.”
The United Nations Conference on Trade and Development said in a 2018 report that international shipping contributed an estimated 2.2% of global greenhouse-gas emissions, based on a 2012 study. The International Maritime Organization estimated that unless the industry acted to restrain pollution, emissions would increase between 50% and 250% by 2050, depending on trade growth.
Shipowners have already factored in billions in expected new costs from an IMO mandate that went into effect in January aimed at making about 60,000 oceangoing vessels cut slash sulfur emissions.
Shipping executives say the efforts, including a switch to low-sulfur fuel or the installation of sulfur-trapping exhaust systems, will cost around $50 billion over the next four years.
Ships have a 25-year lifespan so any new orders over the next decade will have to be for vessels with new designs that would use biofuels, ammonia, hydrogen, batteries or another form of fuel for propulsion.
Mass producing new fuels will be a big challenge as proposed solutions like ammonia are carbon-intensive to produce, defeating the campaign’s clean-air purpose. The use of batteries would substantially cut cargo space, so growing trade volumes would require putting more ships into the water.
Ioanna Procopiou, chief executive of Greece-based shipping consulting firm Prominence Maritime, told a webinar in June that there is no clear path to decarbonizing the industry.
“A lot of what is being suggested is not practical or available on a large scale, and in many cases it does not even yield the environmental benefit that is intended,” she said.
The ECSA survey said with the exception of tankers, revenue for various shipping sectors has declined by as much as 60% since the lockdowns aimed at limiting the spread of Covid-19 took effect. It said 52% of its members are looking at not renewing fleets.
Any move to order a new generation of ships will require major financing, but banks have largely stood back from investment in the maritime sector until the pandemic comes under control.
“One of the less reassuring results that emerged from the report is the lack of national, regional or local measures put in place against liquidity issues or that these are not applicable to the shipping industry. In the case where measures exist, banks do not offer those options in practice; and when they do, the administrative burden and costs outperform the benefits,” ECSA said.
IMO Secretary-General Kitack Lim has said the cost to the shipping industry to protect the environment “will be the biggest in history.”
But with little money to go around, his organization’s targets look increasingly difficult to meet.
Write to Costas Paris at [email protected]
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