Strides in Sustainability– Reinforcing the Value Proposition of the Shipping Industry

In the ever-increasingly connected world, trade has never been more important. The accelerated pace of global society shows the demand for goods and services to be transported faster and more efficiently every day. To do so requires shipping.

The shipping industry is the engine of global trade. Indeed, without it, international trade would not exist as it does today, if at all. Shipping accounts for roughly 90 percent of all global trade, representing over 14 trillion dollars in 2019. According to data from Clarkson’s research, the global merchant fleet of vessels over 100 gross tons has reached the 100,000-ship milestone for the first time. Of the 100,001 ships in total the average age is 21.7 years. The estimated total value of the world fleet is $976 billion. It is the most cost-effective, environmentally benign, and most efficient mode of transportation for bulk commodities, including agri-products, petroleum, coal, iron-ore, electronics, finished goods, clothing and more.

Shipping also proves to be the most effective mode of transportation for medical supplies and sensitive pharmaceuticals like vaccines since it allows them to be transported at their required temperature for longer distances and in larger quantities than air travel. During the pandemic, the transportation of the vaccines against COVID-19 virus has been especially critical. According to IATA, 3.5 million metric tons of pharmaceuticals are shipped by ocean each year, compared with 0.5 million metric tons by air. According to Alan Kennedy, founder and executive director of TEAM UP, an organization that focuses on pharma supply chain issues, it is also 80 percent less expensive than air transport. It is even more environmentally friendly. According to Freightos, two tons shipped for 5,000 kilometers by ocean freight will lead to 150 kg of CO2 emissions, compared to 6,605 kg of CO2 emissions by air freight. Although shipping is responsible for the transportation of the vast majority of goods, it is the mode of transportation that contributes the least to atmospheric emissions per ton.

However, though the shipping industry is the most efficient, economically viable, and environmentally benign mode of trade, it is not without its impacts. Despite how it compares to other modes of transportation, it still contributes to about three percent of total global CO2 emissions.

Background on Current and Future Maritime Industry Environmental Regulations

 The shipping industry is covered by several major regulatory frameworks governed by the International Maritime Organization and its member states. The IMO has passed several different frameworks into “law” by convention or treaty. The International Convention for the Prevention of Pollution by Ships (MARPOL) in 1973 created the framework plus its six annexes. MARPOL is a set of regulations concerning pollution caused by the maritime industry and the best ways to mitigate or prevent pollution from occurring.   The MARPOL regulations include Annex I- Annex VI.

• Annex I Regulations for the Prevention of Pollution by Oil,
• Annex II Regulations for the Control of Noxious Substances by Liquid Bulk,
• Annex III Preventions of Pollution by Harmful Substances Carried in Packaged Form,
• Annex IV Prevention of Pollution by Sewage from Ships,
• Annex V Prevention of Pollution by Garbage from Ships
• Annex VI Prevention of Air Pollution by Ships.

These six annexes ratified since the passage of the convention make up the current MARPOL regulations governing the pollution and environmental impacts of vessels at sea. China is looking to create its own set of emissions regulations or ETS (emissions trading scheme). These will undoubtedly impact GHG regulation of the maritime industry at a later date.  The Emissions Trading Scheme developed by China will look to rival the EU’s ETS. It remains to be seen how and when the upcoming Chinese ETS will impact shipping and future MARPOL regulations. According to experts, coal- based power station emissions are the biggest culprit of China’s GHG output. Shipping will likely be impacted but it still too early to tell.

The IMO is examining how its regulations and preventions include the IMO Sustainable Development Goals, a part of the UN 2030 Agenda for Sustainable Development, which calls for an eradication of global poverty by 2030, and to achieve sustainable development in all sectors. The United Nations has 17 Sustainable Development Goals (SDGs) in its 2030 plan.

Pathways and Solutions

The shipping industry faces multiple hurdles as it moves towards decarbonization. However, various solutions are underway that the industry is putting into action to reduce emissions, fuel consumption and increase sustainability.

There is a call for increased collaboration across the shipping industry sectors, from ports to ship designers to ship owners. As such, throughout the industry, there are various initiatives to increase collaboration and transparency among those in the industry. A few of these are the Global Maritime Forum, the Sustainable Shipping Initiative (SSI), and the Zero Emission Ship Technology Association (ZESTAs).  NAMEPA supports these initiatives to reduce shipping’s impacts on the environment.

The Global Maritime Forum is an international non-profit organization created to increase sustainable long-term economic development and human wellbeing in shipping. It was founded on the idea that progress is catalyzed by collaboration from all parts of the global maritime industry with its stakeholders to discuss challenges and find new solutions. It hosts the Annual Summit, in which key stakeholders and high-level leaders from across the maritime industry convene with policymakers, NGOs, experts, and other influential decision-makers. It also facilitates a variety of different initiatives, such as the Getting to Zero Coalition Sea Cargo Charter, Poseidon Principles, and Neptune Declaration. All of the Global Maritime Forum’s initiatives are consistent with the IMO’s policies and ambitions, including reducing greenhouse gas emissions from international shipping by at least 50 percent by 2050.

The Getting to Zero Coalition is an alliance of more than 140 companies within the maritime, energy, infrastructure, and finance sectors, supported by important governments and IGOs. The Coalition’s goal is to get commercially viable deep-sea zero-emission vessels powered by zero-emission fuels by 2030. It is supported by knowledge partners such as UCL Energy Institute, Environmental Defense Fund, and the Energy Transitions Commission.

The Sea Cargo Charter initiative is the first of its kind. It sets a new benchmark for responsible shipping, transparent climate reporting, and improved decision-making by bringing together a group of the world’s biggest energy, agriculture, mining, and commodity trading companies. Through the Charter, these companies will assess and disclose their shipping activities for the first time. It establishes a common baseline to quantitatively assess and disclose whether shipping activities are aligned with adopted climate goals, further increasing transparency throughout sectors. It is consistent with IMO’s policies and ambitions, including its aim to reduce greenhouse gas emissions from international shipping by at least 50 percent by 2050.

The Poseidon Principles are the world’s first sector-specific, independent climate alignment agreement amongst financial institutions. They establish a global framework for assessing and disclosing the climate impact alignment of ship finance portfolios. Signatories of the Principles include banks from all over the world, including ABN Amro, Amsterdam Trade Bank, BNP Paribas, Bpifrance, Citi, Credit Agricole CIB, and more, with additional banks expected to join. Together they represent more than $150 billion as a bank loan portfolio to global shipping, over a third of the global ship finance portfolio.

The Neptune Declaration is an initiative specifically designed to help resolve the crew change crisis. It is signed by more than 700 organizations and outlines the main actions that need to be taken to resolve the crisis. The COVID-19 pandemic has caused an unprecedented humanitarian crisis that has left hundreds of thousands of seafarers stranded on ships for far longer than contracted. Seafarers carry 90 percent of world trade and are the maritime industry’s frontline workers, making this initiative vital to ensuring workers’ wellbeing and the flow of goods depended on worldwide.

The SSI is a multi-stakeholder collective that works to accelerate and improve sustainable development in the shipping industry through cross-sectoral collaboration. SSI organizes itself into working groups, consisting of several members and external partners, that set goals for themselves and the industry. It works to increase the shipping industry’s social, environmental, and economic benefits by identifying trade patterns, shifting global powers, rising fuel costs, changing customer demands, and acting accordingly. Their reports, like the Vision for 2040 document, outline specific commitments to increase sustainability. The reports include switching to a diverse mix of energy sources that reduce GHG emissions and developing financial solutions that reward sustainable performances. They also include using accountability and transparency to foster more sustainable decision-making, providing exceptional work environments so that people want to work in shipping, and actively contributing to the oceans’ responsible governance. 

ZESTAs was formed to promote the interests of the Zero Emissions Ship Technology Industry. It informs the shipping industry on available zero-emissions ship technologies (ZEST) and works to influence regulators and policymakers to introduce legislation that encourages it. It provides a platform for collaboration approaching ZEST projects and works to prevent devastating climate impacts by assisting commercial shipping to reduce emissions. It works to educate policymakers at national and international levels on the availability and readiness of ZEST. It also develops research projects for zero-emission technologies and has a database of companies and their zero-emission technologies by type of of innovation.

NAMEPA is another contributor to sustainability through its CSR/ESG Maritime Sustainability Passport (MSP) launched last year.  Companies, organizations and individuals can assess their efforts to become more sustainable through this process, with successful candidates receiving NAMEPA’s coveted MSP seal and certificate.  Companies that have qualified for NAMEPA’s MSP include Cargill, the American Club, and Mediterranean Shipping Company (MSC) with others in process. In addition to its industry efforts, NAMEPA develops and disseminates educational material to seafarers, port communities and students providing tools to Save Our Seas.

Initiatives by NAMEPA Members

NAMEPA members are a vital part of the sustainability initiatives and pathways that are being developed to meet the 2030 and beyond goals as an industry. The importance of pollution prevention, climate change awareness and strategy, and marine environment protection are crucial to the strategies of NAMEPA industry members.  Last year’s IMO 2020 Sulphur cap was planned over ten years in advance to decrease the environmental impacts of marine fuel, and NAMEPA members were among those who helped make this radical transition a success. Many of NAMEPA’s members are working diligently to support the maritime industry’s sustainability:

The Port of Los Angeles is a highly motivated contributor to sustainability. As a member of NAMEPA, its commitment to sustainability is unparalleled. The Port has committed to a broad plan (Sustainable City Plan) that includes reaching high-level decarbonization benchmarks. This plan includes a goal of getting to full decarbonization by 2050, with different benchmarks in between. The Port of LA is also a part of the San Pedro Bay Ports Clean Air Action Plan. The plan was updated in 2017 to include a reduction of up to 40% in GHG by 2030 to pre-1990 levels, and 80% below 1990 levels by 2050.

NAMEPA member Mediterranean Shipping Company (MSC) spoke about its decarbonization efforts at the Greentech Virtual Shipping Forum. Bud Darr, EVP Maritime Policy and Government Affairs spoke about the need for ways for the industry to implement full decarbonization. The current methods for decreasing GHG emissions involve energy-efficient strategies included the use of LNG or biofuel technology. The name of Darr’s speech was ‘The Route to Zero Carbon Shipping, Acting Now, Investing in the Future’.  Darr outlined how this does not go far enough and is a not long-term strategy for effective decarbonization. However, they are effective short-term strategies for battling climate change. Darr mentioned the company’s commitment to up to 45% usage of biofuel blends within the MSC fleet. Full decarbonization will require collaboration with technology and initiatives like the Getting to Zero coalition. The Hydrogen Council is another groundbreaking initiative MSC is involved with to reduce emissions and develop clean hydrogen fuel for shipping.

RightShip has been committed to environmental sustainability in shipping since 2001 when the company was founded. They have developed three major products that track the impacts of pollution and emissions from vessels. The first product they have is a GHG Rating, which allows shipping companies to measure their output in greenhouse gas and CO2 emissions. The GHG rating looks to make shipping more transparent regarding emissions, by ranking vessels according to energy efficiency and GHG emissions.  It is products like the GHG Rating which are crucial to the development of a sustainable future for industry-led organizations and firms worldwide.  This initiative by RightShip is important because it could encourage maritime clients to maintain a healthy emissions profile for each of their vessels, making GHG ratings a profitability issue as well as an environmental one.

ABS is a valued NAMEPA member and an important contributor to reducing the carbon footprint of shipping and maritime. They were a founding partner in the Maersk McKinney Moller Center for Zero Carbon Shipping and have committed resources to decarbonization in the shipping industry through a comprehensive sustainability program. ABS has committed to helping the industry reach both the 2030 and 2050 goals of decarbonisation. ABS has written different guidance and whitepapers advising how to best meet requirements for the current low Sulphur fuel cap, as well as reducing GHG footprints and lowering emissions.

Cargill Ocean Transportation is an asset when it comes to sustainable shipping. In 2019, they published a complete Ocean Transportation Sustainability Report, which outlines and discusses their approach to sustainability and their sustainability priorities. These include: People, Safety, and Wellbeing, Climate Change and Health, Inclusion and Diversity in Our Workforce, Ocean Health and Biodiversity, Ethical Business Conduct and Compliance and Ship Recycling. These six priorities are the foundation for Cargill Ocean Transportation’s commitment to sustainability, and NAMEPA is proud to have them as a member.

Conclusion

The shipping industry is responsible for people worldwide getting most of the things they use in everyday life. Ninety percent of what people buy, sell, and use are there because of the industry. It all comes from seaborne transportation––from food to clothing to medical supplies to technology to furniture to toys.

The efforts made by maritime industry-led groups and companies will be an important and essential piece of providing sustainability for the foreseeable future in the shipping sector. The industry can only be improved by the people and organizations who work in it.

Therefore, it is crucial that the public be aware of the shipping industry’s intrinsic nature in their day-to-day lives. Through that awareness, global society can better understand its challenges as it moves towards decarbonization and sustainability and what solutions it is presenting. Only through education and understanding can the public influence how the shipping industry operates and hold it accountable to push for more environmentally sustainable trade.