Making Waves #11: Time is running out, it’s time to slow down

Mitigation of climate change ??

Do you remember your first introduction to climate change? Truly remember? Take a moment and think about it. The wording itself is nothing new now, feels like it’s been around for a while. Even the sense of urgency has seen its novelty wear off, if only generating action in a begrudging way as if to say “I get it, I’ll do something about it, if only you’d stop talking about it”. Your answer could go as far back as March 1972, when an ambitious quatuor from Boston, published ‘The Meadows Report’, detailing that humanity’s constant focus on growth would lead to its own demise. It made a lot of noise at the time, so I read, then was entirely forgotten shortly after. For me, and I suspect a few readers will have the same answer, it would have to have been after seeing An Inconvenient Truth. The documentary narrated by Al Gore, an American politician who served as Vice-President in the Clinton Administration, came out more than 3 decades later. A survey conducted after the release found out 89% of its viewers were now “aware of climate change”. It is hard to believe that this was released 15 years ago. Since we have had, on one hand the election of a US President that denied the science of climate change only out of power less than 2 years ago and at the same time, the emergence of an electric vehicle company now worth more than $1 trillion.

I hope that by now the IPCC, the UN body for assessing the science related to climate change, needs no introduction. The IPCC has published three reports since 2019. The first one introduced the physical science behind climate change, the second the impacts, adaptations and vulnerabilities to climate change and the final one the mitigation of climate change. The conclusion of their latest work is straightforward. Reduce emissions by 43% by 2030 and most crucially, ensure emissions are in decline by 2025 in order for us to have any chance at meeting the objective of limiting global warming to 1.5 degrees. The press release was unequivocal. Its opening line read as follows: “The evidence is clear: the time for action is now.”

Nor-Shipping ????

As I arrived in the large exhibition hall in Lillestr?m, I looked at the large letters above me on one of the walls, spelling out ‘Blue Economy’. The message was straightforward. Though the Russian invasion of Ukraine was omnipresent in everyone’s minds, the theme for this year’s Nor-Shipping remained without a doubt how we could advance the energy transition. The future of our industry was at stake, as much as the future of our planet. Nor-Shipping is a maritime industry event that has been held since 1965, usually every two years. It features conferences, halls filled with exhibitors ranging from industry publications TradeWinds and Tanker Shipping & Trade to the world’s leading shipbuilders, as well as an increasing number of technology companies operating in the maritime tech space. Panels held ranged from the Ocean Leadership Conference, which saw prestigious industry leaders such as the Secretary General of the IMO, Kitack Lim, or Trafigura’s Head of Fuel Decarbonisation Rasmus Bach-Nielsen amongst others, debate the most effective ways to steer the industry towards a greener and thus cleaner future. Let’s just say, not everyone agreed, that it was being done the right way and at the right pace.?

Attending the Nor-Shipping Ocean Leadership Conference with Vortexa’s Senior Shipping Specialist, Seb Prowse?

Between events attended at the tail end of last year and this year’s Nor-Shipping the mood has significantly shifted. The IPPC called out shipping’s 11% contribution to global transport CO2 emissions whilst highlighting the industry still needed to invest in research and development and was falling short of its mission to help mitigate climate change. However, those waiting for a one-size fits all quick fix risk waiting for a long time. Solutions exist today! We are seeing ships use battery packs, run on a number of alternative fuels already on the water, and I mean physically sailing using alternative fuels and technologies. Yes, most of these are pilot projects, and we are far from replacing the 50,000 odd vessels that make up the bulk of commercial shipping as well as ferries and cruise ships but we aren’t starting from scratch. A lot of these solutions were on display at Nor-Shipping and Nordic companies in general are stepping up as leaders in the field and spurring along the decarbonisation of their industries in order to survive, and save us all in the process. However, today, nothing beats operationally-driven decarbonisation with the use of technology and data. Which brings me to the main reason as to why I was in Oslo during this event, the launch of our partnership with Siglar Carbon.

Commercial decarbonisation ?

Siglar Carbon was set up a couple of years ago by two founders from the industry. It seeks to provide carbon emissions insights to help their customers, charterers mainly but also other shipping industry stakeholders, reduce their carbon footprint and seize commercial opportunities in doing so. This is where the genius really lies because it brings together a number of truths that become very powerful when combined. The first one is that for this to work, it needs to be financially interesting. As much as we’d like to believe this is the case, climate change won’t be tackled solely because we all believe in the greater good and it is going to go a lot faster if there’s money to be made in saving the planet. The second truth is that we have the data we need today in the market to make carbon-efficient chartering decisions, we don’t have to wait for a more technologically advanced future, it is already upon us! There is no need to wait for zero-carbon propulsion systems or vessels, there is no need to invest hundreds of millions of dollars to decarbonise one’s shipping operations. Anyone can start tomorrow, if not today, if not right this instant. This can be done by slowing down, optimizing a voyage, chartering the right ship, one that isn’t ballasting from halfway across the world, and planning ahead to potentially privilege short-sea voyages as opposed to longer-haul ones.

Siglar Carbon’s founder, Sigmund and I delivered a panel chat, alongside Jean-Marc from UMAS, a leading academic involved in the Sea Cargo Charter research to a number of industry participants, to explain how commercial decarbonisation would lead to commercial opportunities. It can be done using Siglar Carbon’s solution, combined with Vortexa’s analytics for example, when it comes to available vessels and their characteristics to not only choose a vessel, but know exactly how efficient it is, how much it will emit and what that means for a company’s carbon exposure. Most importantly, this can be replicated across all of the vessel operations to constantly fine tune decisions using the right data and using a common carbon language to measure that data. It is only one of many possibilities to use data to support decision-making in order to charter in a carbon-efficient way. Ultimately, this will reduce costs, optimise operations and reduce the carbon footprint of the industry at the same time. Sounds like a win-win for everyone involved wouldn’t you think?

In summary ??

The “cost” of climate action, or how to reduce carbon emissions, is often used to argue that tackling climate change is expensive. I want you to banish the use of the words ‘cost’ and ‘climate action’ in the same sentence. There is no cost to climate action, only a cost to climate inaction. The global shift towards tackling climate change represents an incredible opportunity across all industries, especially shipping.?

I have believed for a while now that the shipping market will consolidate dramatically, especially in the tanker space, and all shipping markets will gravitate towards a model similar to container shipping with larger vessels and more defined patterns of trade, with more time-charters and consecutive voyage contracts. It will become very difficult for all companies that exist today to remain competitive, and the ones that will are the ones which will have the first-mover advantage of knowing exactly what their carbon exposure is, and which will manage their fleets as efficiently as possible. They should be prioritising shorter routes and slow steaming and thus making themselves attractive to charterers that will fall under the same pressure to reduce their carbon footprint and engage in carbon-efficient chartering. Once more, following our partnership with Siglar Carbon, the tools already exist to be taken advantage of. Wouldn’t you think it’s also time to slow down?

About Arthur Richier

Arthur is the Lead Freight Analyst for?Vortexa?based in London. Prior to this he was on the freight pricing desk at S&P Global Platts, covering dirty and clean tanker markets.