At the Carbon War Room, we work with industry to make decarbonisation profitable and peak GHG emissions from shipping in 2025. A major part of the decarbonisation puzzle is making sure that those ships that burn less fuel to move goods than their peers are financially rewarded. Our groundbreaking report Revealed Preferences showed that markets don’t show any signs of systemically valuing efficiency in vessel design or operation. This is a challenge the industry will have to accept, understand, and overcome to decarbonize profitably.
Due to employing EVDI in analysis, our report, Revealed Preferences, and a basket of rating schemes (EDI, EEOI, EVI, CSI, EVDI, and ESI) have been branded ‘fake news’. This criticism misses the mark on both accounts.
Rating schemes have increased in number due to the need to understand specific elements of a complex and opaque industry. The use of rating schemes has increased due to demand for them. For example, the GHG Emissions Rating, underpinned by EVDI, provides design efficiency data for over 76,000 vessels. Carbon War Room and RightShip launched the GHG Emissions Rating in 2010 to address the dearth of transparent information on vessel design efficiency.
Today, nearly 2 billion tonnes of goods are moved each year by charterers using the GHG Emissions Rating to help select vessels and save carbon as well as fuel spend – it’s specific use. That’s about 25% of non-containerised trade. The GHG Emissions Rating is, of course, used alongside all the other data necessary to make an informed and business-appropriate decision. As an example - and to Mr Zachariadis’s point concerning fuel consumption data - the GHG Rating and other indices should be used in tandem and as a cross reference with Bunker Delivery Notes (which are themselves open to manipulation), flow meters and continuous emissions monitoring, to most accurately identify a ship’s and the shipping industry’s fuel consumption and carbon footprint.
Carbon War Room’s perspective is simple. Making decarbonisation profitable is crucial to making it possible. Unless owners are financially incentivised to ensure that vessels burn less fuel through a combination of vessel design and operation, decarbonising the shipping industry is going to be very difficult. Revealed Preferences showed that some TC markets don’t show any signs of systemically valuing efficiency in vessel design or operation.
That’s a reality that will have to be addressed by both industry and policymakers. Increased transparency will play a key role in getting markets to more effectively reward efficient vessels. Moreover, our latest report, Navigating Decarbonisation, suggests that those companies that can find innovative ways to overcome these tough market conditions, such as charter party agreement that share fuel savings, stand to profit once some form of climate policy is brought into shipping.
What shipping has achieved over the course of the last many decades should make those who work in the industry proud. Ships move 90% of the worlds’ goods more cheaply and safely than ever before.
But, there are many challenges on the horizon. We would invite Mr Zachariadis to join us in tackling the biggest one of them all – decarbonisation.
By James Mitchell, Senior Associate, Carbon War Room
The views presented hereabove are only those of the author and not necessarily those of GREEN4SEA and are for information sharing and discussion purposes only.
James is a Senior Associate with Rocky Mountain Institute-Carbon War Room’s Shipping Efficiency operation, where he leads engagement with maritime financial institutions on stranded assets and financial decision-making as well as works to identify financing for the industry’s efficiency solutions. James joined Rocky Mountain Institute-Carbon War Room from his role as a Researcher at the Stranded Assets Programme, University of Oxford, where he led and contributed to work on investment risks in coal-based industries. His work on financial risk has been featured in publications globally and is incorporated in the investment strategies of major banks and investment firms. He has also worked with Oxford Microfinance Initiative, where he led the implementation of GIS-based systems to improve the social performance of MFI loans in Tanzania and Zambia.