Watson Farley & Williams (WFW), has issued a report which explores how sustainability squares with new geopolitical challenges such as the war in Ukraine. Among many key findings, the report reveals that industry stakeholders consider carbon trading and carbon offsets as a catalyst for emissions reductions.
To remind, in February 2021, Watson Farley & Williams (WFW) published “The Sustainability Imperative” report on the impact of environmental, social and governance (ESG) considerations on the shipping industry.
Built around a global survey of circa 500 industry executives and senior managers, this years’ report’s key findings are:
- The industry now has a better understanding of how long it will take to meet ESG goals. Respondents estimate that 28% of the maritime industry will meet milestones for emissions within five years.
- Shipowners have become more collaborative. In 2021, two-thirds said they would like to form partnerships to pursue innovation. Now, 56% already are in ESG-linked tie-ups, of which almost all report tangible progress.
- Shipowners are more concerned about choosing the right technology than how to pay for it, listing regulatory and technological uncertainty – no longer cost – as the biggest constraint on investment in emissions reduction.
- LNG and LPG have fallen behind many other alternative fuels in the sustainability planning of shipowners. Perhaps this is because LNG in particular is already viewed as an established transition fuel option although concerns regarding methane slip and fallout from the war in Ukraine are other
possible causes. - Most of shipping accepts the need for carbon trading and carbon offsets, which will be important for emissions reduction, according to 91% of respondents. Support is weaker in the Americas, though, where 28% believe that clean fuels will almost negate the need for carbon trading and offsets.
Despite the impact of the war in Ukraine (and related international sanctions regime) on global energy prices, war and political instability are not seen as a particular threat.
Surprisingly, with the exception of the EMEA region where decarbonisation remains the top priority, diversity targets now have the biggest influence on ESG decision making, particularly among listed companies. Crew welfare issues are also of growing importance to many shipowners, a recognition of the plight of many seafarers during the pandemic.
According to the report, virtually all shipowners are now considering using alternatives to bunker oil within the next five years. Fewer than in 2021, however, favour LNG or LPG as alternative fuels sources, perhaps due to rocketing gas prices and because these are viewed as transition fuels. Replacing gas as the top choice among alternatives are biofuels, followed by hydrogen and wind and solar power. Methanol and clean ammonia are also more popular than they were two years ago, while batteries have slumped, possibly because storage technology is not advancing as quickly as expected and shipowners see technology and proven results as important factors in supporting one technology over another.
As explained, an even greater driver for opting for a specific fuel source is regulatory guidance, with access to finance being both shipowners’ and operators’ primary concern. Two years ago, cost was the key issue when choosing a particular technology but this is now the case for only a very small minority, possibly as they expect to pass on or absorb transition costs or due to the challenge of accessing finance mentioned previously.
