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Source: Carbon Positive
Image: Helena Athoussaki, CEO, Carbon Positive

Shipping’s CO2 Tipping Point: Managing Carbon Emissions

Market fundamentals and impending emissions regulation demand that shipping takes the next step in formalizing and professionalizing its approach to sustainability, reflecting its increasing importance as a business-critical asset. As bunker prices rise, difficult market conditions persist and regional carbon emissions regulations strengthen, minimizing carbon management risk and encouraging shipping to become more sustainable and share this transparently with all key stakeholders will be critical to securing a competitive advantage.

The connection between sustainability and commercial success is strengthening and although the shipping industry is gradually preparing for imminent regulation, this focus must increase. DNV recently stated that as few as 10% of shipowners are implementing energy efficiency initiatives , and the market stalemate on regulation, lack of clarity surrounding emissions management best practice and sheer volume of information around this in the market has hindered action.

While no specific mechanism is yet confirmed, further emissions regulation and a price on carbon in some form is a certainty. So taking the appropriate action now will ensure that shipowners are better prepared with a strong commercial advantage once compliance is made mandatory. Without a well-structured and formal reduction program, revenue can be at risk or lost from carbon costs.

Managing carbon emissions risk is therefore the crux of the challenge facing shipowners, who need expert support to navigate the strategic management of carbon emissions, which can be complex. Understanding the ways that carbon management can affect your business is a knowledge curve that must begin now, taking into consideration operational factors, mandatory regulation - such as EEDI and SEEMP - and CSR, as carbon has the potential to impact the bottom line in a variety of ways.

Adopting a process at an early stage that takes a holistic approach, encompassing all options starts with monitoring and reporting, as this will be required for any European policy, and implementing a standardised process is crucial for the environmental effectiveness of any successful carbon reduction scheme. The first step is to accurately measure carbon footprint, starting with every vessel and port. This vital data will be used to set baselines and therefore emissions reduction targets. Not only is creating transparency the absolute foundation of any successful emissions reduction programme, but on an industry-wide level it is particularly crucial for an emissions trading system. Secondly, using the latest and most effective technical and operational measures to reduce emissions in line with current regulations will result in genuine cost savings and better performance that can be monitored and reported. The last step is for the ship owners to voluntarily offset their carbon emissions and prepare for further regulation, while responding to sustainable shipping in a responsible and professional way.

Shipping must collectively look to assist the regulator to develop a cost-efficient process and take a longer-term view. This will establish the industry’s current carbon footprint based on true and current data that can be used to benchmark success and set achievable reduction targets, which of course will be absolutely critical for any carbon emission reduction scheme.

From an organizational perspective, while sustainability is rightly increasingly taken seriously at board level, a formal process is essential to enhance this progress further by articulating the clear-cut commercial benefits of investing in both technical and operational measures, ensuring a competitive advantage and minimising risk. Taking a strategic approach to carbon by aligning this with stakeholder expectations, business strategy and the vision for your organisation will eventually become second nature to shipping companies as it is within other industries. Having a healthy awareness of the operational, regulatory and reputational risks that carbon presents and turning those into opportunities to build commercial advantage will benefit both the environment and the bottom line.

Not only do efficiency measures simultaneously reduce fuel consumption and therefore spend, at the same time the world’s focus on shipping’s stance against climate change continues to sharpen. Stakeholders across the global supply chain are all placing greater importance on carbon emissions management. Major retailers are driven by consumer interest in sustainability, for example, and for financial institutions climate change CSR is now a key criterion on which banks such as ABN Amro evaluate future funding.

Where the financial institutions lead, charterers follow closely as they are also attracted to more efficient vessels. Communicating your sustainability credentials to these stakeholders in a way that is standardised and accredited by an independent, third-party organisation is another element of a formal emissions reduction programme. Being able to show that a vessel is part of a carbon reduction programme will become an additional asset that adds genuine value and return on investment for your organization.

Essentially, investing in efficient vessels means investing in a long-term carbon emission strategy. Guided by experts and based on a three-phase programme of measuring, reducing and offsetting carbon emissions, this will prepare shipowners to weather the introduction of competition further regulation and fluctuating fuel prices. Whilst we wait for further regulation to be agreed, the shipping industry must focus on understanding that carbon has a price, as well as the proactive measures that can be taken to realise the value that it presents both now and in the years to come.

This is a pivotal time in the development of global carbon measure for shipping. Now, more than ever, ship owners need support to understand and capitalise upon this new era of emissions regulation and the positive impacts that this can bring to the market.