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Part 1: The dilemma of Maritime Decarbonisation

Many reports have been published in the past 18 months that focus on the pace of progress of shipping’s energy transition set against the trajectory of the Paris 1.5°C international treaty. The tone of these reports varies in terms of outlook and positivity. Some praise the exponential growth of key innovations and effective collaboration through ecosystem developments, whilst others report a somewhat bleaker picture of our collective shipping future. Where there is a unanimous agreement, however, is when comparing the scale of effort against the necessary timeline of transition, which points squarely to a need for Shipping to chart a new course towards cleaner and sustainable operations.

To gain a balanced view of progress against plan, it is important to consider the nature of ship management and operation. Management of ships is regularly a relentless exercise in ‘keeping calm and carrying on’. Margins can be paper thin, and markets extremely volatile meaning owners must make the most of the fiscally good times to ride the storm of economic downturns.  Add to this the fact that each ship is an island, anything can, and more likely will happen, and when it does it is generally expensive and time-consuming to correct, necessitating an all-hands-on deck approach to resolution. When such occurrences happen on a near daily basis, it is little wonder ship owners have little time and energy to apply already scarce resources to solving the global climate crises – after all theirs is just one of nearly 60,000 ships operating globally. What difference would it make?

Until shipping companies experience first-hand the financial crunch of emission trading schemes, or the operational disruption of implementation of the CII-imposed ‘corrective action plans’, why would they resource specialists in environmental compliance who may not directly deliver day-to-day relief of ship management? Particularly in this hyper competitive market when budgets are set retroactively and monitored closely. Similarly, why would they invest in new-fangled energy efficiency technologies that may, or may not enable environmental compliance, but will certainly act to worsen the original operational challenges with yet more machinery maintenance, inspection and repair?

The constant balancing act of effective operations for today vs. environmental stewardship for tomorrow is one of the biggest dilemmas and therefore blockers to expedite maritime decarbonisation.

Unfortunately, this dilemma is compounded by the general lack of directives from many of these reports and underpinning regulations, resulting in huge proportions of the industry becoming frozen in inaction whilst they wait to see what everyone else does. Goal-based regulations that project a general “it doesn’t matter how you do it, just do it” approach to compliance is great for enabling flexibility and hot competition within the market for technology, however loopholes emerge that whilst enabling ship owners to comply, they do so in a way that can actually be detrimental to the environment. A good example of this is the ‘transport work’ component of the CII calculation which incentivizes inefficient operational practises and Engine Power Limitation which synthetically reduces the total capacity of the world fleet and by doing so incentivizing the environmentally damaging practises of early ship retirement and excessive construction of replacement ships.

Interestingly, certain reports do not shy away from outlining the pure scale of intervention needed in the energy efficiency space. For example, Maersk Centre for Zero Carbon Shipping’s 2022 Maritime Decarbonization strategy explains that “1/4 of all vessels must include new, CapEx intense technologies such as air lubrication and wind assisted propulsion” by 2030 to realise 1 EJ saving through energy efficiency (1EJ equates to approx. 45% of emissions in 2030 as compared to 2010 levels). Similarly, a UK Department for Transport’s report projects the air lubrication market alone will reach $2.8B/ annum by 2027. Whilst these projections may be considered ambitious, there is hope that they become self-fulfilling prophecies. However, until then, the timeline to adopt these technologies shortens and there is an ever-growing emphasis for capital markets and ship owner/operators to act. The sad fact of the matter is that globally the shipping industry has seen less than 0.2% adoption of Air Lubrication technology to date.

All of this said, there is certainly hope for rapid improvement. Shipping is currently rife with technological innovation as well as public funding to bolster it. Similarly, 2023 is believed to be the year of hardware venture capital financing, and for this reason it is likely that we will see more and more exceptional innovation emerging in this space. As vendors in each technology category push to bring to market a dominant design, innovation makes way for further innovation, and it is from this position that Armada is very well placed to offer the industry a solution to its maritime decarbonization dilemma. I for one have a lot of belief in what Shipping can do when we work together to solve these world scale challenges, so let’s watch this space.

 

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