Shipping charts a course for cleaner oceans
The environmental impact of marine shipping is set to fall in the coming years as a result of new initiatives and financing.
According to the UN’s International Maritime Organization (IMO), over 80% of world trade is carried across the world’s oceans. While shipping is the most energy-efficient way to move large volumes of cargo, it is nevertheless heavily polluting, accounting for 2.3 % of global CO2 emissions. Low-grade ship bunker fuel (or fuel oil) has up to 2,000 times the sulphur content of diesel fuel used in European cars. Moreover, rising emissions are anticipated: if growth continues at the current rate, emissions could be as much as 250% higher by 2050.
New rules are coming into force in 2020 designed to curb pollution. The rules, drawn up by the IMO, will dramatically cut sulphur emissions (which cause respiratory illness and acid rain) by banning ships from using fuel with a sulphur content higher than 0.5% (compared to 3.5% currently). Ships can continue to use high sulphur fuel if they have equipment, so-called sulphur scrubbers, to clean sulphur emissions. But this technology costs around €1 million to €3 million per ship and is in short supply in the run up to the deadline.
In February, ING signed a €300 million green shipping partnership agreement with the European Investment Bank (EIB) to provide attractively priced finance to sponsors of sustainable shipping projects and investments in areas including alternative fuels (such as liquefied natural gas), hull treatment and ballast water treatment systems. The facility is available to clients with significant European interests, and can be used for green innovation projects relating to the construction of new vessels or retrofitting of existing vessels. It applies to both inland shipping and seagoing operators.
ING and the EIB will each contribute € 150 million to the facility which will be invested by ING’s shipping team over the next three years to help clients make sustainable changes to their business models on favourable terms.
“The shipping sector is a major contributor to CO2 emissions. Climate action is one of the EIB’s top priorities, and this type of financing should be seen as an incentive for ship owners to consider doing things differently,” says EIB president Werner Hoyer. “The facility was set up after numerous discussions with Dutch counterparts from the public and private sector and aims to help the shipping sector transition to a greener future.” 1)
Isabel Fernandez, head of ING Wholesale Banking, adds: “This agreement helps us support our shipping clients in making changes to their business models by adapting for the future in an increasingly sustainable way, and supports them throughout their green journey.”
The new IMO rules are not without their critics. There are suggestions that ships using sulphur scrubbers could rinse them at sea, killing marine life, or that some ships could try to avoid inspections by carrying both low- and high-sulphur fuel. Some scientists have even suggested that reducing sulphur emissions could accelerate global warming, as sulphur in the atmosphere helps to reflect heat. Despite such concerns, by focusing attention on shipping pollution, the IMO rules are an important step in the right direction, according to most ship operators and environmental campaigners.
For shipping, moving to low sulphur fuel could just be the first step towards greater sustainability. Alternative fuel sources that are currently seen as potential solutions for other forms of transport – most notably battery storage of electricity for electric vehicles – are currently inadequate for the huge power demands associated with shipping. One potential option, however, is liquefied natural gas (LNG).
While gas is a fossil fuel, its CO2 emissions are 30-40% lower than coal, it has no sulphur oxide, hardly any nitrogen oxide emissions and produces no particulates, notes Rolf Brouwer, managing director of Gate terminal, a 35 hectare LNG depot built on reclaimed land in Maasvlakte, Rotterdam. He describes LNG as a transition fuel that can play an important role while electricity and other technologies evolve. 2)
“We were one of the first companies to establish a significant presence in this new supply chain when we built small scale ship loading facilities, starting in phases between 2014 and the summer of 2017,” says Brouwer. “We took a calculated risk to develop this market – the investment was not supported by customer contracts.” There are now commercial facilities available across the Netherlands for ships to refill with LNG.
Gate terminal has a close partnership with its banks, including ING. “When we raised finance for our third jetty recently, ING was part of the deal – just as it had been in the previous tranches – and acted as agent to the banks,” says Annunziata Tripodi, finance manager at Gate terminal. “We value that commitment, knowledge and understanding of our objectives. We feel supported by ING at all times and appreciate the fact that ING really knows what we trying to achieve at Gate terminal.”
Responsible ship recycling
ING has also been involved in efforts by the banking sector to encourage responsible ship recycling. Ships pose a large social and environmental risk for the industry at the end of their lives. Working with two other banks, ING is encouraging financial institutions worldwide to endorse the Responsible Ship Recycling Standards (RSRS): the initiative now has eight members worldwide.
“ING finds it important to engage in discussion with our clients on the importance of responsible ship recycling in order to raise industry awareness and encourage regulatory bodies to take decisive action,” explains Stephen Fewster, ING’s global head of shipping.
The RSRS aims to promote responsible ship recycling and minimise the dangers associated with hazardous materials on board ships. Signatory banks engage with ship owners and encourage them to prepare and maintain an inventory of hazardous material (IHM) on board their ships. This describes the materials present in a ship’s structure and equipment that may be hazardous to human health or the environment. The presence of an IHM will contribute to crewmembers’ safety during the ship's working life and minimise adverse effects on the environment. It should also improve the safety of workers during recycling.
Labour union FNV, the NGO Shipbreaking Platform, which works to prevent end-of-life ships from being run aground in developing countries, and the Bellona Foundation, a non-profit organization that fights climate challenges, have endorsed the initiative. “We welcome the leading role taken by the banks to ensure a departure from the unnecessarily risky, dirty and dangerous practice of beaching, and expect that investors and clients of shipping that are increasingly pushing for higher standards for ship recycling will join the initiative,” says Ingvild Jenssen, founder and director of the NGO Shipbreaking Platform.
Better use of data
While large scale initiatives such as cutting sulphur emissions and improving ship recycling will make a major impact to shipping’s sustainability, smaller scale measures are also important. Dutch company CoVadem’s technology provides up-to-date water depth information by combining a 'sailing network' with big data technology. Water depth information is critical to inland shipping because to optimally load a vessel, without the risk of grounding somewhere on the intended route, ship owners need actual and forecast information.
CoVadem captures depth information readings from the collaborating vessels’ echo sounders and combines it on cloud-hosted servers. The data is then filtered, processed, enriched, managed and finally distributed via a growing range of services. The data should help prevent ships from running aground and causing potential environmental damage; it will also help to improve fuel efficiency, reducing CO2 emissions.
CoVadem recently won the 2018 Investment Ready accelerator for sustainable startups, which is a five-month accelerator for scalable solutions to global sustainability challenges, and will receive support from partners including ING. Ultimately, CoVadem plans to offer a subscription-based service that enriches existing navigation software with its valuable depth information.
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