Category Archives: Managerial Econ

Posts relevant to Managerial Economics.

How to better deliver carbon reductions in EU’s maritime sector

This article takes issue with the Emissions Trading System (ETS) put in place by the EU. Pricing the emissions of various fuels into the equation will induce fuel users to use cleaner fuels in some cases. The argument goes that such process, based on greenhouse gas (GHG) emissions from the fuel, will be compromised by the lack of availability of cleaner fuels until sufficient supplies are readily available. And the process considers only greenhouse gases and not the lifecycle costs of certain fuels.

Perhaps the pricing scheme can be adjusted. Certainly there will be more investment in cleaner fuel capabilities. But the issues brought up are real. Just how significant they are is yet to be seen.

One real issue, however, is the fact that maritime operators can avoid fueling at EU ports and places where the ETS price is added. They can choose routes where dirty fuels can be burned, and minimize their time sailing where ETS is enforced. One way to reduce this is to create green corridors, where use of clean fuel is mandatory. An example is the Singapore to Rotterdam corridor backed by those governments.

Added 9/30/2022: Other green corridors are being planned. Here is one between Hamburg and Halifax.

By Jim Corbett | World Shipping Council Sep 20, 2022

How to better deliver carbon reductions in EU’s maritime sector –

Carriers unable to pay drivers, buy fuel after CoreFund Capital closes

More heartbreak for truckers, especially owner-operators.

Many small businesses turn to factors to handle one of the messiest jobs, invoicing and collecting from customers. Factors collect a percentage for each transaction, and often advance the money to the trucker before it’s collected. It costs the trucker some of her earnings, but the money is available right away, and the factor handles the arguments with the shippers.

But when a factoring firm, such as CoreFund Capital, goes bankrupt, truckers who have not received funds for their invoices are out of luck. They have to stand in line with other creditors, waiting for a court to approve payment.

That means they don’t have cash for immediate expenses such as fuel, even though they have already completed work they have not been paid for. Some cash flow problem, right?

And there isn’t much that can be done. The contracts that included use of CoreFund for payment have to be broken (by a court or receiver) before alternatives can be put in place.

The firm is owned by some brothers, and a family feud may be behind the collapse. Let’s hope the truckers get paid soon.

Clarissa Hawes Thursday, July 28, 2022

Carriers unable to pay drivers, buy fuel after CoreFund Capital closes – FreightWaves

Liners get a preview of alternative fuel costs

A new technical and commercial comparison of alternative fuels for ocean carriers compares expected bunker costs for different size and differently equipped ships. Alphaliner, a consultancy for ocean carriers, has reviewed that comparison.

Alphaliner’s review shows the ship owner and operator what they can expect in economy over the next few years. The results indicate that as the new regulations for CO2 emissions kick in, fuel costs will become a much larger percentage of total ship operating costs, perhaps double, or even more.

For instance, the graph they publish shows fuel costs for differently equipped Megamax-24 (MGX-24) ships. A megamax-24 ship is typically 400 meters long and 61 meters wide, with a depth of about 33.2 meters. It should carry around 23,500 twenty-foot equivalent (TEU) containers (Alphaliner newsletter).

The graph compares use of fossil fuels, bio fuels, and power-to-fuel (PtX) fuels (read about them). The PtX fuels convert renewable sources such as wind, sun, hydro, and geothermal, to fuel products such as hydrogen, ammonia, or products containing carbon, such as syn-crude. If carbon is used in the PtX process it should be from non-fossil sources or unavoidable industrial carbon emissions capture and reuse.

Source: Splash247 article.

Even bio-fuels cost a lot more than conventional fuels when all the upstream supply chain emissions are considered, for these very large ships.

The graph seems to imply that scrubbers are still a very important technology in the fight to clear the air. And LNG has a role to play, though it might be temporary. At their best, the PtX technologies such as electric-powered ships are comparable to or better than bio-fueled vessels.

There’s clearly a long way to go for ocean shipping to go where it needs to in the race to clean up global emissions.

However, some of these non-fossil technologies will adapt over the next few years, and costs will come down. It’s hard to do much more with the fossil fuel technology.

The argument Alphaliner makes is that soon fixed costs will be a smaller part of the total cost of a large ship than fuel operating costs. As these proportions change, emphasis will come more on building ships with desirable emissions control power systems, since the availability and price of fuel will be driving overall costs.

That’s an interesting point. We will see the extent to which it influences the next generation or two of ship orders.

Sam Chambers July 27, 2022

Liners get a preview of alternative fuel costs – Splash247