Tag Archives: decarbonization

EU ETS at a glance

I found this article very informative. It’s from Bureau Veritas, a classification society based in the EU.

It makes very clear how the EU’s emissions trading system (ETS) will work for the maritime industry. It’s part of the Fit for 55 package that aims to reduce emissions by maritime and other sectors in the EU.

The timeline is very important for shipowners and ship charterers. The rules require payments for emission credits, so there will be a financial impact. It remains to be seen how chartering contracts will divide the costs of the credits between shipowners and charterers, but the financial burden will be there.

Most people agree that the emissions trading credit system is an extremely important motivator for participants in the maritime industry to get serious about reducing emissions. We are seeing activity now to reduce emissions, but the pace has to pick up if the EU goals of a 55% reduction by 2030 are to be met. Investment is needed, and internalizing the cost of emissions through the trading of credits is an important lever to use. It’s a good example of a sensible regulation to impel action. More nations should try it.

The FAQ format of the article makes it easy to see the answers.

One unfortunate issue is the somewhat longer time frame for implementation of the ETS; the first bite starts in January 2024, covering 40% of emissions. This escalates to 70% in 2025 and 100% in 2026. Another critique of the system is that for ships that either enter or exit the EU ports fro outside the EU, they only pay for half the emissions. It’s a compromise that is necessary, since nations outside the EU might have their own emissions trading regimes, or none at all. Having it apply only to EU port visits insures more cooperation.

The basis of the trading is an updated MRV plan, which must be kept updated. There will be an accredited verifier of the plan for each fleet owner. The fleet’s individual greenhouse gas (GHG) emissions must be monitored from January 1 of 2025, and a report submitted by March. Then by September, the emissions will be calculated (surrendered, in the words of the document) and the emissions credits purchased on 40% of it.

Penalties include expulsion orders from EU ports, or a flag detention order until obligations are fulfilled, for EU member state flagged ships.

EU Emissions Trading System Directive | Bureau Veritas M&O

EU Emissions Trading System Directive | Bureau Veritas M&O

Biden climate blueprint promotes modal shift away from trucks

Building on the idea that maritime and rail generate less carbon than trucks, the blueprint for decarbonization suggests shifting transport to those means.

That’s easier said than done. The EU has been working hard for some years on a modal shift to river and rail transport for cargo inside Europe. They have actually had some success— a few percent improvement.

But the geography of the EU is a lot more conducive to waterborne transport of cargoes. There there are quite a few navigable rivers going inland from the coast where the ports are. Many EU ports have set up ‘inland ports’, large distribution areas inland that often can be reached by barge, to offload container cargoes and get them ready for distribution. This foresighted policy offers many advantages, both from an ESG standpoint, and for reducing congestion at the ocean ports. But the US has only one large river, the Mississippi, navigable for a long distance into the heartland, in a land mass much larger. Smaller rivers on the East Coast don’t go as far.

However, particularly on the Mississippi, there is a lot of potential for more barge traffic. I also suspect that maritime transport could be used along the coasts for some kinds of moves, particularly movements of products like refinery outputs, that might travel by truck otherwise.

So there is rail. The EU has a problem with rail; most rail is state-owned, and is oriented around passenger travel, not freight. And rail lines in Europe are not all compatible; not only are their practices disparate, but the physical equipment isn’t even compatible at some borders. That adds transfer delays as well as simple handling delays to transport. The EU will have a much harder and more costly time increasing rail cargo percentages.

In the US, we have seven Class I rail firms, all private, that crisscross the country and offer cargo service. Rail can provide the backbone of distribution from ports to the hinterland. But will it? Rail firms are all private, not public; they are currently focused on their most profitable segments, and have engaged in rampant cost-cutting. Sometimes, it’s referred to as PSR (precision scheduled railroading), but quite often it is more closely allied with old-fashioned cuts driven by short-term accounting. The recent reductions in staffing are claimed to result from PSR, but in fact, simply serve to reduce operating costs and improve operating ratios. They may result in reduced safety, as some of the claims in front of the STB put forward. And the popular step of running really long trains to save labor costs reduces flexibility and adjustability of rail traffic to support less predictable loads. These moves by private firms greatly increase the complexity of carrying out the proposed modal shift in the US.

But certainly a modal shift will reduce carbon output. And there is actually a lot that a government push could accomplish. Some of these things are:

  • Infrastructure improvements for inland maritime operations;
  • Streamlining projects for on-dock rail at ports large and small;
  • Inducing rail lines to improve their rail yards and lines to support a more flexible cargo mix and customer set;
  • Driving rail common carrier rules that will induce or force rail lines to accommodate cargoes from a broader set of customers, even though the traffic will not be as profitable as long steady coal or grain trains.
  • Keeping pressure on the rail lines to serve a broad base of customers, particularly intermodal (container on flat car or trailer on flat car). A move to transport this type of cargo long distances to inland container terminals would help with emissions and get trucks off the major interstates.
  • Supporting inland terminals and distribution points that are rail connected.

There are probably more, and Pete Buttigieg and the President’s commission on supply chain probably are thinking of them.

The biggest problem is how to get private industry and investors on board to finance and support the projects.

US National Blueprint for Decarbonization

John Gallagher·Tuesday, January 10, 2023

Biden climate blueprint promotes modal shift away from trucks – FreightWaves

Supply chain decarbonisation needs partnerships to create a reaction

This discussion of a recent UNCTAD paper by Mikael Lind and Wolfgang Lehmacher sheds light on the complex problems facing shipping in the path to decarbonization. It spawned a whole chain of searches for me, to find out more about what some visionaries in the field are saying.

Admittedly seeing the future is fraught with risk. Scenario analysis gives one a sort of lay of the land. The article shows clearly how partnerships are essential since the problem is bigger than any one firm or country.

Read the article, and follow some of the links; you’ll be rewarded with a view of the problems the maritime industry faces to decarbonize.

Nick Savvides 20/09/2022

Supply chain decarbonisation needs partnerships to create a reaction – The Loadstar