Tag Archives: ocean shipping

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

When more is less

Drewry’s has an interesting Container Insight feature that clearly shows how container lines can add ships to their fleet and maintain a fixed effective capacity on a route. The essence of it in simplest form is to go more slowly. Consider their example, in Figure 1.

Figure 1: How to hide containership capacity

Note: * Based on a fixed-day-weekly end-to-end westbound Asia to North Europe service with no wayport / intermediate calls; assumes High-Cube capacity reduction of 8.5% and out-of-scope reduction of 1% (differs by trade).

Source: Drewry Maritime Research

Frequency on the route in Figure 1 stays the same, and the average capacity remains constant. The effective capacity of the trade lane stays the same.

So liner companies have quite a bit of flexibility to deploy their ships and manage the supply. In times when the demand is dropping, however, there are limits to what these policies can do. And all the strategies are not equally profitable. In times of financial pressure there would be motives for firms to use the cheapest solution instead of the one best suited to the customers’ needs, the customer being the shippers.

Understanding your shippers’ needs and developing schedules and provisioning of the routes to meet those real needs is the best way for success.

Drewry – Weekly Feature Articles – When more is less (or net neutral)

Drewry – Weekly Feature Articles – When more is less (or net neutral)

Benefits of slow steaming exaggerated?

Studies by Simpson, Spence and Young, a leading global shipbroking firm, seem to indicate that emission benefits of slow-steaming have been exaggerated.

One reason offered is that the ‘cubic law’, which says that fuel consumption rises as the cube of ship speed, is erroneous for many vessels, and is only approximately true at the designed speed of the ship.

Another problem is that slow-steaming effectively reduces capacity, requiring more ships to cover a route with a regular schedule, for instance. Those extra ships produce more emissions even though the per-ship emissions might be smaller.

Capacity is not a problem at present. There’s not enough cargo. But scheduled service may suffer.

There are a lot of moving parts in considering emissions release.

The best way to attack the problem may be to get to zero or low-emission ships as quickly as possible. But in the short run, these considerations in he study are worth thinking about.

By Charlie Bartlett, technology editor 15/05/2023

Benefits of slow-steaming on emissions exaggerated, studies find – The Loadstar