Shipowners Seek to Slow Services to Meet Emissions Limits

Jerry Zaidi|May 13, 2019|No Comment

In 2019 Shipowners Consider Slowing Services to Meet Stricter Emissions Limits

As the shipping industry works to reduce its impact on the environment, shipowners are exploring a range of options to meet stricter emissions limits. One approach that is gaining popularity is to slow down shipping services, reducing fuel consumption and emissions.

Slowing down shipping services involves reducing the speed of vessels, which in turn reduces fuel consumption and emissions. This approach is seen as a cost-effective way for shipowners to comply with stricter emissions limits, while also reducing operating costs and extending the lifespan of their vessels.

The International Maritime Organization (IMO) has set strict new emissions limits that will come into effect in 2020, requiring ships to reduce their sulphur emissions by 85%. Shipowners are already taking steps to comply with these new regulations, with many investing in new technologies and alternative fuels.

However, slowing down shipping services is seen as a complementary approach that can further reduce emissions and help shipowners meet their emissions targets. According to industry experts, slowing down services by just a few knots can lead to significant reductions in fuel consumption and emissions.

Despite the potential benefits of slowing down services, some industry players have expressed concern about the impact on supply chains and the wider economy. Slower shipping services could lead to delays in the delivery of goods, which could in turn affect the supply of goods and increase costs for consumers.

To address these concerns, some shipowners are exploring ways to balance the benefits of slower services with the need to maintain reliable supply chains. This may involve working closely with customers to manage expectations and ensure that any delays are minimized.

In addition to slowing down services, shipowners are also exploring other options to reduce their environmental impact, such as investing in alternative fuels, improving the efficiency of their vessels, and developing new technologies to reduce emissions.

Overall, the shipping industry is facing significant challenges as it works to reduce its impact on the environment. Slowing down shipping services is just one approach that shipowners are considering, alongside a range of other options. As the industry continues to evolve, it will be important for shipowners to balance the need to meet stricter emissions limits with the need to maintain reliable supply chains and keep costs under control.

After The Pandemic: 2022 Updates

In addition to the challenges posed by the pandemic and geopolitical conflicts, companies worldwide must prepare for another obstacle on the horizon: new environmental regulations that will reshape the operations of shipping companies on transoceanic and regional routes.

The International Maritime Organization (IMO), a United Nations agency responsible for regulating global shipping, will implement rules with far-reaching implications for container lines and the choices made in production locations that form the foundation of global supply chains. Additionally, the European Union (EU) is set to pass regulations, likely in 2022, that will further complicate matters and add costs. Supply chain and sourcing managers need to plan for these upcoming changes proactively.

Maritime transport is the backbone of international trade, offering a cost-effective means of moving large volumes of goods over long distances. However, this sector is also a significant contributor to greenhouse gas (GHG) emissions, accounting for approximately 3% of global emissions.

The burning of heavy marine fuel oil in ship engines produces not only carbon dioxide (CO2) but also other harmful pollutants. If no measures are taken to mitigate emissions, the IMO projects that CO2 emissions associated with the sector could increase by up to 250% between 2014 and 2050. Overcoming emissions challenges is complex due to the need for large amounts of energy over long distances without convenient refuelling options.

Achieving net-zero emissions by 2050 will require substantial investments in near-zero fuels and propulsion technologies by as early as 2030.

Beginning in January, the new IMO rules will necessitate individual ships to measure and report a carbon intensity index called the annual efficiency ratio (AER). The AER considers a ship's deadweight tonnage (DWT), fuel consumption, distance travelled, and other factors from the previous year. Ships are graded from A to E, with grades becoming increasingly stringent each year. Vessels that fail to comply may face penalties, including removal from service and scrapping.

These rules will significantly impact container shipping, a vital component of global merchandise trade. Many older and smaller ships with less than 8,000 twenty-foot equivalent unit (TEU) capacity are expected to fall short of compliance requirements, posing severe challenges.

To improve a ship's grade, shipping companies have three primary options:

1. Switching to fuels with lower CO2 emissions: Some companies are exploring alternative fuels such as bioethanol, liquified natural gas (LNG), and hydrogen. However, the scalability and availability of these fuels remain vital factors in their viability.

2. Changing operational practices: Optimizing routes, reducing port calls, and implementing fuel-saving measures like slow steaming can help improve efficiency and compliance. However, these measures have practical limits, and older ships may need to be replaced.

3. Making technical refinements: Upgrading engines, emission controls, and hull designs can contribute to reducing emissions. These enhancements, however, come with significant costs.

Decarbonizing ocean shipping will reshape cost considerations for sourcing goods. While spot market rates have recently declined, it is unlikely that costs will return to pre-pandemic levels. Carriers planning to add new capacity will face challenges as retiring older ships, which need help to meet emissions regulations, balance out the additions. Producing goods far from their point of consumption may become less viable, even if production costs are lower.

Lower-volume trade lanes will likely experience less-frequent and higher-cost services, favouring efficiency, larger ships, and fewer port calls.

Companies exporting to Europe or relying on European suppliers should anticipate the higher costs associated with the EU's Emissions Trading Scheme (ETS) and the Carbon Border Adjustment Mechanism (CBAM). Similar actions by other countries may also require adjustments in supply chain strategies. Policies and regulations to mitigate climate change will significantly impact supply chain design and shipping logistics. As costs rise and practicalities change, companies must adapt and plan for this new era in shipping. 

The time to start preparing for these changes is now.