Are we through the looking glass on sustainability in shipping?

As I write [24/9] , the #GretaThunberg Twitter stream I just created is updating too fast for me to read it. The response to this teenage climate protester is unprecedented; as is the backlash.

It’s disappointing to think that the trend could turn negative so quickly but comforting to believe that Greta probably thinks Twitter is a bit 2006 and something her parents use.

What Thunberg is trying to do is change the conversation – though has been observed even by non-trolls, speaking to liberal elites on the US East Coast is preaching somewhat to the converted.

The Poseidon Principles and their bigger brother the Getting to Zero Coalition, themselves unveiled at the same New York meeting are something similar for shipping. We can’t get to where we need to be by making incremental improvements. New thinking and new approaches are needed.

In principle, what they represent is a new phase in shipping’s relationship to the challenge of decarbonisation, itself a relatively new subject to most players in the industry. In practice, both are market measures in an industry defined by statutory regulation.

What both potentially represent is a break with the regulatory model which many believe is, if not broken, then certainly in need of an overhaul. Given the decade it took to get IMO2020 into statute thanks to delaying tactics by certain member states, it’s reasonable to assume that its 2023, 2030 and 2050 deadlines are tentative.

Both initiatives suggest that there is too much at stake to wait for the IMO and that innovation must be driven by the lenders and the leaders; access to finance will be increasingly dependent on performance so shipowners need to be able to order ‘zero carbon ships’ to remain in the game.

What remains to be seen is whether the owners are prepared to pony up their own money to effectively foot the bill for decarbonisation with the threat that if they do not, no more money will be available in future.

As it was put to me recently, that immediately pushes the finance risk up the chain; away from refinancing of existing ships and towards newbuildings, because owners have no way of knowing what the regulations will actually be in 25 years.

And here lies the problem that the principles and coalition seek to address; without investment in zero carbon ships and zero carbon fuels, the industry will be hard pressed to reach a 50% intensity cut by 2050, let alone net zero.

So much for the stick, but the carrots are trickier to harvest. One could say that holding global warming at anything like UNFCCC targets is incentive enough, but this assumes that all shipowners and charterers agree that it is happening and that contributing to a greater, global good is enough of a lever.

Given the projected levels of non-compliance with IMO2020 as well as the threats by some governments that they might delay implementation, the ability of non-regulatory bodies to persuade owners to comply with a non-mandatory instrument represents the biggest test the industry has ever seen. This decoupling of the industry from its regulatory process also creates the risk that in the rush to do good, those for whom regulation is the driver to their business model will simply see no reason to play along.

This is not a market that traditionally has moved quickly. If LNG is GHG-efficient and cost-effective enough to implement at scale – and after 10 years in which it has penetrated no more than 1% of the fleet, that is questionable – then perhaps the herd instinct will drive shipping towards a lower emissions profile.

The orthodoxy goes that shipping does not reward first movers; they tend more towards martyrdom than the mainstream, so what’s changed? The imploring of a Swedish teenager or the belief that doing the right thing is equivalent to a licence to operate?

For the signatories, that’s what the principles and coalition represent. The challenge it creates is that in future it won’t be a case of a two-tier market but a multi-tier model with more regional variance between performance and compliance.

The reality as described to me by one of the Poseidon Principles founders is that it won’t be more expensive to get new finance without proof of greater efficiency, it simply won’t be possible.

That should push owners into the spotlight, but I can’t help but feel it will see them run for the shadows too, safe in the knowledge that until the IMO manages to write its carbon targets into a new chapter of Marpol, they will still be able to operate with something like impunity.

Calls for a body to research and develop sustainable marine fuels and other clean fuel coalitions sound like the traditional, industry-led response to a problem of this scale and the approach makes sense, though possible IMO auspices are blessing and curse.

The more pressing need is to raise the money that supports development of a range of renewable fuels in a neutral, non-profit forum with results for which the entire industry has access. Sound like shipping to you?

Make no mistake, the Poseidon Principles and the Coalition are a good start; the most concerted and positive action for a decade. Decarbonisation is a process that cannot afford to be delayed by prevarication or by the opposition of governments, but it also needs to demonstrate to the trailing edge that it gives them much more than a nice warm feeling.

Ends