Emerging Trends in the Shipping Industry –Transitioning Towards Sustainability

AbstractGrowing concerns about the slow revival of the world economy, volatility in oil prices, overcapacity in shipping and fierce competition is denting profits in the shipping industry. On the other hand, emergence of greenhouse gas emissions and pollution control regimes at sea is forcing ship owners to make expensive technical modifications onboard ships, which are further driving up the costs of operations. In such a rapidly changing scenario, there is a need for a long-term vision for transitioning to an era of sustainability in the international shipping industry. The paper commences with a discussion on the concept of sustainability as applicable to the shipping industry and highlights the recent developments in the maritime domain, which pose significant environmental and economic challenges for the shipping industry. It identifies the emerging trends in the shipping industry and argues that these challenges also present a window of opportunity for the industry, for undertaking a paradigm shift towards sustainable shipping. It further explores the transition pathways and presents various options that can be implemented in the shipping industry, which will aid its transition towards sustainability. Using a case study, the paper highlights the key characteristics of sustainable shipping and briefly discusses the Indian maritime scene before concluding that the adaptability of the world shipping industry to adopt the practices of sustainability is fundamental to its survivability in forthcoming decades. Notes1. Vincent Valentine, eds. , Review of Maritime Transport 2008 (New York and Geneva: United Nations Conference on Trade and Development, United Nation, 2008). http: //unctad. org/en/docs/rmt2008ₑn. pdf (accessed February 1, 2014). 2. World Shipping Council. http: //www. worldshipping. org/about-the-industry/global-trade/trade-statistics (accessed February 5, 2014). 3. Expected to be 9. 55 billion tons in 2013 as per preliminary estimates. 4. "Sustainable Development" is defined by Brundtland Report, United Nations World Commission on Environment and Development, 1987 as "development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs". 5. Koji Sekimizu, Secretary-General, IMO, "Vision of Sustainable Maritime Development" (paper presented at side event of Rio +20, Rio de Janeiro, Brazil, June 20, 2012). http: //www. imo. org/mediacentre/secretarygeneral/speechesbythesecretarygeneral/pages/rioplus20sideevent. aspx (accessed February 10, 2014). 6. IMO has identified seven key areas of work to promote sustainable maritime development, namely global standards for shipping, energy efficiency, new technology and innovation, maritime education and training, maritime security, maritime traffic management and the development of maritime infrastructure in the Rio +20 UN Conference for Sustainable Development. Anon, IMO and the Environment (London: International Maritime Organization, 2011). http: //www. imo. org/OurWork/Environment/Documents/IMO%20and%20the%20Environment%202011. pdf (accessed April 10, 2013). 7. The IMO is the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships. 8. World Maritime Day focuses on the importance of shipping safety, maritime security and the marine environment and to emphasize a particular aspect of IMO's work. The theme for World Maritime Day theme for 2014 is "IMO Conventions: Effective Implementation". 9. IMO Council: 108th session – 11 to 14 June 2012, Briefing: 23, June 18, 2012. http: //www. imo. org (accessed on January 21, 2013). 10. Sam Kimmins, Rupert Fausset and Stephanie Draper, Sustainable Shipping Initiative – The Case for Action (London: Forum for the Future, 2011). http: //ssi2040. org/wp-content/uploads/2012/11/SSIfullreport. pdf (accessed March 10, 2013). 11. Megha Mandavia, "Shipping industry may confront another deluge of overcapacity, " Economic Times, April 2, 2014, New Delhi edition. 12. 625 dry bulk and 192 container ships were ordered in 2011. Megha Mandavia, "Shipping industry may confront another deluge of overcapacity, " Economic Times, April 2, 2014, New Delhi edition. 13. 625 dry bulk and 192 container ships were ordered in 2011. Megha Mandavia, "Shipping industry may confront another deluge of overcapacity, " Economic Times, April 2, 2014, New Delhi edition. 14. These include air emissions, ballast water discharges, oil spillages, ship recycling, garbage disposal at sea, ship bio-fouling and emission of volatile organic compounds (VOCs). 15. ECAs are specially protected areas that are sensitive to marine pollution and have high density of shipping. An EAC can be designated for SOx and PM, or NOx, or all three types of emissions from ships, subject to a proposal from a Party to Annex VI. 16. Existing EACs include: the Baltic Sea (SOx, adopted: 1997/entered into force: 2005), the North Sea (SOx, 2005/2006), the North American ECA, including most of US and Canadian coast (NOx & SOx, 2010/2012) and the US Caribbean ECA, including Puerto Rico and the US Virgin Islands (NOx & SOx, 2011/2014). 17. Chapter 4, "Regulations on energy efficiency of ships". 18. Market-based mechanisms include emissions trading, emission-related charges and taxes, and emissions offsetting. 19. Seventeenth session of the Conference of the Parties (COP 17), took place from 28 November to 09 December 2011 in Durban, South Africa. 20. Proposed jointly by International Chamber of Shipping (ICS), Oxfam and the World Wildlife Fund (WWF). 21. This tax would raise 26 billion a year, which would contribute to the UNFCCC "Green Climate Fund". 22. Anon, Comment on "EU shipping carbon tax faces widespread opposition" posted from People's Daily March 7, 2012. http: //www. safety4sea. com/eu-shipping-carbon-tax-faces-widespread-opposition-10015 (accessed April 3, 2014). 23. The weekly weighted average bunker fuel prices (in US per metric ton) on the west coast of US changed from 274 in the week ending 05 June 2009, peaked to 749 in April 2012 and was 668 in the third week of August 2012. It is currently 589 USD/ton for bunker fuel. http: //www. tsacarriers. org/calcbunker. html (accessed April 9, 2014). 24. The cost of bunker fuel was assumed to be 400/ton in the study. 25. As per 2010 cost data. 26. The cost of distillate fuel onboard ships in 2030 is forecasted to increase to 1300/tonne, as per the projections of Annual Energy Outlook, 2011 (Department of Energy, US), due to the mandatory shift in fuel mix towards low sulphur fuels. 27. Clean North Sea Shipping. "Clean Shipping Technology. " http: //cleantech. cnss. no/air-pollutant-tech/sox/low-sulphur-fuel/ (accessed February 3, 2014). 28. Residual oil is the heaviest fraction of the distillation of crude oil, with high viscosity and high concentration of pollutants (e. g. sulphur). It is the cheapest liquid fuel on the market. IFO stands for intermediate fuel oil. IFO 180 has a viscosity of 180 centistokes at 50°C while IFO 380 has a viscosity of 380 centistokes. While IFO 380 has a mix of 88% residual oil and 12% distillate oil, IFO 180 has 98% residual oil and 2% distillate oil. Due to the higher content in distillate oil, IFO 180 is more expensive than IFO 380. Although the ISO specification for sulphur content (by weight) in both IFO 380 and IFO 180 is 5%, the same has been revised to 4. 5% by the IMO. MDO mainly consists of distillate oil (with traces of residual oil) and has a 2% sulphur content (by weight). MGO is a pure distillate oil, has a 1. 5% sulphur content (by weight) and is used in boats. Ministry of Transport, Government of New Zealand. "Series data TI 008 Bunker Fuel Prices" Transport-Related Price Indices: Prices. http: //www. transport. govt. nz/ourwork/tmif/transportpriceindices/ti008/ (accessed February 9, 2014). Aviation and the Belgian Climate Policy: Integration Options and Impacts. "Glossary – Marine Fuels". ABC Impacts. http: //dev. ulb. ac. be/ceese/ABCImpacts/glossary/marinefuels. php (accessed February 9, 2014). 29. Ivar Strand, A Game Changer for the Shipping Industry (Oslo: Pricewaterhouse Coopers AS (PwC), June 2011). 30. Ivar Strand, A Game Changer for the Shipping Industry (Oslo: Pricewaterhouse Coopers AS (PwC), June 2011). 31. The current cost of MDO and IFO 380 per tonne at Singapore is US895 and US582. Bunker World. "Bunker Prices. " http: //www. bunkerworld. com/prices/ (accessed on April 9, 2014). 32. In comparison, the same for rail and road is in the range of 15–120 and 80–180 g CO2/ton-km respectively. Ø. Buhaug et al. , Second IMO GHG Study 2009 (London: International Maritime Organization, 2009). 33. Of this, 870 million tons of CO2 was emitted from international shipping and the rest was attributed to domestic shipping and fishing. In comparison, the same for rail and road is in the range of 15–120 and 80–180 g CO2/ton-km respectively. Ø. Buhaug et al. , Second IMO GHG Study 2009 (London: International Maritime Organization, 2009). 34. Of this, 870 million tons of CO2 was emitted from international shipping and the rest was attributed to domestic shipping and fishing. In comparison, the same for rail and road is in the range of 15–120 and 80–180 g CO2/ton-km respectively. Ø. Buhaug et al. , Second IMO GHG Study 2009 (London: International Maritime Organization, 2009). 35. A modelling scenario in climate change mitigation, which sets out an energy pathway consistent with the goal of limiting the global increase in temperature to 2°C by limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2. 36. IMO Council: 108th session – 11 to 14 June 2012, Briefing: 23, June 18, 2012, Available at http: //www. imo. org (accessed on January 21, 2013. 37. Carbon intensity from shipping is projected to decline from 25. 93 grams of CO2 per ton-mile in 2007 to 17. 22 grams per ton-mile in 2030 under the intermediate scenario and to 16. 40 grams CO2 per ton-mile, under the best-case scenario. Buhaug, Ø. et al. , Second IMO GHG Study 2009 (London: International Maritime Organization, 2009). 38. These measures could see carbon dioxide emissions reduced by between 100 and 180 million tonnes a year by 2020. Carbon intensity from shipping is projected to decline from 25. 93 grams of CO2 per ton-mile in 2007 to 17. 22 grams per ton-mile in 2030 under the intermediate scenario and to 16. 40 grams CO2 per ton-mile, under the best-case scenario. Buhaug, Ø. et al. , Second IMO GHG Study 2009 (London: International Maritime Organization, 2009). 39. Anon, IMO and the Environment (London: International Maritime Organization, 2011). http: //www. imo. org/OurWork/Environment/Documents/IMO%20and%20the%20Environment%202011. pdf (accessed April 10, 2013). 40. Energy for operation of auxiliary engines and power generation is separate and is not shown here. 41. For a small well-maintained cargo ship moving at about at 15 knots in Beaufort 6 head weather condition. 42. Parties to the MARPOL Annex VI have the option to waive the EEDI requirement on their ships for a maximum of 4–6. 5 years after the entry into force. However, no country has a yet approached the IMO for this waiver. 43. The categories of ships covered include oil and gas tankers, bulk carriers, general cargo ships, refrigerated cargo carriers and container ships. 44. Zabi Bazari and Tore Longva, Implementing the EEDI, Guidance for owners, operators, shipyards and tank test organisations, Version 3. 0 (London: Lloyd's Register, 2012). 45. Together, the included ship categories will account for 72% of CO2 emissions from the newly built fleet. 46. Anon, 2012 Guidelines for the development of a SEEMP, MEPC 63/23, Annex 9, page 1. http: //www. imo. org/KnowledgeCentre/IndexofIMOResolutions/Documents/MEPC%20-%20Marine%20Environment%20Protection/213%2863%29. pdf (accessed April 10, 2013). 47. Maersk expects delivery between 2013 and 2015. MV Mærsk Mc-Kinney Møller is the lead ship of Maersk's Triple-E class of container vessels and was pressed into service in July 2013. It is the largest ship build in the world. 48. Anon, Annual report 2008–09: Ministry of Shipping (New Delhi, Government of India, 2009). 49. Ministry of Shipping. "Development of Indian Shipping Tonnage, " http: //shipping. nic. in/writereaddata/l892s/tonnage-35709190. pdf (accessed on April 2, 2014). 50. A large number of coastal vessels were tugs, offshore supply vessels and those belonging to port trust and were not involved in actual cargo movement and hence overseas vessels, which include dry cargo bulk carriers and crude oil carriers contributed to 89% of the GRT, while being lower in number, than coastal vessels. 51. Indian Shipping Statistics, 2012 Ministry of Road transport and highways, Transport research wing (New Delhi, Government of India, 2013), p. 9. http: //shipping. nic. in/showfile. php? lid=1205. 52. Except 2008–09 when it was only 2. 5% due to global economic downturn. 53. Except 2008–09 when it was only 2. 5% due to global economic downturn. 54. Of this, only 58. 23 million tons, which is just 7. 95% of India's total overseas cargo, was carried by Indian registered flag vessels in 2010–11. This has increased significantly in one year to 82. 09 million tons, which is 10. 87% of India's total overseas cargo in 2011–12. 55. Basic port statistics of India 2010–11, Ministry Of Shipping, Transport research wing (New Delhi, Government of India, 2012). 56. Vincent Valentine, ed. , Review of Maritime Transport 2008 (New York and Geneva: United Nations Conference on Trade and Development, United Nation, 2008). http: //unctad. org/en/docs/rmt2008ₑn. pdf (accessed May 12, 2013). 57. Anon, Maritime agenda: 2010–2020: Ministry of Shipping (New Delhi, Government of India, 2011) (accessed on May 15, 2013). 58. By comparison, the diesel fuel used for land-based transport contains only 0. 0010% sulphur by mass. 59. Theo Notteboom and Eef Delhaye, Analysis of the Consequences of Low Sulphur Fuel Requirements, Study commissioned by European Community Shipowners' Associations (ECSA) (Antwerp: University of Antwerp, 2010). http: //www. lemoci. com/media/anvers-enqueteecsa. pdf (accessed on May 10, 2013). 60. Zabi Bazari and Tore Longva, Assessment of IMO Mandated Energy Efficiency Measures for International Shipping (London: Lloyd's Register and DNV, 2011). http: //www. imo. org/MediaCentre/HotTopics/GHG/Documents/REPORT%20ASSESSMENT%20OF%20IMO%20MANDATED%20ENERGY%20EFFICIENCY%20MEASURES%20FOR%20INTERNATIONAL%20SHIPPING. pdf (accessed on April 4, 2013). 61. Rob Almeida, How to Design a More Efficient Ship (Part 1–4), gCaptain, Courtesy Wartsila Technologies, posted January 4, 2012. http: //gcaptain. com/part-propel-efficient-ship/ (accessed February 15, 2013). 62. 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