Report ranks the world's biggest shipping firms by climate readiness and emphasises need to invest in innovative technologies that can slash sector's emissions
Shipping companies are largely failing to push for the technologies required to reduce the industry's carbon footprint and deliver on its emissions goals, according to a CDP report published today that ranks the world's biggest shipping companies on their readiness for the low-carbon transition.
The latest report from the investor-backed body concludes that of the 18 largest publicly listed shipping companies - together representing $62bn of market capitalization - only three are seriously working to develop technologies that can help transform the industry for a low-carbon future.
For example, NYK are working on zero-emission vehicles for 2050, while Maersk and NORDEN are pioneering the use of 'second generation' biofuels produced from waste sources such as cooking oil, the report finds. As such, NYK and Maersk top CDP's new climate readiness rankings, with Norden coming sixth.
Similarly, Maersk, HMM, and Norden are found to be the most ambitious in setting long term targets to reduce carbon emissions.
The report also notes that 13 of the 18 companies have formal slow steaming policies, seen as an important short-term solution that could reduce industry carbon emissions by up to 30 per cent. Firms such as K Line, HMM, Euronav and COSCO S.H have all established 'super slow steaming' policies, for example. But the report adds that slow-steaming is a short-term solution which, as well as facing market barriers, could also result in more voyages to meet rising freight demand - eroding the emission reductions made by slowing down ships.
Consequently, the industry needs to be pursuing the integration of new ultra low emission technologies into its business model if it is to deliver decarbonisation targets set by the UN's International Maritime Organization (IMO), which include a pledge to reduce shipping's greenhouse gas emissions by 50 per cent by 2050. But it is here, in the critical development of clean technologies, that so much of the industry is found wanting.
"While it is promising to see that leading companies are acting, with Maersk and HMM setting net zero emission targets for 2050 and exploring alternative fuels, the onus must be on the whole sector to jump start their shift into a low-carbon future," said Carole Ferguson, head of investor research at CDP. "Against the backdrop of the IMO's targets, the industry needs to drive collaboration with the manufacturers of vessels and shipping technologies to develop the step change innovations needed to have any chance of meeting these goals. Separately, our recent analysis of the capital goods sector also shows that these manufacturers are much more focused on transformative change in power generation and other areas of transport than in technology solutions for the shipping sector."
The research also finds that whilst container companies which carry consumer goods such as clothing and food are resilient to long-term decarbonization trends, they are facing increasing scrutiny and pressure as their customers look to cut emissions from their supply chain. On the other hand, bulk and tanker companies that transport fossil fuels and other commodities face risks from changes in demand for these products due to wider decarbonization trends.
CDP's analysis suggests that retrofitting exiting fleets could prove to be the most efficient strategy over the short term, before more transformative technologies become viable. It finds that 14 companies show evidence that retrofitting is underway, such as through the derating of engines and the installation of new propellers.
Another promising avenue for delivering emission reductions is the development of low-carbon fuels, including biofuels, hydrogen, and ammonia. The alternative technologies can deliver significant emission reductions and a number of trials and commercial deployments are underway. However, experts agree the nascent technologies are underdeveloped, with the report finding that only Norden and Maersk are showing evidence of supporting the development of second-generation biofuels.
The CDP report also criticizes the opaqueness of the industry, echoing long-standing criticism from campaigners who have accused the IMO of a lack of transparency in its decision making which has itself fuelled suspicion of intense lobbying against bolder climate policies from some governments and businesses.
CDP said only five shipping companies completed its 2018 Climate Change questionnaire, and only four officially support the recommendation's put forward by the international Task Force on Climate-related Financial Disclosures (TCFD). Furthermore, CDP said board level oversight of climate issues is found to be very low compared to other sectors, with only three companies having a formal climate committee at the board level.
The International Maritime Organisation agreed a target to reduce greenhouse gas emissions by at least 50 per cent by 2050 in April 2018. But progress has since been criticised as too slow, with many operators still lacking clear emissions goals and remaining committed to operating ageing ships for years to come. The latest round of talks to chart a course towards the 2050 goal produced limited results, with focus now on the next meeting of the IMO's GHG working group, which will take place in November.
As the CDP report acknowledges, marine freight is the least emissions intensive way of moving cargo. It currently transports around 80 per cent of the world's trade in physical goods while accounting for around three per cent of global emissions and 10 per cent of transport emissions - roughly the same as aviation.
However, with freight demand on the rise, failure to take decisive action could see the industry's share of global emissions expand to 10 per cent by 2050.
As a result, pressure is growing on shipping companies to shake off their sluggishness and adopt a long-term approaching to curbing their carbon footprint. In the most recent move, last week eleven banks with a combined shipping finance portfolio of $100bn pledged to disclose the extent to which these assets align with the IMO's reduction target.
The calls for shipping companies to step up investment in a new generation of zero emission technologies will only grow. But sadly, too many of the world's leading shipping operators remain oblivious to the fact high carbon operating models could soon be holed below the water line.
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