Could trade wars improve shipping’s environmental performance?
Earlier this month BSR, the business sustainability NGO, published a report under its Clean Cargo working group, which said that average CO2 emissions per container per kilometre for global ocean transportation routes were reduced by one percent from 2016 to 2017.
The report also stated that ‘Since Clean Cargo began publicly reporting data from the industry in 2009, emissions per container per kilometre have dropped 37.1% on average. This (2017) was the first year that Clean Cargo began tracking use of low-sulphur and lower-carbon fuels. The data show that five percent of fuel used by the global container fleet in 2017 was light fuel oil (LFO), while liquefied natural gas (LNG) was used by some vessels on the Intra-Northern Europe trade lane’.
The report was compiled using data from major carriers and while the methodology may be questioned for its accuracy across the world fleet as a whole, it is probably as good a measure as any other and was based on a 70% utilisation of shipping capacity.
Shipping has been subject to a raft of environmental regulation through the 21st Century with particular emphasis on exhaust emissions. It is right that the worst offenders needed to clean up their act but most owners and operators were already doing so voluntarily as a response to spiralling fuel costs and the need to reduce consumption. Keeping out of the red was and still is the main reason for being green.
The Clean Cargo report covers the period that includes 2015 when Phase 1 of EEDI kicked in with its required 10% improvement in energy efficiency. With the improvement being calculated at 37.1%, this surely highlights that shipping has improved more and faster than it has been required to do despite carrying more cargo over greater distances.
Regulatory attention has focussed on shipping because of the rapid growth of the industry over the last two decades to the point where shipping is often compared to being close to Germany in terms of overall emissions. On the bare facts that may be true but shipping is a diverse business and some aspects of it probably belong under other headings. Ferries for example are frequently a complement to road transport and arguably fuel burned there would better fit under domestic transport. Then there is the fact the growth in international shipping is being driven less by a real increase in demand for products as by the globalisation of manufacturing which has seen production shift from consuming centres in Europe and North America to Asia.
Globalisation has benefitted shipping to some extent but maybe not as much as some claim. The utilisation imbalance between west and eastbound legs of container carriers has grown over the years and the economies of scale provided on fronthaul legs by the new breed of mega container carriers probably work in reverse on the back haul.
This year has seen the US impose trade tariffs on steel and aluminium from most parts of the world and on other goods from China and most recently Turkey. It has also re-imposed sanctions on Iran. The aim of the tariff increases has been mostly to repatriate manufacturing to the US even if other official reasons are given. Sanctions on Iran could boost US crude and petroleum product exports although that is more of a secondary effect.
In the short term, tariffs will have little immediate impact but if manufacturers do indeed respond by re-opening production facilities in the US then that will inevitably reduce the need for shipping. While there is not yet the same attitude in Europe, the rise of populist parties and a backlash against globalisation could see something similar happening.
Some might see that as a bad thing but the impact on shipping emissions will mean that the growth forecasts of demand for shipping of the IMO and others will be far higher than the actuality. As a consequence, the doomsday scenarios of growth in GHGs from shipping will not materialise and the root cause of more environmental regulation might well diminish to a point where it becomes a non-issue.
After all, if container transport efficiency in terms of GHGs has already fallen by over 37% and with a further 10% reduction imminent when Phase 2 of EEDI kicks in in 2020 shipping looks to be ahead of the curve. More to the point, the downward trend in fossil fuel use – particularly in coal – has reversed and looks to continue to do so for several years yet to come.
That will push up the share of GHGs attributable to industries other than shipping and so further reduce shipping’s share of man-made CO2 output. It would not be beyond the realms of possibility for shipping’s share of CO2 to not be the 17% once forecast by some NGOs just a few years ago but even below 2% and nearer to 1%.