Energy and Shipping

Malcolm Latarche
Malcolm Latarche

29 May 2017


Shipping has once again come in for criticism over its energy requirements, this time in the International Energy Agency’s latest report titled Tracking Clean Energy Progress: 2017. The report covers all aspects of global energy use with a section devoted to shipping. According to the report, which at least acknowledges shipping is the most efficient form of transport, but says ‘limited policy deployments have led to a slow uptake of clean technologies in shipping and meeting the 2°C scenario targets by 2025 goals requires the rapid adoption of markedly more ambitious policies’. The report says that the shipping sector accounts for 80% of global trade in physical units and 2.0% of CO₂ emissions from fuel combustion. Both shipping activity and GDP have increased steadily, by 3.8% and 3.6% per year from 2000 to 2015 respectively and international shipping energy demand increased by 1.6% per year from 2000 to 2014. Historically, shipping energy use has also been closely correlated with GDP growth; however, a decoupling of this trend has been observed since around 2010. This matches a decline in trade activity in 2009 and a slow subsequent recovery after that, as well as a trend towards upgrading of the global container fleet to larger and more efficient ships beginning in 2011. The vast overcapacity resulting from this led to the early retirement of old and inefficient ships, and boosted the energy efficiency per tonne kilometre (tkm) of the global fleet by an unprecedented average annual rate of 5.8% from 2010 to 2014. Slow steaming, which has become more common in response to overcapacity, also led to operational efficiency improvements. On energy efficiency measures in shipping the report says the EEDI mandates a 1% annual improvement in the efficiency of the global fleet from 2015 to 2025. According to IEA statistics and United Nations Conference on Trade and Development (UNCTAD) activity data, the energy used by the global shipping fleet per tonne kilometre declined by 2.2% between 2000 and 2014. This suggests that the EEDI will prevent the backsliding of energy efficiency, but not the reduction of GHG emissions beyond historical trends. Fuel price increases due to the sulphur cap could stimulate interest in efficiency and reduce energy use, but technologies that reduce SOX emissions – except for advanced biofuels, low-carbon synthetic fuels and, to a much lesser extent, LNG – will not lower GHG emissions. The report suggests that the EEDI needs to be made more stringent and ports should look at incentives for more efficient ships while at the same time looking at penalising older less efficient vessels. What the report does not cover is the fact that while some ships are most definitely less efficient that some newer vessels, there is a price to pay in terms of energy use for making any changes beyond the natural replacement of the world fleet. A vessel which has a limited life span remaining will eventually be replaced by a newer vessel if there is sufficient demand for shipping space, but scrapping it early will require the replacement to be delivered earlier than it might have been in any case. If a ship due to be retired in 2021 is replaced in 2019 it will not be subject to the 10% reduction required by Phase 2 off EEDI which begins in 2020. More to the point, the paper to be presented at MEPC 71 by BIMCO, IPTA and WSC requesting the IMO to commit to sponsoring technology development highlights the fact the existing technology is not sufficient to meet future demands. By forcing vessel replacements to be done at this point may negate the benefit of any future developments as shipowners will likely be reluctant to replace vessels at intervals less than the current 25 years or so without a corresponding reduction in newbuilding prices. Then there is the uncosted side effects of the new generation more efficient vessels. Firstly, there is the energy needed to produce the steel, materials and equipment for replacement vessels and that needed for demolishing the older ships. That energy would have been required in any case but bringing it forward makes meeting the global 2°C target even more difficult. In addition, for the container fleet the trend is to larger ships gaining from economies of scale. This may make shipping more efficient but then there is a need for new port cranes with extended reach. Producing these larger cranes requires energy and the longer reach also adds to the power requirement as the containers have to be moved further from the quay side than on narrower ships. Larger ships tend to have either a deeper draught or a wider beam (or both) and so require deeper and wider channels to be dredged at ports. That again adds to energy use. Sometimes there are many more factors to be considered than the simplistic approach that is all too frequently taken by regulators. Fortunately, the natural inertia in the regulation of the shipping industry does at least help to mitigate the knee jerk reactions.