Shipping faces turbulent ride on carbon-cutting quest

Wind, used to power ships since time immemorial, could make a comeback as some entrepreneurs look to reduce carbon emissions and costs in the shipping industry.

What's a natural resource that is free, produces zero carbon emissions and has been used to power ships since time immemorial?

The answer is of course the wind. The graceful sailing ships that sent the likes of Christopher Columbus and Vasco da Gama to the Americas and India are long gone, though, replaced by vast iron vessels loaded with crude oil, minerals and neat stacks of shipping containers to feed the voracious global economy.

These massive vessels, which can reach as long as three soccer fields put together, consume fuel oil that pumps out tonnes of planet-warming gases such carbon dioxide (CO2) and nitrous oxide as well as other pollutants that cause acid rain.

Shipping is responsible for ferrying over 90 percent of global trade and produces about three percent of mankind's carbon emissions, or more than the CO2 produced by the German economy.

Yet reducing these emissions means tackling idiosyncratic maritime laws, the vested interests of countries such as China that rely on shipping to fuel rapid economic growth, and convincing conservative ship owners to embrace green technology.

Ironically, one of the most promising technologies to reduce ship fuel consumption is the same one used thousands of years ago when ancient mariners first ventured across seas on rickety boats--sails.

German entrepreneur Stephan Wrage is among those re-inventing the sail and his 21st century version is very different from the sails that graced the masts of Columbus' Santa Maria.

As a teenager, Wrage figured he could speed up his sailing boat if he attached a sports kite overhead. Two decades later, he has translated that idea into a kite system for large vessels such as bulk carriers.

"Wind is unbeatable because it's free and you don't need to transport it with you so you just use it as you need," said Wrage, whose company SkySails makes giant kites that look similar to paraglider canopies for ships.

Kites propel ships faster than traditional sails, Wrage said, because they are dynamic, not fixed, and can move around to capture winds coming from different directions.

The system, he said, can save between 10 to 30 percent of fuel on a single voyage, a significant cost saving given that 60 to 80 percent of a vessel's operation costs derive from fuel.

Free as the wind
Convincing shipping companies to buy costly green technologies, however, is easier said than done as the industry recovers from the economic slowdown and faces volatile fuel prices that make it difficult to calculate returns on investment.

A carbon emissions scheme, in which ships would be penalized for inefficient fuel use and rewarded for conserving fuel, would spur green investments in a conservative industry that has been slow to embrace new technologies.

"The most important business driver would be if there was a carbon emissions scheme in place," said Wrage.

"The most important thing is that we get a price on carbon so the industry has security and knows what is coming and knows where to invest," he added.

However, developing a carbon scheme for shipping is politically charged and highly complex as the vast majority of vessels sail under flags of convenience of other countries to avoid tighter regulations and higher taxes and labor costs.

Ships from countries such as Denmark, Britain, and Germany are largely registered in developing countries such as Panama, Liberia and even land-locked Mongolia which, under the U.N.'s Kyoto Protocol, have no duty to cut carbon emissions.

"If the whole shipping industry was viewed as a country, it would be the sixth or seventh biggest emitter of greenhouse gases," said Philip Roche, a maritime and trade lawyer at British firm Norton Rose.

Those emissions are set to keep rising as world trade grows. The International Maritime Organization (IMO) has estimated that greenhouse gas emissions from shipping could grow between 150 and 250 percent by 2050.

"So we're talking about a lot of emissions but at the moment the emissions don't belong to anybody at all," Roche told Reuters.

Under the Kyoto Protocol, only about 40 industrialized nations have to meet emissions targets between the climate pact's 2008-12 first commitment period.

Developing countries are exempted from mandatory targets under provisions that recognize rich nations are responsible for most of mankind's greenhouse gas pollution emitted since the Industrial Revolution of the 18th century.

Poorer nations are meant to take voluntary steps under the guideline of common but differentiated responsibilities to take into their account the need to keep their economies growing to lift millions out of poverty.

But this guideline is now widely seen as out of date given the pace of emissions growth. China has overtaken the United States as the world's top greenhouse gas polluter and India is the fourth largest, with its emissions growing rapidly to nearly two billion tonnes by 2007, or just below Russia's.

Developing nations balk at agreeing to mandatory targets as part of a broader climate pact and at last December's climate talks in Copenhagen would only agree to add a list of voluntary steps as part of the Copenhagen Accord.

Carbon conundrum
The split over responsibility for emissions has proved just as divisive in the International Maritime Organization.

The U.N. body responsible for shipping usually deals with technical issues to reduce pollution and improve safety. For example, world nations have agreed to steps to progressively cut the sulphur content of shipping fuels and the nitrous oxide emissions from engines.

But mandating cuts to CO2 emissions is another matter.

Due to the difficulties of obtaining a global maritime agreement which may end in failure if China and others fail to compromise, Roche believes regional schemes may be set up first.

The EU would likely take the lead followed by other regional blocs until a patchwork quilt of schemes are formed. Over time, they may eventually merge into one scheme to reduce CO2 emissions from shipping.

However, this would be a painful route for the industry as ship owners and others would have to deal with multiple schemes rather than one global scheme administered by the IMO.

"I think it's unrealistic of the global community to expect the IMO to reach a global agreement on emissions...when, at a wider level, the international community cannot agree a way forward, as illustrated at Copenhagen," said Roche.

Then there's the gnarly question of who do the emissions belong to? The country under whose flag the ship sails, the true country of origin, or the countries with which the ship trades?

"Do we attribute emissions to the flag state or do we attribute them to the shipping industry as a whole?" asked Roche.

And if emissions are attributed to the country where the ship is flagged then what would happen with ships flagged in developing countries which, under the Kyoto Protocol, are exempt from making carbon emissions cuts following the "common but differentiated responsibility" principle.

This runs completely counter to the cornerstone IMO principle of "no more favorable treatment" for any ship or any flag.

"If global regulations required that all ships flagged, say, in Germany and the U.K. must comply with emissions targets...but ships flagged in developing countries do not have to comply, then in a New York minute all these ships will transfer their flags to those countries that don't have to comply," Roche said.

At Copenhagen, negotiators discussed, but did not agree, to a bunker levy on shipping and aviation fuels to drive efficiency and to raise funds for poorer nations to green their economies.

For example, the European Union is pushing for shipping to cut emissions to 20 percent below 2005 levels over the next decade, and for aviation to cut by 10 percent. It also wants a levy on the two sectors' emissions to go to poor countries.

The IMO has just established an expert group which has to conclude its work in August and report back in October to put all market-based measures on the table.

More advanced is a plan to launch a ship energy efficiency management plan, which should be on board every vessel and would allow port inspectors to see what a vessel is doing in terms of reducing its emissions, whether it has implemented any specific measures and what targets have been set.

The plan would be unique to each vessel and text for the plan has already been written with the aim of getting agreement at a major IMO meeting in October to make it mandatory.

Change in the air
The MV Beluga SkySails, a bulk carrier, was the first new-built ship equipped with Wrage's SkySails kite system. Since 2008, the giant kite has helped the vessel reach ports across Latin America, Africa and Asia.

As ship owners such as Beluga Shipping start looking at sailing systems for their vessels, there is new interest in the Trade Wind routes used by 19th century trading clippers.

"It is recommended to exit Europe on a course south of the Azores toward west and on the way back from Northern America to follow a course north-northeast to benefit from the particularly strong and sufficient winds of the Northern Atlantic," said Niels Stolberg, President CEO Beluga Shipping GmbH.

The MV Beluga SkySails kite system costs 5 million euros with a payback period of about 4 to 5 years. Stolberg says it's high time the maritime industry began opening up to new technologies.

"Not only stricter national and international rules and the highly volatile oil price but also environmental concerns (require) a rethinking in the traditional maritime sector," Stolberg told Reuters in an interview by e-mail.

Some other technologies that could help reduce fuel consumption and cut carbon emissions include state-of-the-art IT systems so ships can determine the optimal speed based on forward planning for berths in their ports of call and special paints with a finish similar to shark skin that reduce friction on ships' hulls and therefore cut fuel consumption.

Many tanker owners were already taking some of these steps to reduce emissions, said Tim Wilkins, Asia-Pacific manager for Intertanko, the world's largest association for tanker owners and covering more than 3,000 vessels.

"The incentive is already there in terms of if we can reduce our overall costs then we can reduce our emissions," Wilkins told Reuters in Singapore, pointing to rising fuel oil costs.

Intertanko members have already adopted a six-point best practice charter that includes optimizing vessel speed during voyages to ensure the most efficient fuel consumption, steps to keep hulls free from slime, propeller polishing and engine monitoring systems that boost efficiency.

"Traditionally this industry has been regulated in a technical and operational way. There are no other precedents for regulating pollution using a market or financial-based measures," Wilkins added.

A key question, he said, would market-based measures be an add-on, built on top of technical and operational regulations on shipping?

"Giving credit to those companies which are going beyond regulation, that is an area that needs to be explored a little bit further. That's again where we draw in other entities, such as the charterers, making sure they recognize and choose the vessels that are more efficient."

Struggle
But Wilkins had reservations about the bunker levy plan, a type of tax on bunker fuel consumption to offset shipping emissions.

"When you start going down that route--developing a fund and offsetting--where's the incentive for the shipping industry to reduce emissions?

"Could the man in the street be justified in suggesting the shipping industry is buying its way out of any real commitment to reduce its emissions? That is something we would want to avoid."

For the moment, Wilkins said, the move toward emissions trading and levies was tough and still in its infancy.

"We've got emissions trading, a levy compensation scheme and a combination of those two on the table," he said.

The aviation industry, which is smaller and does not have the flags of convenience system to muddy the waters, prefers a global emissions trading scheme rather than piecemeal or regional schemes with different rules which may put some airlines at a disadvantage and would be a headache to administer.

"Where the industry is struggling, and the IMO as well, it's the whole model, the whole mechanism that needs to be put on the table and explained more clearly."

"For example, who would benefit, the flag state, would it be the coastal state, would it be where the owner is registered? Will it be an open trading system or a closed trading system? It's just too early for the industry to say."

He also pointed to frustration from many in the industry over attempts by some countries to block negotiations.

"Every time you get into a discussion about something mandatory relating to greenhouse gas emissions, you get a block from those countries who are concerned about common but differentiated responsibilities. It's frustrating."

"I don't know how we're going to get around that."

 

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