Green finance for dirty ships
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New green-lending vehicles, such as one called “Save as you Sail“, a brainchild of the Sustainable Shipping Initiative are being created to help upgrade shipping vessels that carry the majority of global trade among modern economies in today’s world, but are main nitrogen, carbon and sulfur polluters to the planet.

Lloyd Register

Why It Matters – Shipping’s Carbon Footprint

As trade and globalization rose in past years, so has the shipping industry. 90% of world trade is transported by ships today, an increase of 400% in the last 45 years. Annually, the planet’s oceans see up to 100,000 working vessels traveling an incredible 160,000 nautical miles or 67% of the distance to the moon.

With those distances and high growth rates, it is no surprise that the shipping industry lays down a significant carbon footprint (see chart). According to a 2009 report, the top 15 largest ships emit as much as all the 780 million cars in the world combined in terms of particulates, soot and noxious gases. The International Maritime Organization (IMO) says sea shipping makes up around 3% of global CO2 emissions.

A chief source of pollution is degrading and inefficient ship technology in older vessels. A particularly well-known one is inaccurate fuel readings of consumption.

The “Save as you Sail” aims to better quantify and share the fuel savings between the shipowner and the charterer over a longer contract, giving both an incentive to make the necessary upgrades.

Newer technologies will allow more accurate readings, more streamlined hull designs and upgraded electrical ship grids to include regenerated solar and wind power.

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“Tens of billions of dollars are needed to pay for upgrades to meet the new rules, according to James Mitchell at CWR. But the industry can hardly pay even its existing debts. Freight rates have collapsed owing to a slowdown in world trade since the financial crisis and to enormous overcapacity. An earnings index compiled by Clarksons, a research firm, covering the main vessel types (bulk carriers, container ships, tankers and gas transporters), touched a 25-year low in 2016. Banks do not want to throw good money after bad.

So finance providers are keen to get involved. Last June the European Investment Bank announced €250m ($282m) in funding for such retrofits; it hopes other banks will follow suit with billions more. In future, the idea might be extended to greening aircraft and trains.

For now these businesses do not suffer a shortage of finance. But a downturn is a matter of “when not if”, says Michel Dembinski at MUFG. Green finance could rescue many other industries sailing into a storm.”