In this week’s edition of the Green Seas podcast, Guy Platten, secretary general of the International Chamber of Shipping, explains the feebate proposal that the industry group has submitted to the International Maritime Organization.
The industry association says its proposal comes with little administrative burden for shipowners, uses the IMO’s existing data collection requirements for shipping and allows users of low-carbon fuels to be rewarded financially for the fuel, thus covering some of the additional cost of these new energy sources.
Also in this episode, Oistein Jensen, chief sustainability officer at Norwegian chemical tanker owner Odfjell; Pia Meling, managing director of Grieg Green; and Rasmus Elsborg-Jensen, founder of data platform Reflow, talk about the future of environmental data and how lifecycle perspectives will soon be a mandatory part of being in business.
A full transcript of the episode can be found below.
Episode transcript
Craig Eason (podcast host):
Hello, this is Green Seas the podcast from TradeWinds about the environment and the business of the shipping and oceans industries. I’m Craig Eason, TradeWinds technology editor and your host for this episode and this week we have two stories for you.
We will dive into the updated proposal that has come out of the International Chamber of Shipping for a feebate measure it says will help decarbonise shipping by helping shipowners with the extra costs of low-carbon fuels.
And we will also take a dive into how fuel reduction will be only one part of the lifecycle picture of a vessel as owners begin to search for more data across a vessel’s whole lifecycle from construction to recycling.
Later this year, the IMO member states will once again gather in London for more talks about the policy measures to decarbonise shipping.
These talks will focus on the so-called midterm measures and in particular, the adoption of a financial measure, or market measure where a price is effectively put on CO2 that is emitted from ships.
The International Chamber of Shipping has been in the thick of these discussions, having first submitted a proposal in 2020 for a $5bn research and development fund, which it has had to evolve and develop as discussions progressed.
But this latest proposal is somewhat different, being a feebate proposal, very much leaning on the proposal that Japan had submitted to the IMO. There are other proposals that have been submitted.
Here’s what ICS secretary general Guy Platten said when I spoke to him for the Green Seas podcast after a press briefing to discuss this latest proposal:
Guy Platten, ICS:
“We believe it’s a simple approach, which is then easy to administer, so essentially shipowners will pay money into a fund if they’re burning fossil fuels, and they will have the ability to take money out of the fund, if they are burning zero-carbon fuels or a proportion of it is, and that will help bridge the gap between the price of the fossil fuels. And what we anticipate the price of the new fuels are going to be three, four times as much as the fossil fuels they replace.
“It sounds a simple approach. But actually, there’s been a huge amount of work being put into actually making this all work and actually going together, we’re confident that the regulations can be provided to make this happen. We’ve even provided draft text of how that can happen.
“And this is industry is coming forward, pragmatic, listening to people taking other ideas as well and seeing what we can do to make something work. So, you know, we obviously would love member states to say, ‘Yeah, we’ll go for this,’ because we do think this is a workable, pragmatic solution, which can be easy to administer, and easy to police as well.
“In terms of how much money goes into the fund, that’s going to be a political decision. It’s always going to be a political decision, you know, and we don’t see it’s our place to say what that money should be, because that’s going to be discussion member states.
“We want to focus on the architecture, or what we’re putting forward. Because if you can agree the architecture, then it’s a matter of agreeing the font, if we tried to one before the other, I think it’s going to have less chance of success.”
Craig Eason:
One of the things about this proposal is that you’re starting off with an example figure.
Now, you’ve just said that there’s no pricing in terms of the font. But there’s a sort of figure there around the $40 per tonne mark. This is a proposal that looks at the midterm measure.
So, this is relating to the 2030 goal and not the 2050 goal. So this is a way, I would almost suggest, that this is a way to get the industry used to the midterm measures, used to the idea of having some sort of model and then being able to adapt it going forward to meet that net-zero goal of 2050.
Guy Platten, ICS:
“Absolutely. I mean, of course, we’ve agreed the goal of net zero by around 2050, I think is the terminology used, but you’re going to have to have these intermediate goals to meet in order to [get to] waypoints along the way to that and that’s why this midterm measure we propose is a way of doing that.
“It is a way to kick-start this whole thing properly, really driving the demand side for the zero-carbon fuels and incentivising the early movers which will then allow us then in 2030, to look again saying ‘How does it need to be adapted now to meet’.”
Craig Eason:
That’s Guy Platten, secretary general of the International Chamber of Shipping, talking to me in London about the chamber’s updated “fund and reward “ proposal for a market-based measure as the IMO begins to discuss midterm measures.
The proposal is in a paper being submitted to the IMO by ICS and supported by Liberia and the Bahamas.
Very soon everyone will want to know everyone else’s carbon emissions. They will, because there are regulations forcing it to happen and there are the technologies to make sure we can measure, compare and share the emissions data.
I am talking in a business-to-business perspective of course, and shipping is in the thick of this, and while most shipowners are worrying about their fuel-related emissions and how they will have to record, report and eventually pay for them, there is a growing sea swell behind that regulatory wave.
What this is, is a growing awareness that one company’s emissions can also be another company’s, that the lifecycle picture of a ship, a cargo, a piece of equipment are indelibly linked, and there are regulations that are going to tie these together even more.
If you are in shipping and listening to this then you will know that a vessel’s voyage emissions, created by the fuel consumption, need to be recorded and paid for, albeit not heavily at the moment. You know also that cargo owners are getting interested in the emissions linked to the ocean leg of a cargo supply chain.
But what about the emissions data for the steel used to build the ship, and make the equipment on the ship?
In this episode of the Green Seas podcast I have spoken to three experts who are, I think ahead of the curve in their awareness of this. How hard is it going to be to get the whole lifecycle emissions picture of a vessel, not just the fuel, but everything, and who benefits?
One shipping company has tried to do this with one of its vessels. Odfjell, in Norway, operates a fleet of chemical tankers and is one of those that have been pushing forward to understand the real picture of a vessel’s life cycle: from construction to recycling, from cradle to grave.
Here’s Odfjell sustainability officer Oistein Jensen, on its work in determining a vessel’s Scope 1, 2 and 3 emissions.
Oistein Jensen:
“The project that we just did, where we did a lifecycle assessment of one ship on one class; we wanted to do an educated decision and really understand the effects of life extension.
“If you wanted to extend the life for it, if we do the recycling of a vessel? What would be the kind of climate effects if we did an earlier recycling or if we did, and when we did a new one?
“And that was the initial question, and that led us to have an understanding of what’s the kind of total footprint of the vessel? What’s the footprint of actually building a vessel? And what’s the footprint of actually recycling a vessel? And also, of course, the operational costs.
“So I think that is what led to it, and it’s also a good thing for us to understand that and where can we have an impact?
“Because when we are building vessels it has to be an element when we are building a vessel, that we understand how much CO2 and what kind of the Scope 3 of actually building, and what’s the Scope 3 on maintenance, in addition to the Scope 1 of operations, and then the Scope 3 on the downstream recycling activities.
“And I think it’s just important for us to understand this. And that’s where we started. So we did some lifecycle analysis of a ship and the ship class, and it gave us a lot of insights to where are the kind of the major footprints, and what’s the kind of the big parts of the value chain where we have we have the big emissions.
“And I wouldn’t say surprisingly, but I think that one of the key findings is that the operational emissions are so high compared to the emissions related to Scope 3 in the total value chain of the vessel.
“I’m not saying that it is less important, but the Scope 1 of operating a vessel for 20 to 30 years are significantly the biggest emitter.
“A lot of our customers, not everyone, but a lot of our customers are asking for those data now, because we are a big Scope 1 emitter, and so we’re also they’re big Scope 3 emitters.
“So that means that a lot of our stakeholders they need, they need our Scope 1 data, which will be their Scope 3 data, and not only our customers, but other stakeholders like banks and investors, etc, because our Scope 1 is also part of their investment portfolio and adds to their Scope 3.
“So, what we did is that we tried to break down, for example, for a voyage with a lot of products, we’re trying to break that down to give the exact footprint of a product that has been transported from A to B or C with a different kind of product.
“So, each customer will get a Scope 3 report. We have spent a lot of time developing that. But we are now able to do that. So that now when that is done automatically, so each time you transport something with Odfjell, you will get a Scope 3 receipt, and saying that this is the amount of CO2 that this journey has represented.
“And of course, some of these data are we using also for the emission trading system, because we are also allocating the same kind of resources with some differences, of course, since ETS is also only within the EU, but the ability to collect and distribute data on Scope 3 has been a lot of work that we have done on has been appreciated by a lot of their customers.
“And I think that is also something going forward because we see that it’s [getting] growing attention, and especially with the upcoming regulations in the EU where you have to disclose Scope 3, that means that this will matter, and we believe that that is also an opportunity because we believe that Odfjell represents being a very efficient 3, that we represent a lower Scope 3 than the alternative, and then it could be a kind of a competitive advantage. So we think of this as an opportunity for us as well.”
Craig Eason:
One company which has been helping Odfjell in determining a vessel, or even a fleet, lifecycle emissions understanding is Copenhagen, Denmark-based Reflow.
This is a small company which has developed its own software system and platform to allow companies to work out their emissions and to then share them across the emissions chain. So to take one example, the construction of a cargo pump or a lifeboat will create a certain amount of emissions. This data, this information, can get shared with Odfjell who can use it. The Scope 1 emissions for the pump maker are the Scope 3 emissions of Odfjell, just as the fuel emissions from the Odfjell vessels are the Scope 3 emissions for the cargo owner.
Here’s Rasmus Elsborg-Jensen, chief executive of Reflow:
Rasmus Elsborg-Jensen:
“The vision and the idea with Reflow is to allow maritime stakeholders especially to become data-driven in their decision making, but also make it easier for the maritime stakeholders to get a more granular understanding of their emissions, their footprint for the company, but also their vessels.
“When we look at the shipowner, today, emissions can be very not granular in that way that you do it for compliance.
“Typically, you look at your emissions for the fuel, and you look at all your procurement emissions and the latest addition to the Reflow platform is to make it easier to get a better understanding, especially what’s called Scope 3 emissions — so all the emissions that are related to your supply chain.
“And then you might ask, why is that interesting? And why is that something we’re especially focusing on right now? Well, there’s new development, the European Union with the corporate sustainability reporting directive, and in Norway, you have something called Transparency Act. And in the US, you’re going to get a similar they’re working on right now, you’re going to get a similar requirement for companies to report on the material matters in their company.
“Now, material matters can be a lot of things. But what we see is the vessels have a lot of embedded emissions in their whole in their entire life cycle. So for shipowners just to report on fuel, like you normally are required by IMO to report and EU to report on your direct emissions from fuel, it makes a lot of sense.
“But as we go in and look at these new directives, the embedded emission Scope 3 emissions will be required to report on because this is a central part of the emissions and the vessel itself.
“So making that easier, we have rolled out a new feature on the Reflow platform we call a climate hub, which allows shipowners, OEMs, shipyards in the maritime segment also outside to make the calculations of their vessel of their product.
“And then, based on lifecycle assessment-based calculations, you can populate the data for your corporate emissions, that means we have made a connection between product emissions and corporate emissions. So you’re able to basically say how many vessels do we have based on LCA data you can make your greenhouse gas protocol-compliant calculations.”
Craig Eason:
Rasmus Elsboeg Jensen, CEO of Reflow, the emissions data company. Now Odfjell’s Oistein Jensen noted of course that the largest emissions from a vessel are its operational emissions, with the fuel consumption being by far the largest. But as shipping switches fuels, as low carbon fuels are taken up, this will begin to change. Here’s Rasmus from Reflow again.
Rasmus Elsborg-Jensen, Reflow:
“I think you can view it from two sides, Craig. I think what we’re going to see is that the owners of the cargo will require some kind of emissions reporting that they are going to include, because their cargo emissions is part of their supply chain emissions.
“So when you move cargo around, you will need to attach the emissions for that voyage to that cargo. So they can make their reporting and report to their seller, so buyers of their goods. So that’s the commercial side of it.
“And another interesting thing that we’re seeing right now is we’re getting a lot of attention on new dual-fuel newbuilds, like methanol and ammonia. Because once you start adding this green fuel, you’re no longer looking at just the fuel emissions, because they’re going to be very low, since it’s an e-methanol e-ammonia.
“So, the next thing is going to be the Scope 3 is the supply chain of the fuel, as we’re talking about where the IMO LCA guidelines that they’re working on, which is really important, but also everything else.
“And what we can see from all the work we have done the last couple of years, also on dual fuel, is that about 30% to 35% of the total emissions of the vessel in its life cycle is going to be Scope 3 related to the construction, maintenance and the end of life.
“So that’s a substantial part. And that’s much more than the 3% to 4% we are seeing with traditional fossil fuel.
“So this is calling for a more detailed understanding of our emissions. And why we are seeing it, it’s going to be mandatory at one point.
“The question is, is it going to be tomorrow? I don’t think so. I think the fuel is going to be something we need to have clarity on, especially the new fuels because the supply chain on the fuels is not a standardised procedure. So you can actually end up emitting a lot in the production of the fuel so that makes good sense. And then the next would be the vessels.
Craig Eason:
So total emissions life cycle will become more and more important, and of course we do have the regulations such as the corporate sustainability reporting directive that Rasmus mentioned earlier which will mean more and more companies will be seeking the data they need to be more transparent.
But, let’s turn back to this cradle-to-grave concept. How industries can take this total picture of a vessel from its conception to its recycling. Last month, another Norwegian shipping company invested in Reflow. Grieg Group has evolved a strong link with sustainability and in particular this lifecycle picture and it is its Oslo-based Grieg Green, a division which was launched originally to look at ensuring Grieg vessels were recycled properly, but has now become a supplier of total life cycle services.
Grieg Green’s boss is Pia Meling.
Among the work they do is site verification and data verification, something that she says that means Reflow’s work sits very neatly alongside.
But in reality how easy will it be for a total lifecycle picture of a very complex ship, with equipment from hundreds even thousands of suppliers, and with a ship even changing hands as it is sold possibly many times in its 15, 20, 30-year lifespan. Here’s Pia:
Pia Meling, Grieg Green:
“There’s quite few shipowners that own the ship through the whole life. So normally, a shipowner would sell the ship, and there will be various shipowners through the lifetime of the ship, and that also leads to less optimal decision-making for end-of-life planning, of course.
“So I think if you can actually measure the whole lifecycle of the ship and have that data-driven decision-making, you can optimise a lot, not only on the design, or the retrofit, or the life extension period, but also of course, end of life.
“And you can potentially prove that as the steel that goes into remelting, or reuse using renewable energy is something you can deduct on your emissions, if you look at it in a total lifecycle perspective, which puts more emphasis on the recycling phase, which we believe is deserving more attention. So putting into this context, it actually, it can be some kind of commercial advantage to have a strategy for the recycling phase, and to trace what’s happening to the steel.
“And we’re also very interested to connect with green steel industry, who are marketing their steel, as recycled in green, and then you need to trace where it’s coming from, and that it’s actually that the vessels are dismantled, in an environmentally friendly, but also socially acceptable way.
“So this is something that we’ve always been interested in exploring, and together with Reflow, we will have that data and that connection, so that we can actually start measuring what is the advantages of doing the recycling in various places in the world, and in various methods, and what happens to all the steel and all the other materials.
“For Grieg, it’s also, as you know, we are investing in green fuels at the moment is green ammonia, it could be other fuels as well, and we are building vessels ourselves, we are designing and deciding on what tools to use, and as the decision tool for Greg, as a shipowner, and as an investor in the new fuels, it’s also very useful to look at the emissions and the environmental impact in a lifecycle perspective.
“Personally, I am worried that we do this burden shifting, and we’re so concerned about cutting the emissions during the voyage that we are blind for just moving emissions to another area, which is not going to fix the problem.
“So it’s going to make us look good, but if it doesn’t fix the global warming issues that we’re facing, it will not help us. I know that most shipowners are worried about CII and ETS, and just dealing with today, emissions of the ships, but I’m pretty sure this will shift. And that you can make much better decisions if you consider the whole lifetime.”
Craig Eason:
That’s Pia Meling, managing director at Grieg Green, and before her you heard Rasmus Elsborg-Jensen, the founder of the lifecycle data platform Reflow, and Oistein Jensen, chief sustainability officer of Norwegian shipowner Odfjell.
That’s it for this week’s episode of the Green Seas. Remember to go to TradeWinds News where you can find more on these stories and of course lots of other stories on sustainability, environment and technology.
Remember also to subscribe to the podcast on whichever platform you use to listen to podcasts; Green Seas can be found on Spotify, Apple Podcasts, SoundCloud and many others.
Until the next time, it’s goodbye from me, Craig Eason and we are now off to research and work on next week’s episode.
