Marine decarbonisation

Green logistics in the US: making the marine cargo sector more environmentally sustainable

The US government wants to make a tangible difference to its country’s carbon footprint and has implemented a number of environmentally friendly initiatives for the logistics sector. Mark Trevitt, Class Underwriter, Marine, at International General Insurance (IGI), explains the impact this has on the marine cargo sector in America, and how insurers can actively encourage greener freight transportation

At first glance, the maritime world and environmental initiatives do not necessarily mix. However, there is an ever-increasing demand for transport that is sustainable in terms of the impact it has on society, our environment and the climate – and the maritime industry has a significant part to play in reducing global emissions.

Many of these environmental concerns lie in the transportation of goods via the shipping industry, which is heavily reliant on fossil fuels. Although transporting goods by ship is less environmentally damaging than the equivalent journey by road or air, the colossal scale of global shipping means that change is needed. This amount of movement on a global scale demands an extraordinary amount of energy, consuming billions of barrels of oil every year.

According to the US Environmental Protection Agency (EPA), US freight activity continues to expand significantly. It said the US transportation system moves a daily average of more than 51 million tons of freight or about 57 tons of freight per capita. And freight’s contribution is expected to increase. E-commerce sales increased 20-fold between 2000 and 2019 and projections are that by 2025, as international commerce increases and supply chains become more global and complex, shipments of US goods will grow another 23.5%, and by 2040, a total of 45%. Also, experts project that by 2050 global freight transport emissions will surpass those from passenger vehicles.

LEGISLATION FOR LOGISTICS OPERATORS

THE ROLE OF THE INDUSTRY

Marine insurance is having to evolve and adapt in a changing world that is becoming more focused on being environmentally friendly.

That may be facetious to say when many marine insurers still insure coal shipments and similar environmentallyunfriendly modes of transport. As an industry, while we are mindful of the move towards a greener future, we have to remember that there is a journey to get there. We cannot abrogate responsibilities that we have to our existing clients. That said, we have an obligation to engage regularly with our clients, brokers and partners in terms of their intentions further down the line in terms of their ultimate goal – and to actively encourage the route to a net zero world.

While there are signs that positive progress is being made, the shipping sector’s path to achieving sustainable practices is unlikely to be linear. It will require multiple stakeholders to participate and collaborate across the sector to overcome challenges and adapt to ever-evolving landscapes.

Marine insurers should be working with their clients and encouraging environmentally friendly initiatives. The financial and economic support and backing for the green transition by the insurance industry is of utmost importance. It is not about insurers imposing restrictions on shipowners, but rather about helping them to understanding the opportunities that exist so that they can act now.

improve and streamline shipping operations so that they can use less fuel and generate less pollution. Since entering into office in 2021, President Biden has initiated several legal protocols that mandate laws to be enacted governing all elements of cargo movements – including land, sea and air - within the US, to be in place within the next three years.

Meanwhile, the EPA has said it believes that the companies involved in production, distribution, and |transportation of goods can make a difference. It states that the business community can reduce the risks we will face from air pollution and health effects caused by freight transportation. By measuring, benchmarking, and assessing freight transportation activities and strategically making better choices that reduce emission, the EPA believes that companies can make a significant impact on the contribution of freight to cleaner air.

These new environmental rules mean that all transportation and logistics companies need to take proactive steps to reduce emissions. That said, the move to sustainability in logistics will not be an easy one – and there will be a huge cost burden. Environmental initiatives in the past have often been viewed as a compliance burden, however logistics companies can play a significant role in changing the current trajectory of climate damage and become a key player in the journey towards zero carbon emissions – and marine insurers should be supporting any move to green logistics.

“President Biden has initiated several legal protocols that mandate laws to be enacted governing all elements of cargo movements – including land, sea and air - within the US, to be in place within the next three years.”

Mark Trevitt, IGI