VIEWPOINT

NICK EDSTROM | Editor nedstrom@motorship.com

Business models to influence tech choices

Welcome to The Motorship’s first issue of 2023.

2023 promises to be a momentous year for the shipping industry.

Shipowners should be under little illusion about the determination of regulators outside the maritime sector to require greater decarbonisation efforts on the industry. Emissions controls for the California Air Resources Board (CARB) at berth regulations will be extended to car carriers and tankers (calling at the Ports of Los Angeles and Long Beach) from January 2025, while we report that the EU has reached a preliminary agreement on extending the EU’s emissions trading system (ETS) to the maritime sector from 2024.

Roger Strevens, VP of Sustainability at Wallenius Wilhelmsen noted that the ship owner and operator had examined the impact of such regulations, and identified that every vessel in its fleet would call at California within the course of a two year period.

While the tanker market is also facing similar challenges, the differences between the liner models in the PCTC and the charter model typically used in the wet and dry segments means different calculations are being considered by ship owners in the tanker segment.

The charter model tends not to incentivise owners to invest in energy efficiency measures, as the charterer typically pays for the fuel consumed during the charter. The problem of split incentives is by no means a new one for analysts and economists examining potential pathways for the energy transition.

It is interesting to note that the comparatively high cost of converting dual-fuel engines to operate on some of the alternative fuels that have entered the fuel mix has been concentrated in the liner sector, aided by the comparatively attractive payback periods available for larger-bore engines.

By contrast, there is considerable interest among ship owners and operators in the tanker market in introducing onboard carbon capture functionality to exhaust gas cleaning systems. As Russian commodity traders were wont to say (in happier times), “one’s perspective depends upon your position at the table”.

Other factors are also driving the evolution of the nascent carbon capture market, as we consider in this issue of The Motorship. This is an area where commercial appetite from customers, significant investment from suppliers and a fast-evolving wider commercial market are aligned.

Returning to the wider theme of the economic case for investment in emissions reduction technology, the challenges of encouraging commercial investment into the deep-sea fleet pale compared with that facing the domestic and short-sea markets. This issue’s Viewpoint reflects the perspective of Marine Capital’s ceo, Tony Martin, who noted that the decarbonisation of the UK’s domestic market might cost up to £75 billion. Such a sum can only be financed by attracting investment from the financial community, but the individual investment opportunities are too small to be ‘investible’.

This echoes The Motorship’s long-standing concern about just how the cost of decarbonising the long tail of smaller, and often less financially secure, ship owners around the world will be managed.