Speaking to delegates at the opening of the Nor-Shipping event in Oslo today, the Chairman of the International Chamber of Shipping (ICS), Masamichi Morooka, said that impending new legislation to protect the environment potentially presented an additional industry-wide cost of more than half a trillion US dollars between 2015 and 2025. This is around 50 billion dollars of additional capital and operating cost in every single year for a 10 year period and beyond.
4 June 2013
“As many companies struggle to survive during the difficult years ahead, we must persuade governments to avoid placing yet more straws that risk breaking the shipowner’s back – and the straws to which I refer are the impending costs of environmental legislation,” said Mr Morooka.
Much of these costs will result from the switch to low sulphur distillate fuel, assuming that a 0.5% global sulphur cap comes into effect in 2020, in addition to the 0.1% sulphur requirements that are expected to be enforced in Emission Control Areas in North West Europe and North America from 2015. However, the costs of installing new ballast water treatment equipment will also be significant, as will the potential contribution that shipping might have to make to the UNFCCC Green Climate Fund.
“The imminent switch to vastly more expensive, low sulphur distillate fuel is a very serious concern which is compounded by worries about the adequacy of supply and the dangers of modal shift,” said Mr Morooka.
He explained that the key message that ICS was communicating to regulators was the need for greater focus to be given to the economic sustainability of shipping, backed up by evidence of years of continuous improvement of shipping’s environmental performance. “Many of the expensive environmental regulations that are about to enter into force were conceived in a different world, at a time when shipping markets were booming and finance for retrofitting had not dried up,” he told Nor-Shipping delegates.
ICS stresses that the protection of the environment must always remain a priority for the industry, but the prevailing economic situation requires that a degree of pragmatism is applied to enforcement as a plethora of new environmental regulations is implemented. “Unless this is understood, there is a danger of creating real barriers to investment in our industry as we hopefully move closer to recovery,” said Mr Morooka.
More generally, asked to look ahead for the next two to five years, Mr Morooka said he remained positive and optimistic: “We are shipowners after all!” But he predicted it was probably unlikely that, for most sectors and trades, much will have fundamentally changed before 2015 or 2016.