World Shipping Council CEO John Butler says breakthroughs will be needed to reduce greenhouse gas emissions.
Shipping companies, ports, marine terminal operators and inland transportation providers are all “trying to make a living in a revenue-constrained environment at the same time that they recognize the need to reduce their environmental impact,” said John Butler, the president and chief executive officer of the World Shipping Council.
In a keynote address at the spring meeting of the American Association of Port Authorities in Washington, D.C., on Tuesday, Butler said the solutions to these challenges will come from “innovations in business processes and new technologies and from having smart, well-qualified people working on these challenges. But at the same time, we have to have regulatory systems that recognize that issues of consumer protection or economic regulation now have impacts on environmental outcomes and vice versa.
“One of the most interesting things to me in terms of regulatory developments in the industry is the fact that these environmental and economic regulatory threads have now converged into a question of overall efficiency of the international supply chain,” he said.
Butler highlighted the challenges the members of his organization — the world’s leading container carriers — face in meeting the global low-sulfur fuel rule from the U.N.’s International Maritime Organization (IMO), which will require ships to use fuel with a sulfur content of 0.5 percent or less compared to the 3.5 percent sulfur limit today starting next year. (Ships equipped with exhaust gas scrubbers can continue to use fuel with more sulfur, but a relatively small percentage of the global fleet will have scrubbers by the time the rule goes into effect.)
“We have known for 10 years that this rule would come into effect, but human nature being what it is, serious preparations really only got underway in the last several years,” he noted, adding, “There is virtually no chance that it will be delayed at the IMO.
“We are seeing more and more public announcements by refiners and fuel suppliers about new products that are being brought to market to meet the demand,” Butler said. “One thing that is important to keep in mind is that, although the compliance date is January 1, carriers will be switching to new fuels no later than the fourth quarter of this year, based on timing of loading bunkers, so the process is a little less sudden than it might seem.”
At the same time, he noted the IMO’s Marine Environment Protection Committee has set out objectives for reducing greenhouse gas emissions through 2050 with the “long-term objective to take CO2 emissions from shipping to zero by the end of this century.”
“There are lots of ideas being put on the table by a lot of IMO member states. Those ideas include mandatory ship speed reductions as well as schemes that would require existing ships to become more fuel efficient over time, without saying how that would be achieved,” he said.
“One thing that is becoming increasingly clear in terms of the CO2 discussions at the IMO is that, if we are going to meet the ambitious goals that IMO member countries have agreed to, there will need to be a substantial research and development effort to identify and implement new fuels and new propulsion technologies in the coming years,” he said. “We have already picked a lot of the low-hanging fruit in terms of fuel efficiency, and we will need substantial technological breakthroughs in the coming years if we are going to meet the numbers that have been set.”
In terms of economic regulation, he noted a new study commissioned by WSC on the benefits of shipping consortia and what would happen to efficiency levels and service offerings in the absence of vessel-sharing arrangements (VSAs).
“VSAs are essential to providing the most comprehensive service offerings to the widest range of markets and to providing those services in the most efficient way,” he said. “Liner shipping costs per TEU have been cut in half over the last 20 years, even as cargo volumes have increased dramatically and fuel costs continue to rise.”
The study from RBB Economics was submitted to the European Commission as it studies whether to extend the so-called “block exemption regulation” past next April. That regulation allows shipping consortia to operate without running afoul of European antitrust laws.
Butler said the RBB study “shows conclusively that voyage times, frequency of sailings and cost levels would all be negatively affected if the vessel-sharing model were replaced with a model in which all carriers operated independently.
“The differences are really quite stark, and the report puts into perspective the importance of having regulatory regimes around the world that explicitly recognize and provide legal certainty for these sorts of vessel-sharing arrangements.”
Butler also applauded amendments to the U.S. Shipping Act, which he said strengthened and clarified the authorities granted to the Federal Maritime Commission and reassured members of Congress that the commission has the tools it needs to properly monitor and regulate the industry in today’s market.