Sunday, May 27, 2018 | ISSN 0719-241X

Challenges ahead and how to beat them in the race towards decarbonization

ITF case specific report on Sweden’s successful policies
Edition of April 26, 2018

“The main challenge to decarbonization of shipping is the upscaling of current promising initiatives,” reads the International Transport Forum’s Case-Specific Policy Analysis Decarbonizing Maritime Transport: The Case of Sweden, to which MundoMaritimo had exclusive access. The Nordic country has successfully implemented a series of measures, policies and initiatives to promote the zero-carbon objectives in the maritime transport industry focusing on three main avenues: finance, public policies and international policy development.

Finance for zero-carbon shipping

“The successful examples in this report on low-carbon ships in Sweden were enabled by ship-owners who were willing to take risks or invest energy in mitigation of these risks. In order to upscale these examples, there would also need to be finance available for the ship-owners that do not have the same time or determination. In other words, the business case for green ships would need to be self-evident to a point that ship-owners would have a disincentive to invest in ships that are not green,” details the report.

Fossil fuel powered ships are becoming a less attractive asset in light of climate change agreements. Financial loans for fossil fueled vessels have high interest rates and are harder to acquire, opposed to funding for zero-carbon ships, which will be more favorable via subsidies, national development banks or funds similar to the NOx Fund in Norway. Another recurrent challenge for decarbonization of shipping is the misalignment of fiscal policies with climate policies. Heavy fuel oil for ships is not taxed but generates huge negative externalities, whereas some of the alternative energy sources (e.g. electricity) with much less of these externalities are actually taxed. This complicates a massive transition from HFO to alternative fuels/energy.

Public policy alignment

Sweden has a climate law with a target of zero net greenhouse gas emissions by 2045. This legislation includes a sector-specific emission reduction target for domestic transport: 70% less CO2 emissions in 2030 compared to 2010. This target does not specify which transport sectors should contribute to which share of the transport emission reductions. Yet, more than 90% of the domestic transport emissions in Sweden are from road traffic. Domestic shipping is included in this target and a mode shift to coastal shipping could potentially play a role in decarbonizing the domestic transport sector.

The current challenge is to translate this political ambition into a coherent strategy for the decarbonization of shipping. As set out below, there are various areas of public policy that do not seem to be aligned with the political climate ambitions. Government policies such as public procurement, fairway dues, optimization of supply chains and support for innovative shipping platforms could help this objective. Also, the public sector could help sustain platforms that have been helpful in decarbonization of shipping, such as the Zero Vision Tool, which could play a useful role in the necessary roll-out of shipping innovations to a larger set of shipping companies.

The potential at the national level to reduce the GHG emissions of shipping has its limits. The reason is that the link between countries and the ships calling their ports is usually thin. Many ship-owners have registered their ships in open registries, so are not even subject to the rules of their national shipping registry. Even if Swedish ship-owners have registered a substantial share of their ships in Sweden, their behavior is conditioned by national and international measures. So the challenge is to disseminate and upscale some of the good practices from Sweden internationally.

By MundoMaritimo

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