Executive Briefings

Is 'Green' an Economic Boon to Ocean Shipping or Just Another Cost

While diesel engines remain the norm in shipping, competitors like LNG are becoming both more feasible and more available. Part of the reason is the rapid expansion of Sulfur Emission Control Areas (SECAs) across North America and Europe. So the critical question becomes: Does "green" propulsion allow the merging of economic efficiency with environmental benefits, or is it just another compliance cost for the shipping trade?

In a business where cost-control spells the difference between insolvency and survival, every euro (or dollar) leaving the books must be scrutinized. And meeting regulatory requirements is generally a pure financial drag. This is especially the case when it comes to environmental requirements – chiefly because, right now, traditional bunkers are so cheap. This means an economic benefit to ship owners who use these fuels while the negative benefits (i.e., pollution) are socialized. Being compelled away from high-sulfur fuel oil is, in cost terms, bad.

Unlike a year and a half ago, when LNG prices were low and oil prices high, many regarded the move away from fuel oil as a cost-cutting measure. For a brief, magical moment, environmental protection and economic gain were aligned. This is no longer the case. The "carrot" of cost-savings has been replaced by the "stick" of E.U. regulation. Ship owners must retrofit and comply with low-emissions requirements if they intend to sail in E.U. waters.

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In a business where cost-control spells the difference between insolvency and survival, every euro (or dollar) leaving the books must be scrutinized. And meeting regulatory requirements is generally a pure financial drag. This is especially the case when it comes to environmental requirements – chiefly because, right now, traditional bunkers are so cheap. This means an economic benefit to ship owners who use these fuels while the negative benefits (i.e., pollution) are socialized. Being compelled away from high-sulfur fuel oil is, in cost terms, bad.

Unlike a year and a half ago, when LNG prices were low and oil prices high, many regarded the move away from fuel oil as a cost-cutting measure. For a brief, magical moment, environmental protection and economic gain were aligned. This is no longer the case. The "carrot" of cost-savings has been replaced by the "stick" of E.U. regulation. Ship owners must retrofit and comply with low-emissions requirements if they intend to sail in E.U. waters.

Read Full Article