Investing in a green future for sustainable shipping

Investing in a green future for sustainable shipping

The EIB answered the questions of Government Europa about the agreement and the complications which green, sustainable shipping projects are facing.

In February 2018, the European Investment Bank (EIB) and ING signed an agreement which will provide support through green investments for the European shipping market, at a figure of €300m. Sponsoring green and sustainable shipping projects, the agreement will ensure that transport in the maritime sector benefits by ushering in the green transition.

As a whole, the deal benefits from the support of the European Fund for Strategic Investments (EFSI), which is central to the European Commission President Jean-Claude Juncker’s plan. The agreement was reached under the provisions of the Green Shipping Guarantee (GSG) programme which aims to benefit general fleet renewal, as well as the retrofitting of existing pollutant ships with sustainable technologies, such as: liquified natural gas (LNG); ballast water; and energy efficiency.

The EIB functions as the lending institution within the EU, under the ownership of member states; the bank aims to ensure that long-term finance is available for sound investment and therefore contribute towards the goals established in EU priorities. The EIB answered the questions of Government Europa about the agreement and the complications which green, sustainable shipping projects are facing.

What are some of the complications which green and sustainable shipping projects face? How will the agreement signed by EIB and ING alleviate these issues?

While shipping is facing significant pressure from increasing global environmental and climate –greenhouse gases (GHG) – regulatory pressure, it is important to say that the ship owners are generally quite open and willing to improve their environmental performance but are facing challenges on a number of fronts.

First – competitiveness. Investing in greener technologies represents an immediate expense and unfortunately, it does not yet provide first movers with a (green) competitive advantage, as users of maritime transport services are not always willing to pay for goods to be transported on more environmentally friendly ships. The majority of users do not yet recognise the value and their lack of willingness to pay for such is not conducive to green investments. Stricter emission standards are ensuring a level playing field in this respect.

Regulating pollutant maritime transport

In 2014, the Third International Maritime Organization (IMO) GHG study was published, revealing that maritime transport is responsible for emitting around 1,000 bn tonnes of CO2 each year, as well as being responsible for 2.5% of GHG emissions. By 2050, emissions from shipping are expected to increase between 50-250%, which is dependent on economic and energy developments.

The Second IMO GHG study argues that the energy consumption of ships, and CO2 emissions, could be reduced by up to 75%. To do so, operational measures and existing technologies need to be implemented. These technologies would not only contribute to reducing energy consumption and pollutants but offer cost efficiency and net benefits. New, innovative technologies will only help to cement these reductions.

In 2016, the European Commission contributed €10m in funding towards the
IMO energy efficiency project, Maritime Technology Cooperation Centres (MTCCs). The project is targeted towards developing countries and is intended to be established in five regions, including: Africa; Asia; The Caribbean; Latin America; and the Pacific.

These centres will be established in efforts to promote uptake of low-carbon technologies and operations within the maritime industry, whilst ensuring that operations reduce pollutant practices. It aims to achieve these objectives through both technical assistance and capacity building.

Second – the availability of financing. Arguably, we are in a period where markets are very liquid, but for a number of reasons, many commercial banks have reduced their lending volumes to this specialised sector. Some banks have decided to withdraw from the sector following the 2008 financial crisis, when we saw volumes and daily rates collapse while capacity was on the rise. Commercial banks have limited capital and have hard choices to make. Ship financing is not always easy, given its capital utilisation implications, cyclicality and associated risk.

One of the goals of EIB’s €750m green shipping guarantee (GSG) is to support the sector with additional risk capital to help compensate for the reduction of commercial lending available to the shipping sector.

sustainable shipping
© NOAA’s National Ocean Service

What more can be done at an EU level to foster economic growth and success for sustainable shipping projects?

The European Union already does a lot to support innovative and greening solutions for the sector. The Connecting Europe Facility (CEF) has been supporting innovative and green solutions for years through its grant programme, but continued engagement in international collaboration – especially through the International Maritime Organization (IMO) – to provide an efficient global regulatory and support framework for the environmental sustainability of the shipping sector is key.

Ship owners, shipyards, governments, commercial banks and international maritime bodies such as the EU, IMO and classification societies, need to be engaged in discussions in order to facilitate economic growth, success and environmental sustainability for shipping.

How will the EIB continue to foster growth? What will be some of your priorities in this area for 2018?

By continuing to provide long term financial support to the maritime sector, as well as engaging with our international partners – the European Commission, IMO and other international maritime associations and representatives – to examine ways in which the EIB can provide technical and economic advice in order to achieve the goal of shipping sustainability.

In 2018, the EIB will aim to provide continued financial support to ship owners for the purpose of:

  • Renewing short and deep-sea fleet;
  • Building new environmentally sound vessels; and
  • Retrofitting existing vessels.

Our objective is always being the reduction or elimination of harmful air and seaborne emissions.

European Investment Bank
http://www.eib.org/

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