A hidden treasure for the shipping industry

Everybody in the shipping industry knows that ships emit carbon emissions and that, consequently, the sector as a whole is contributing to the global warming of the planet. Many in the shipping industry also know that companies can buy carbon certificates to offset their emissions. Those purchases will not be registered with the International Maritime Organization (IMO) or with any government since they are not mandatory, but companies will report to their shareholders, clients, and other stakeholders that they are offsetting all or part of the carbon emissions by supporting the preservation of rainforests or other similar projects in developing countries. Being responsible for carbon emissions, and finding a way to reduce those emissions are two issues that are well known in the maritime industry. 

However, did you know that shipping companies can recover part of the investments they make to reduce fuel consumption and become more energy efficient by issuing carbon certificates? You read well: not spending money on buying certificates but earning money by selling certificates. I have written about it a couple of times in the past months here on Linkedin, but today I will develop longer the argument since I still have the impression that about nine out of ten in the industry do not know about it and that the other one out of ten may think that something like that sounds too good to be true. How is that a shipping company can earn money on climate change issues when everything indicates that shipping companies belong to the side of the "bad guys" when we talk about global warming?

Believe it or not, but it is possible, and why? Because it has been done before. AkzoNobel, the manufacturer of a biocide-free advanced hull coating (superior to biocidal anti-fouling), was able to issue carbon emission reduction certificates. After a process that included the elaboration of the methodology, the elaboration of the project design document (PDD), and the fulfillment of the necessary validation and verification stages, the manufacturer was able to issue carbon reduction certificates for 16 vessels. The hull coating had environmental benefits because it was not biocidal, but the issuance of certificates was possible thanks to its superior anti-fouling characteristics: the manufacturer demonstrated that there were fuel savings during the docking cycle following the administration of the advanced hull coating with the fuel consumption of the previous docking cycle; obviously, the fuel efficiencies represented reductions of carbon emissions. In that case, it was the manufacturer who issued the certificates, sharing the proceeds with the owners of the vessels. However, if a shipping company was going to use the advanced hull coating in several ships, the owner of the shipping company could have become the issuer of the certificates. 

How was that possible? Gold Standard, one of the top voluntary offset programs in the market, had approved the methodology: "Reducing Vessel Emissions Through the Use of Advanced Hull Coatings." Nowadays, that methodology is not valid any longer, but not because Gold Standard had withdrawn that program. On the contrary, the reason for the withdrawal is because Gold Standard has widened much more the range of options with a new methodology called "Retrofit Energy Efficiency Measures in Shipping." The option of advanced hull coatings continues, but shipping companies can apply now for many other measures. Since Gold Standard is not a specialized institution in maritime issues, to select the range of new measures, they follow a catalog of energy efficiency measures written by Wartsila some years ago. As a consequence, all the following retrofitting can benefit: 

1. Design related measures: This category includes engine derating, reconfiguration of the bulbous bow, interceptor trim plates, optimization of hull openings, superstructure aerodynamics, aft waterline extension, and air lubrication.
2. Propulsion measures: This category includes pre/post-swirl devices including boss cap fins, vane wheel, presswork ducts, Mewis duct and stator fins; propeller/rudder integration including propeller rudder bulb and propeller nozzles, propeller rudder matching/combination, and asymmetric rudder and propeller modifications including advanced blade sections, winglets/Kappel and propeller section optimization; propeller modifications; usage of wind power with sails, Flettner rotor, kites, etc.
3. Machinery measures: This category includes engine tuning and common rail technology.
4. Operating measures: This category includes variable speed operation for controllable pitch propellers, propeller surface finish/polishing, advanced hull surface coatings/paints, part load operation optimization, vessel trim, and lubricants and fuel additives.

Here, in the last group, you see the advanced hull surface coatings I was referring above, but it is more than clear that the new methodology by Gold Standard is much more ambitious than the previous one.

This is the hidden treasure I was referring to in the title of this article. Offsetting is undoubtedly not the best way to deal with climate change since it could be a way "to sin, to pray for forgiveness, just to sin again." Between reducing emissions by buying offsets and lowering emissions by becoming much more efficient on the use of energy, there is no doubt that the second option is the best. However, if some shipping companies are spending significant amounts to reduce their carbon emissions, why will they not take the opportunity to issue carbon emissions certificates to recover part of their investments? The institution is there (Gold Standard), the methodology is there ("Retrofit Energy Efficiency Measures in Shipping"), and all that is needed is to prepare a very good PDD for one ship or a group of ships and to pass all the requirements demanded by the methodology. Will shipping companies recover all their investments by the issuance of those certificates? Certainly not, because prices in the voluntary market are not high; however, shipping companies could recover part of the money they spent by retrofitting their ships at the yards. 

In case your company is interested in pursuing this route, do not hesitate to contact me by email or direct message since you will need an expert in both: carbon markets and maritime issues. However, first, I encourage you to contact Gold Standard: www.goldstarndard.org