Digitization and sustainability: Renaissance of the maritime sector
A popular Chinese saying states: “The best time to plant a tree was 20 years ago. The second best time is now.” Also for the shipping industry the best time to build and prepare for a successful sustainable future is now, says Professor Dr. Michele Acciaro, Director of the Center for Shipping and Global Logistics at KLU, in his analysis published in the Bollettino Avvisatore Marittimo (Maritime Advisor Bulletin) in Italian Language. Title: “A Before and an After: How digitisation and sustainability will lead to a renaissance of the maritime sector”.
The guest article was initially published in the Italian specialized magazine Bollettino Avvisatore Marittimo.
In a recent interview, the CEO of DNV-GL Maritime, Knut Ørbeck-Nilssen referred to an imminent maritime renaissance. He believes a new era is dawning for the maritime industry, and there is momentum for positive change ahead. We are on the verge of a transition in the maritime sector, one that is likely to shape the maritime industry for the decades to come. This transition has been brewing for a while, with digitalization slowly but decisively changing the business, new environmental technologies showing the potential and possibilities of environmentally friendly shipping, and a shift of the world economic power away from the transatlantic axis that has dominated in the last three decades towards a more balanced Asia-centric world. The CoViD-19 pandemic has been a catalyst for change, some sort of watershed between the old and the new.
With international trade likely to bounce back to more moderate growth levels in the coming months, with a lot holding on the line on the consumption for the Christmas period, as the long-term economic consequences of a lingering pandemic looming ahead notwithstanding the hopes of a vaccine being confirmed in November, some might argue there is little room for optimism. The gradual spreading of the pandemic, first in Asia, then to Europe to the Americas, have allowed a less dramatic set back on productions systems and tiered contractions in consumer demand, avoiding much more serious consequences that would have characterized a complete closure of the world. In a study where we mapped the impact of blank sailings on global shipping routes, it is clear to see how shipping capacity adapted to the economic activities of the countries affected by the virus. In most economies around the world, economic and industrial activities, the main drivers of international logistics movements, have continued, even if at a reduced level, for a large part of 2020. And begrudgingly and with a lot of sacrifices, we have learned to live with the virus.
But it is the resilience of global supply chains that has been one of the invisible wonders of 2020. With the exception of shelf scarcity of toilet paper, primarily driven by consumer hysteria, and the lack of PPE in the height of the pandemic, a scarcity that could have been mitigated if governments around the world had followed the recommendations on pandemic preparedness from experts, global supply chains worked remarkably well. Nowhere in the developed world supermarket shelves were empty and in April, in the middle of the pandemic in Europe, with many shops closed, it was possible for the majority of us to have all sorts of products delivered at home. This has made the fortune of some companies, and has shown the reliance of our society on precarious jobs, those of curriers and warehouse workers, and the stark contrast between those that could engage in teleworking, typically white collar workers, and those working in factories and onboard of ships. The international chamber of shipping estimates that over 300’000 crew members are still stranded at sea, and the CoViD19 case resurgence in factories and among migrant workers are an uncomfortable reminder of such contrast.
The pandemic has shown the increasing flexibility granted to global supply chains by digital technologies. While some applications have become part of our everyday life, like ordering a product online, there have been enormous changes also in terms of operations, with digital freight forwarding increasingly becoming the norm, and advanced digital applications finding their way in the management of terminals and cargo movements. Whether it is through a call on Zoom, a container booking on Flexport, or an Artificial intelligence prediction of dwell time at the HHLA Altenwerder automated container terminal in Hamburg, digitalization has been reshaping logistics. The pandemic has accelerated this transition to a level that allowed many of these technologies to overcome the valley of death of innovation and permanently enter the market.
It is to be expected that these changes will be further supported by the ambitious investment plan connected to the European Green Deal and by the Recovery and Resilience Facility, at the heart of the EU’s extraordinaire recovery effort, Next Generation EU, that aims, to help member states to address the economic and social impacts of COViD-19pandemic, while ensuring that these economies advance their digital and green transition. It was very clear from the beginning of the negotiations, at least in words, that the money advanced for recovery, is not spent to support outdated and moribund business concepts, but should prepare European firms to lead the digital and sustainable transition.
When it comes to a sustainable transition, we can observe that 2020 has not seen a slowdown in the efforts of European policy makers and the IMO to close the gaps on environmental regulation on shipping. The low fuel prices have contributed to avoiding some of the cost spikes expected as a result of IMO2020 regulation aimed at curbing sulfur oxides emissions globally, but much greater change is required if shipping is to curb GHG emissions as Europe and other countries around the world strive to reduce their carbon footprint. The decision of the European Parliament in September to include shipping in the European emissions trading scheme by 2022, will have far reaching consequences, not only on the environmental debates in the IMO, but also on the uptake of new technologies.
The rapporteur for the Committee on the Environment, Public Health and Food Safety (ENVI) at the European Parliament, Jutta Paulus, recently stated that LNG is a dead end and will not be the fuel of the future. Given the recent investments in this fuel, however, LNG will probably have some role to play as transition fuel towards zero emission. The ETS will not be enough, considering the current carbon prices at around 30 EUR per ton of carbon to decarbonise shipping in alignment with the emission reduction targets in other economic sectors, and the European Parliament is pushing for a 40% reduction of emissions per unit of transport work (averaged per fleet) by 2030. An increasing number of tests and pilots are already on their way to use synthetic fuels, but the efforts are enormous, and the investments required substantial not only in the ships but also in ports and on-land infrastructure.
In an upcoming report, the international renewable energy agency (IRENA), foresees that carbon neutrality in shipping will only be reached with advanced biofuels and e-fuels, but with high demand for advanced biofuels for other sectors, there will be few options left for shipping to decarbonize. In their estimate, the agency indicates that 40% of the about 1 gigaton of CO2 attributable to shipping will need to be reduced through lower demand and efficiency improvements. With the exception of wind propulsion and solar propulsion, efficiency measures for shipping can only offer limited further reductions. Some of these reductions are being investigated in the Interreg-funded project Wind Assisted Ship Propulsion (WASP), among other, that are showing promising results for Flettner rotors and turbosails in pilot installations on various ships.
The coming years will be decisive on the adoption of alternative fuels, with ammonia, methanol and hydrogen obtained from renewable sources appearing as the most promising alternatives. By 2030 it will be important to have resolved the main technological issues associated with alternative fuels, and it is likely that the first carbon neutral vessels will already be available. European policy makers seem to be determined to ensure that funding is available for such transition, not only through the instruments already mentioned associated with the European Green Deal (the Sustainable Investment Plan and the Just Transition Mechanisms), but also through the Green Shipping Guarantee (GSG) Programme of the EIB. Green finance is also one of trends becoming increasingly important in 2020.
But policy and finance are not all that is needed to ensure a rapid sustainability transition for the sector. At the core of any transition is also creating cooperation among actors, a shared vision and a sense of shared responsibility, and for a global sector like shipping also policy coherence and coordination: in other words, a new form of governance for the sector. In the Green Shipping Governance project, funded by the Social Science and Humanities Research Council of Canada with 2.5 million CAD, it emerges clearly how governance in shipping is fragmented, notwithstanding the preeminent role of the IMO. It is important then in the coming decade to also improve cooperation and coordination not only at European level but also internationally and create further initiatives to share experiences and best practices and advance the sustainability efforts of the sector.
It is likely that with the election of Joe Biden as US president, there will be increasing efforts in finding shared approaches towards sustainability, in shipping and elsewhere. It is important to consider that IMO negotiations do not happen in a vacuum and more political global goodwill towards decarbonization might accelerate the efforts of this UN body towards responding to the climate emergency. Support to the substantivity agenda will also come from a more advanced use of digital technologies, but for the positive developments that have been triggered by the pandemic to stay, it will be important to embrace change.
To use the words of former president Barack Obama that summaries the message that contributed to his election in 2008, that remain valuable also in thee time do rapid transformation: “Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we've been waiting for. We are the change that we seek.” In the end, it is up to the maritime industry to embrace change and contribute to shaping its future, showing the innovativeness and resilience that emerged during the pandemic, and possibly taking advantage of the upcoming maritime renaissance. A popular Chinese saying states: “The best time to plant a tree was 20 years ago. The second best time is now.” Also for the shipping industry the best time to build and prepare for a successful sustainable future is now.
- Michele Acciaro, Associate Professor of Maritime Logistics
- Original publication in the Bollettino Avvisatore Marittimo in Italian, 21 December 2020 (PDF, download)