As shipping continues to address its environmental responsibilities, industry coalitions are taking shape to advocate specific fuel and energy sources or engage in a wider drive towards decarbonisation. Lesley Bankes-Hughes considers some of the questions we should be asking of these groups
The shipping sector and its associated industries encompass a diverse and burgeoning mix of industry groups which often exist to promote the aims and objectives of a specific body of people, companies and organisations with shared interests. They can, for example, be composed of certain elements of a workforce, such as R&D experts working in a specific field, or they can be more commercially-led enterprises. Such bodies can include trade associations, training entities, standardisation or regulation-driven working groups, task forces, and NGOs. They often include members who represent a wide range of skillsets which come under the umbrella of maritime and who can contribute their particular insights and experience within the forum that each industry group provides.
In recent years, however, and often more closely allied to shipping’s move to address its environmental responsibilities, we have seen the emergence of industry coalitions. These, often multi-disciplinary alliances have largely been formed to focus on single issues, such as advocating the use of a particular fuel, energy source or technology, or they can have a broader remit, such as shipping’s wider decarbonisation effort or ‘greener’ ship financing initiatives.
Without doubt, these coalitions have impressive visibility and are often highly vocal, whether it be through engagement at industry events, providing comment for press articles, or commissioning their own research into, and reports on, the areas of interest that they were created to espouse.
I’m not overly fond of articles that include dictionary definitions of words or terms to support a particular premise or argument, but an explanation of the term ‘coalition’ does seem to be useful in the context of this feature. According to the Cambridge Dictionary, a ‘coalition’ describes: ‘The joining together of different political parties or groups for a particular purpose, usually for a limited time,’
For the purposes of this article, the phrases ‘a particular purpose’ and ‘usually for a limited time’ are important and relevant.
International Maritime Organization (IMO) regulations such as the introduction of the 0.10% sulphur emission control areas (ECA) at the start of 2015 and the implementation of the 0.50% global sulphur cap on 1 January 2020 have been the catalyst for the emergence of a number of coalitions, such as the Trident Alliance, SEA\LNG and the Clean Shipping Alliance. The IMO’s initial greenhouse gas (GHG) reduction targets for shipping, published in April 2018, have spurred shipping into taking action on decarbonisation, and also acted as the catalyst for the formation of new coalitions and alliances, such as Getting to Zero and the Poseidon Principles.
However, while laudable in intent, how effective and proactive are such coalitions? Obviously, these are early days in the progress of the marine energy transition but are these new industry alliances going to be able to effect change or will they be seen as ‘passive’ cross-industry groups that perhaps provide their members with a ‘we are doing something for the environment’ badge, which can also translate into shareholder reassurance while masking corporate inaction?
One of the early environmental coalitions was the Trident Alliance, which was formed in July 2014, ahead of the introduction of the ECAs. Its manifesto at the time of launch described it as ‘a coalition of shipowners and operators who share a common interest in robust enforcement of maritime sulphur regulations and are willing to collaborate to help bring it about.’
The Alliance highlighted its willingness to ‘partner with other groups who share its interest in robust enforcement, to support this objective.’
Following the introduction of ECAs, the Trident Alliance has turned its attention to compliance with, and enforcement of, the IMO 2020 regulations and the subsequent fuel oil carriage ban. Its mantra of creating ‘a level playing field’ will be familiar to all in the shipping and bunker industries.
So how effective has the Alliance been in its messaging? As one industry source told Bunkerspot, ‘I don’t think that maybe they pushed things through as much as they would like to have done.
‘However, whether it was because of the Trident Alliance or the regulators, it is more difficult to cheat [on the regulations] than before.’
One organisation in this for the long term is The Society for Gas as a Marine Fuel (SGMF), specifically set up in 2013 to tackle the issues for IGF code vessels and bunkering. Now with a 150+ membership, the Society has always had a very clear objective: to develop safety guidelines and best practice for Gas bunkering. The Society of International Gas Tanker and Terminal Operators (SIGTTO) clearly has the remit for IGC code vessels and terminal interactions. Put simply, SGMF is for gas as fuel, SIGTTO is for gas as cargo.
Sjaak Klap, who joined SGMF last year as Principal Environmental Advisor after retiring from the Dutch shipping group Spliethoff, says the group’s remit is not that of a trade association but it has proved to be highly effective in providing guidance and clarity for those maritime stakeholders considering a switch to LNG and other gases as ship fuel.
‘With such a diverse membership right throughout the gas value chain, the answer is invariably in the room. We gather our members regularly to discuss and resolve the problems; invariably these take the form of publications and industry guidelines. Another way to evaluate the problems is through user groups and we are having more and more of these, particularly on the operational and environmental aspects,’ he says.
‘When new people come into the LNG bunkering industry, be it a supplier or shipowner, the first thing they now refer to are the various SGMF publications on bunkering, so it has been really successful in filling those gaps and invariably reducing any risks’
SGMF also has consultative status at the IMO, and while it is only Member States that can propose new legislation or legislative changes, Klap thinks that ‘the expertise that SGMF has in safety and in sharing best practice’ can usefully inform the discussions held at IMO level.
Ideal coalitions will bring together industry participants who don’t normally interact. P&I clubs, bunker providers, container lessors and shippers don’t regularly deal with each other, for example, but each has a unique industry perspective that can play into decarbonisation
‘One thing that SGMF strictly does not address directly are the commercial aspects of the business; this is outside of our remit for obvious reasons but it is one area where a coalition can add value – at the same time that coalition needs to be careful not to be seen as a “cartel”, certainly when it comes to pricing and benchmarking,’ says Klap.
Steve Simms, partner of law firm Simms Showers, makes a useful observation about the ‘value’ of coalitions when he notes that: ‘Ideal coalitions will bring together industry participants who don’t normally interact.
‘P&I clubs, bunker providers, container lessors and shippers don’t regularly deal with each other, for example, but each has a unique industry perspective that can play into decarbonisation.’
He also raises another key point about the information exchange that coalitions can encourage and foster, in that: ‘Ideas imported from other industry participants can bring efficiencies that increase profits.’
The place of commercial considerations within coalitions will be discussed later in this article but Simms’ observation about bringing new ideas into the dialogues that take place within coalitions is important. Taking this further and looking at shipping’s efforts to explore the options of new fuels and energy sources as part of the marine energy transition, then the creation of a maritime coalition to look at ammonia as fuel, for example, provides a forum or platform for experts who are knowledgeable about ammonia from their careers in other industry sectors to bring those insights into the early discussions among shipping stakeholders.
Engebret Dahm, CEO of Klaveness Combination Carriers, also sees the usefulness of coalitions in facilitating information sharing.
He told Bunkerspot that: ‘We in Klaveness Combination Carriers strongly believe in coalitions such as the Getting to Zero coalition and other forms of co-operation within the shipping cluster.
‘We believe they have an important role in the mobilisation of shipowners, charterers and suppliers to focus on decarbonisation and the development of low carbon shipping solutions and by creating “venues” for sharing experience from the testing and application of new solutions.
He noted that: ‘Our impression is that the majority of participants in these coalitions, including ourselves, are committed to follow through with positive actions and will do their part in transforming the shipping industry to a low carbon future.’
The delivery of the ambitious European Green Deal, launched by the European Commission last December to, among other things, accelerate the uptake of alternative marine fuels and onshore power and also bring shipping within Europe’s emissions trading scheme, is not, as yet, predicated on any coalition ‘model’ but it may come, as funding is made available for research and development and other initiatives. And, indeed, already formed fuel-focused coalitions may also be called upon to ‘share notes’ with the Brussels’ policymakers.
Similarly, the recent proposal by shipping associations to create a $5 billion research fund to advance the industry’s decarbonisation efforts, through a mandatory payment of $2 by owners and operators per metric tonne of fuel consumed, may come, in time, within the remit of industry coalitions in order to deliver on its promise.
SGMF’s Sjaak Klap also notes that: ‘Cooperation across the shipping industry, fuel industry, OEMs, research institutes, etc., will be essential. A coalition could be a good way forward.’ However, he cautions against coalitions becoming too driven by a single fuel agenda. They must be open to ‘allowing’ other fuels into the future energy mix, he says.
SGMF was set up to promote the use of gaseous fuels in shipping and its first focus was on LNG. However, Klap highlights that: ‘Since the LNG infrastructure is falling into place now is the time to look at renewable methane in the form of bio-methane and synthetic methane, these then can lead onto ammonia and ultimately hydrogen-based solutions.
‘So the pathway becomes both clear and sustainable for the other gaseous fuels but we have some way to go,’ he says.
‘For me, the future for marine fuels is no longer a single solution any longer – it will be about a much more diverse fuel landscape and a completely different mix.
‘Many think that there is a simple solution and that there must be a single fuel to solve this issue – there is not. Let’s stop making it black and white and saying this is not good about this or that option – we must put this approach aside but also think about how ships are powered and also the complete logistics of how they are run,’ he says.
‘Remarkably it is then when we put these three aspects together that we get the carbon reduction numbers we are looking for; fuel choice alone cannot do this and we should stop thinking can it can.’
Klap also makes an important point about how decarbonisation has changed the tenor of discussion about marine fuels, and possibly made them more ‘focus-worthy’ in terms of the attention that coalitions can bring to them.
‘Fuel used to be an operational matter, but now it is a technical and strategic matter [because of decarbonisation].’
Another industry source also broached the issue of how coalitions can push their individual agendas into the public space, and, perhaps more importantly, how the various members of coalitions may work to promote and protect their own commercial positions.
As a service provider you are in a coalition because you want to change things, but you also want to benefit your company
Put bluntly, ‘As a service provider you are in a coalition because you want to change things, but you also want to benefit your company,’ he says.
Taking the example of an engine manufacturer, ‘they will have an interest in a healthy newbuild programme because that’s where they make their profits; having new vessels requiring new designs and new engines will definitely benefit them.’
The larger organisations also exercise the most power in the industry, and it is usually these companies that have the loudest voices within coalitions – sometimes for laudable altruistic reasons but also because of commercial concerns as well.
As the industry source noted: ‘If you are Maersk and you are one of the biggest companies in Denmark, representing so much of the money coming into that country, then of course you are going to have a bigger say than a small shipowner somewhere else in another country.’
In terms of what a coalition can achieve, he suggests that ‘it is easy to say something, less easy to drive things forward.’
And ultimately, ‘while we all want to have the best environment, who is pushing for this and which companies will it benefit? It is always going to come down to the financials.’
Adrian Tolson, Lead at BLUE Insight, agrees with this sentiment to a degree and believes that we should exercise some healthy scepticism when looking at the motivation behind some coalitions.
‘I don’t think you will find any major engine manufacturer or expert in marine fuels or shipping that isn’t arguing right now that we should all be looking at dual fuel engines for ships.
‘The guys with the money are driving that agenda and I think that’s fine because that’s the way the commercial world works.’
However, maintaining a balanced approach is essential, he says. ‘There are clearly organisations arguing different positions but are you creating a bias because that’s where the bias should be – or are you creating a bias in a direction you shouldn’t go?’
That, of course, is the $64,000 question, and very few in the industry would deny that industry coalitions are, in some measure, lobbying groups.
That said, however, Tolson believes there are a good many positives about these groups. He suggests that decarbonisation will necessitate the adoption of new technology by an industry which doesn’t have great track record in responding to the ‘shock of the new’.
Coalitions can do a useful job in spreading the word about technology innovation, he says.
‘A lot of companies and organisations that are trying to forge a new direction in fuels are very small and don’t really have the resources to make a name.
‘They are doing a lot of developmental work and these industry groups can help to promote this.’
He also believes that coalitions can provide a real impetus for change and action in an industry not always known for its proactivity.
‘The marine fuels business has tended to be a follower of shipping and shipping is very much a follower of other industries too, so I think it is useful to have bodies that are trying to lead rather than just follow.
‘And if they really reflect industry composition and an intellectual and fact-based point of view, then I can’t see why anybody wouldn’t want to see them being active.