Achieving maritime decarbonisation, net zero, or even compliance with IMO targets for carbon emissions reductions requires taking a series of unpalatable and unpopular decisions. From today’s perspective the least worst option is to hedge as much of the risk as possible, building in flexibility and optionality to vessel designs and freight contracts.

These are problems that cannot be solved in isolation but neither do they easily lend themselves to collaboration. As we have discussed before on the blog, everything from anti-trust regulation and competitive advantage makes sharing and collaboration a difficult trick to pull off.

As Bud Darr, EVP, Maritime Policy and Government Affairs, MSC Group told the CapitalLink conference at Nor-Shipping, technology is not the barrier, but the uncertain environment meant making investment decisions “with as much flexibility as possible so you have more choices available later”.

Lasse Kristoffersen, CEO of Wallenius Wilhelmsen is a sworn optimist who believes (in his high value, specialist sector) that decarbonisation is possible and that customers will pay for cleaner solutions.

“The rhetoric matters, we have to stop talking about the problems because the solutions are out there. We have told our customers if you want to do more business with us you have to start paying for decarbonisation and they are.”

This decarbonisation demonstration uses expensive biofuel to lower in-service emissions “by 2027 we will have the first zero emissions service”, he said.

Ingvild Sæther, President & CEO of shuttle tanker operator Altera Infrastructure Group Ltd had ordered lower emission hybrid power vessels but thinks this is not addressing the underlying problems. “It was not an easy choice financially, but the tanker market needs new business models so we can make changes in a cost-efficient way. Open and Capex costs go into different pockets which slows down development.”

The split incentive model – or at least the owner/manager divide was highlighted by Khalid Yousef Alhammad, President, Bahri Ship Management. An in-house manager of 92 vessels it has successfully persuaded its owners to invest in energy saving technologies.

“Whether this works also depends on your profile as an operator, for VLCCs, there is a logic for LNG but it’s harder on [smaller] chemtankers. You have to convince customers to buy in to alternative fuels.”

Regulation is only one of the drivers to efficiency, but the implementation of CII has focussed minds both on its failings and the other pieces of the puzzle, such as contract terms and verification.

“The industry structure doesn’t help; it confirms an old model which is not incentivised; we need to turn carbon from a report to a transaction. The EU Emissions Trading System (ETS) means customers will be paying for carbon, but we need to create commonly trusted data on carbon,” added Kristoffersen.

The need to think differently about the relationship between owner and charterer is not a new theme but as Sæther pointed out it is extremely difficult to get all interests aligned. “We need to think not only next quarter but how we align in the longer term. What are we solving?”

For the technical piece, Bud Darr advocated for shipowners to be directly engaged with energy providers. “This won’t work without them,” he observed. And proving that different opinions are universal, he suggested that more not fewer charter options would enable much more flexible collaboration between owners and charterers.

At the crossroads of this conversation lies the split between cost and profit. Because owners still have to make money they are moving slowly on the expensive part of decarbonisation in favour of lower hanging fruit.

As an owner or operator you are in this to make money let’s be very clear about this, net zero or not. If you are going to lose money, you’re not going to do it,” said Bahri’s Alhammad. “I commend those who lead but unless you have cargo owner who is prepared to spend the additional money to decarbonise faster its difficult. You need to make money so you go with most cost effective solution.”

In Sæther’s market, contracts are short term contracts which disincentivises longer term planning despite the asset trading for 20 years. Until we know the outcome of MEPC80 in July, and afterwards for a while too, business will move faster than the lawmakers.

But as Kristoffersen added, “regulation helps us scale”. He also had hard words for those who used the lack of clarity as an excuse for inaction. “Partnership can be used as an excuse not to show leadership. It’s very easy to lean back and say it but we don’t have time,” he said. “We need to take personal responsibility on this.”

All this relentless Norwegian optimism was too much for Bahri’s Alhammad. “What we’re hearing is a very European view. If you are in the Middle East spot market, it’s going to be extremely difficult because everything comes down to cost and complying with regulatory requirements. It’s going to be tough for us.”