From the panel Commercial Decarbonisation = Commercial Opportunities, with Sigmund Kyvik, Arthur Richier and Jean Marc Bonello
During Nor-Shipping I moderated a panel where a scientist, a data analyst and a former commodity trader discussed commercial opportunities deriving from decarbonising commercial shipping decisions. They all carried the same message for the commercial decision-makers in the audience: If you want to earn money while decarbonising start collecting granular emissions data today!
The theme of the panel was "Commercial Decarbonisation = Commercial Opportunities" and the panellists gave the audience some good advice on how to start reducing shipping emissions short-term while making profitable commercial shipping decisions. To make sure that anyone who is involved in commercial shipping can access their advices and be motivated to make carbon efficient decisions, I had to sum up the panel highlights in writing.
Before delving into some of the gems presented by the panellists Jean-Marc Bonello, Arthur Richier and Sigmund Kyvik, the term commercial decarbonisation requires a short explanation.
No doubt, long term measures like developing new ship technical solutions and alternative fuels are vital to reduce shipping emissions. But they’re not enough! We need short term actions – and many of the short-term actions can be found in the commercial space. Because commercial shipping decisions highly influence shipping emissions.
So, commercial decarbonisation is all about reducing emissions related to commercial decisions. It’s about turning high quality data into actionable emissions insight that empowers the commercial players in the shipping game to factor carbon into their decisions and make carbon efficient commercial shipping decisions.
We got to cover four topics, and here are some highlights from each of them:
Commercial decarbonisation = Commercial Opportunities
I started by challenging the panellists to come up with examples of how reducing emissions can be made into commercial opportunities, and then to give the audience some interesting numbers related to commercial decarbonisation.
“We see that forward leaning cargo owners are not driven by reporting any more.They look for commercial opportunities. They know that they need to move now to be prepared, and they start to trim their organisations to understand their carbon exposure. Some clients have already put carbon into the KPI’s of their traders because they want carbon efficiency to be in their DNA.”
“For us it’s all about making cargo owners aware of the carbon consequence of their decision. We do not interfere with the decision, we simply say “Ok, this is the carbon cost of that decision”. Let’s take a TC2 example: A round voyage can emit from 800 to 3 000 tonnes of CO2. If you are unconscious, you can be unlucky and easily double your emissions.”
“Considering carbon in the calculation of “Is this vessel worth fixing?” or “Is this cargo worth moving?” has to become standard practice going forward.”
“1,6-1,9 trillion - that’s the number of dollars that our modelling has estimated that the shipping industry has to invest to be completely decarbonised by 2050. These dollars are basically up for grabs. A lot of it is onshore infrastructure, ports and building new ships, but I wanted to mention this big number because everybody can make money while we decarbonise.”
“It’s good to have dreams and be idealistic and we need to be bold if we’re going to make an impact, but it’s about the money, and this is why commercial decarbonisation will work, because you are going to get commercial opportunities if you decarbonise.”
“On most benchmark routes around the world the carbon exposure is going to add around 10% to the cost of freight. If the current trends with higher prices and more volatility continue, the carbon exposure is gonna squeeze a really thin margin. If you wanna simply survive in that market you’re gonna have to know your exposure.”
“On TD20, which is the West Africa crude oil route to Europe, the carbon exposure goes up to 15 %. We’re talking about 200 000 euros exposure of the bat just for that voyage. And then if the ship is ballasting across the Atlantic it quickly adds up.”
Data and data transparency in commercial decarbonisation
What is the importance of data and data transparency in commercial decarbonisation?
“We’re all in the same boat, we’re in uncharted water – everybody has to change the way they have been doing business, data simply removes the uncertainties, it’s as simple as that. Emissions data can give you insight and more importantly it can give you an edge. You can negotiate a more competitive offer, you can charter the right ship, you can position your ship the right way, and you can see what the competition is doing as well, and ultimately it transfers to dollars.”
“To share good quality data and then to be willing to use it in good modelling for decision making. It is such an intuitive thing to do, which shipping seems to not have done for these past years.”
“I want to turn the question around - “Why not collect data?” I can’t see the downside, but I see a massive upside. I think most industries will agree that owning data and controlling high quality data will create opportunities in the future.”
“We have to remember that this is a highly competitive business, where data and information is seen as a competitive edge. We can’t expect them to willingly share all the data. It has to be done in a way that respects the competition.”
Climate action cost
Most large charterers are setting ambitious climate targets, without knowing how to achieve them, and without planning the measures needed. Top management is looking for cost efficient emissions cuts. How would you evaluate the cost of reducing emissions by making carbon efficient commercial shipping decisions compared to other known actions in the energy section?
“We have to remember that for cargo owners shipping is not a core business, it is a tool they use to move their cargo. So, when this is lifted to the CEO level, and they see this big carbon emitting source in their total footprint, then they start comparing the cost of carbon action. If your alternative is to upgrade a refinery or electrify the North Sea, suddenly making carbon efficient commercial shipping decisions is a really cheap way of decarbonising.”
“The phrase “cost of climate action” - we should totally get rid of that. There is no cost to climate action, there is a cost to climate inaction! It's an investment in climate action.”
Where should first movers start?
We have talked about making data into insight, how emissions insight can open doors to business opportunities and how now is the time for first-movers to seize the opportunities. Can you give one advice to the ones who want to be among the first movers, but are asking themselves where to start?
“The sooner the change in mentality is embraced, the more money can be made or the more money can be saved. Start thinking about this yesterday, instead of rolling the can down the road because everyone stands to benefit from this.”
“Get your ducks in order! Know your data, gather it, clean it, understand it, and use it to make your decisions.”
“This is a new exposure that we need to understand, and the only way to understand your exposure is to start collecting your data in a granular way, so that you can create the insight needed to handle this new level of risks and opportunities.”
Jean-Marc Bonello: Principal Consultant at UMAS and leading scientist in the field of maritime decarbonisation. His long list of merits includes being lead author of the Sea Cargo Charter, the Science Based Targets Initiative for maritime transport and a co-author of the Fourth IMO GHG Study. His PhD involved investigating vessel performance data for decision-making related to chartering, and research on owner-charter relationships regarding the uptake of technologies leading to emissions reduction.
Arthur Richier: Lead Freight Analyst at Vortexa, responsible for covering Vortexa’s analysis of energy freight markets as well as freight-related product development initiatives. Prior to joining Vortexa, Arthur was a Senior Pricing Specialist on the freight desk at S&P Global Platts, covering dirty and clean tanker markets. Once a month he publishes the insightful and witty newsletter “Making waves” where he, in his own words is “lifting the curtain on the exciting intricacies of the shipping world”.
Sigmund Kyvik: Siglar Carbon CEO, left his role as Global Lead Trader at Equinor 2016 after deciding to do something about the lack of data-driven decision-making in commercial shipping. He soon realised another major industry challenge, namely the need to cut shipping emissions. So, he took on both challenges and decided to give the industry a digital tool enabling data-driven emissions decisions.