Finance

Shipping boss warns EU carbon plans threaten to raise industry’s emissions

EU plans to slash carbon emissions threaten to drive up CO2 produced by the shipping industry, the head of the world’s second-largest container carrier has warned.

Soren Toft, chief executive of the Mediterranean Shipping Company, told the Financial Times EU measures, which are still under consideration, would have the reverse effect of their intentions unless low carbon fuels were readily available.

This is because operators would be forced to slow down their vessels to meet the demand for cuts, creating the need for more new ships to maintain service levels.

“For us, it’s very clear that what they are proposing in absence of carbon neutral fuels will add more capacity, more containers, all of which needs to be financed, built in Asia, which will produce more emissions,” he said.

However, Tristan Smith of the UCL Energy Institute said the notion that EU carbon measures would increase the industry’s emissions was “not credible”.

A ship’s emissions from burning bunker fuel are far higher than those produced in construction, and other economic factors such as the oil price and freight rates determine ship speed, he added.

Comments by MSC, set to overtake Maersk as the world’s largest container group in capacity terms with the biggest order book for new ships, come at a critical juncture as the EU prepares proposals to revise its carbon market next month.

It is also significant that Toft, who joined MSC from Maersk in December, has spoken out, as the group has rarely courted publicity since its founding in 1970 by Gianluigi Aponte.

Soren Toft has joined MSC as chief executive with the industry facing scrutiny on its response to climate change and efforts to restore service reliability © Oliver O’Hanlon/MSC

A big question for the shipping industry is the scope of voyages the EU will target in its revised emissions trading system as policymakers attempt to cut CO2 emissions by 55 per cent by 2030.

Shipping, which produces 2.4 per cent of global CO2 emissions, is difficult to decarbonise because low-carbon fuels such as green ammonia or hydrogen are not widely available.

Dierderik Samsom, the European Commission official who heads the team in charge of the EU’s green deal, said the emissions trading system would be the main mechanism used to help lower CO2 in the shipping sector. 

Carbon pricing, which allows emitters to buy permits to meet CO2 targets, would provide a “real incentive for the [maritime] industry to decarbonise their fuel and decarbonise their whole operation”, Samsom told the FT’s Future of Europe conference last week.

He added that the industry could cope with the new obligations by using different types of ships and differentiated speeds of sailing to reduce its carbon footprint. 

Chart showing shipping capacity, existing fleet vs order book

Toft has joined MSC with the industry facing mounting scrutiny on two fronts: its response to climate change and efforts to restore service reliability, which has crashed during the pandemic.

MSC’s ships have lost 10,000 sailing days this year from waiting at congested ports, up about a third on last year.

“We are struggling to deliver the service we believe our customers are entitled to,” Toft said.

But he insisted the current global supply chain disruptions, which he thinks will probably continue into next year, “are not caused by the carriers”.

Another worry for the industry is the possibility of a patchwork of regional levies on emissions. “The EU will take that approach and then before we know it, we will have 10 different approaches to deal with,” said Toft.

But some smaller operators such as Torvald Klaveness and Maersk Tankers say the industry should accept the EU will legislate on shipping’s emissions and work to influence the regional initiative rather than prevent it.

Climate Capital

Shipping boss warns EU carbon plans threaten to raise industry’s emissions

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