The North American “E” in maritime ESG

Last week, I highlighted the notion that the “E” should loom larger than the “S” and the “G”, in discussions of “ESG”. Little did I know, when doing my write-up, that it would be posted on Capital Link’s website at the same time that the Blue Sky Maritime Coalition (BSMC, abbreviations loom large, it would seem) was releasing its report, actually a “White Paper” containing an “analysis of the carbon footprint and emissions-free fuel requirement for the North American Waterborne Transportation (“NAWT”) business ”- some 66 million metric tons in 2018. The BSMC is a coalition of U.S. and Canadian transportation-related interests who are actively developing a decarbonizing strategy for the North American maritime business. U.S. and Canadian marine transport falls, mainly, outside the realm of heavily publicized emissions-related international regulations. So, a separate effort makes total sense. 

As far as the report itself, I would start at the back, where BSMC indicates its intentions to develop real business approaches to managing U.S. maritime emissions- including an important role for the inchoate voluntary carbon markets. “Inchoate” is a polite way of saying that such markets have a long way to go (though airline emission management may provide some templates). BSMC says,  “Although the emissions reduction potential is significant, there is no existing commercial structure or agreement in place that aligns the interests of charterers, owners, and investors to decarbonize the NAWT business. BSMC is collaborating with leading decision makers in the industry to create such an arrangement.”   

Ultimately, huge amounts of alternative fuels will need to be produced, and I agree with BSMC that carbon markets will play a role in financing production and infrastructure for new fuels. BSMC also alludes to new business practices surrounding vessel charters that would promote reduced emissions- easier said than done. Clearly, as carbon pricing enters into vessel charter parties, emissions can be reduced; perhaps vessel owners active within BSMC can take the lead here. 

The majority of the report is devoted to an explanation of how emissions are calculated, for various vessel types. The BSMC authors are quick to note wide discrepancies on estimated emissions, compared with calculations by others (notably UK based UMAS, using different methodologies). I tend to trust BSMC numbers- which are double those of the others- because BSMC’s have been developed with considerable input from actual vessel owners- who know first-hand (not solely by “data scientists” crunching through AIS algorithms )  about trading patterns, real consumption, and when their captains are revving the engine (or not). 

My criticisms of the report (no article would be complete without this part, right?) are mainly stylistic- this being North America, I would change out mentions of “tonnes” for “metric tons” (2204.6 lbs). Also, when talking about fast boats with “planning hulls”, I would ditch the spell checker and instead go with “planing hulls”. On data-crunching, the authors make some brave assumptions- but, thinking back to my own analytics (freight rates, vessel hires, fuel prices, implied prices from spreads, the list goes on-  readers can get the idea), you need to twist and torture various sets of incompatible data (collected for different purposes than the analysis at hand) to get some sensible result. And, to repeat, having actual vessel owners contribute to the data-crunching gives it much more realism than alternatives. 

Then, there is the Jones Act, which comes in for heavy criticism all around (not from me though- some of my shipping clients operate vessels in U.S. coastwise trades). Many of the BSMC assets are Jones Act compliant- they stay in North America; think about coastwise ATBs and thousands of tugs and workboats on U.S. rivers and coastal waters. To me, it seems like it would be a home run for all concerned if Jones Act proponents, including those of a political bent with offices on K-Street, or nearby, would jump aboard BSMC’s efforts. If Jones Act proponents tie themselves to the “E”, their critics will find it much harder to bash the Jones Act- which might then be considered as a force for reducing emissions (rather than as an impediment to low prices, enemy of free trade, etc etc and whatever else its critics incorrectly assert).