VESSELS with higher design efficiency, as measured by the GHG Emissions Rating, save more fuel on average than design alone would indicate, but are not adequately rewarded, say environmentalists.
Fuel efficient ships not rewarded enough in today's shipping market VESSELS with higher design efficiency, as measured by the GHG Emissions Rating, save more fuel on average than design alone would indicate, but are not adequately rewarded, say environmentalists. UCL Energy Institute (UCL) and Carbon War Room (CWR) researchers say the market often fails to reward owners of efficient vessels by way of premiums or preferential hiring. As a result, the industry is not being helped to meet the challenges of a low-carbon future, and could challenge regulations designed to reduce total industry emissions, reports American Journal of Transportation. The research conducted by the UCL and CWR found that in 2012 the difference in fuel costs between a B-rated and an F-rated capesize vessel was, on average, US$5,500 per day, or nearly $1.5 million annually - a higher difference than would be anticipated based on design. Despite this, efficient vessels do not appear to deliver significant rewards for anyone other than the fuel payer. In the time charter market, charterers appear to be reaping rewards when they choose vessels with high GHG Emissions Ratings, but owners of efficient ships do not share in the benefits. On average, there should be a fuel saving for charterers choosing vessels with high GHG Emissions Ratings, according to the study. However, the market does not incentivise owners of efficient ships with premiums that reflect charterers' fuel cost savings. Owners in the time charter market that choose to improve their fleet's efficiency by investing in efficiency technologies are not seeing a return from either price or preferential chartering. This means that in today's markets there is little financial incentive for other owners to follow their example. "This research demonstrates that market failures present significant challenges to realising emission reductions," UCL Energy Institute's Tristan Smith said. "It indicates that policy tools that have contributed to the improvement of other industries, such as carbon prices or fuel levies, would have a greatly decreased impact if applied to shipping unless these observed market failures are addressed. "This is because these policies work by magnifying existing market dynamics that reward efficiency and we don't currently see those dynamics in shipping."
