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Decarbonisation of shipping would create opportunities for financiers

THE main obstacle to industry-wide decarbonisation lies with the shipping industry's composition; it is mainly privately owned, and both shipowners and charterers are driven by short-term cyclical patterns

Decarbonisation of shipping would create opportunities for financiers

THE main obstacle to industry-wide decarbonisation lies with the shipping industry's composition; it is mainly privately owned, and both shipowners and charterers are driven by short-term cyclical patterns

12 September 2019 - 19:00

THE main obstacle to industry-wide decarbonisation lies with the shipping industry's composition; it is mainly privately owned, and both shipowners and charterers are driven by short-term cyclical patterns.

Incentivising shipowners is further complicated by the fact that they are responsible for investing in fuel-efficient technologies whereas it is the charterers who, in most cases, pay for fuel. As a result, only a small part of the fuel savings are passed back to the shipowners.



Nevertheless, financiers have an important role to play in helping the industry move towards effective decarbonisation.



There has been an increasing desire to hold greener portfolios, which stems from a practical need to mitigate against the risk of future (and more stringent) environmental regulations that could directly impact the value and liquidity of vessels, as well as the profitability of potential loans, Hellenic Shipping News Worldwide reported.



The publication presented two strategies that it says could mark the first steps towards financiers incentivising shipowners to invest in cleaner technologies.



The first is internal carbon pricing. Leading economists and industry experts have shown that carbon pricing can play an important role in steering the maritime sector towards decarbonisation. An internal carbon price works as a shadow (or hypothetical) carbon price selected by the financier and it is used to evaluate the sensitivity of prospective financing to future regulatory scenarios.



The financier can use this information to identify and manage risks associated with the implementation of carbon policies. It will also provide the financier with a benchmark of where the vessel sits among peers and can give the bank an idea of the vessel's ability to remain competitive in carbon-constrained markets.


WORLD SHIPPING

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