A global carbon tax may be the eventual goal for the shipping industry to accelerate decarbonization, but the EU ETS is a great first step. It addresses the sector’s emissions, which have previously been exempt from carbon pricing mechanisms and, moreover, creates a set of rules that can be used immediately as a lever and generator of genuine change across the entire maritime value chain.
Challenges of compliance
By design, compliance with the EU ETS will further ramp up regulatory challenges and environmental pressure, as well as increase costs for companies that exceed their emissions threshold. This will add complexity for owners and operators, requiring them to find the right solutions to adjust or face the significant financial risk of not meeting the requirements.
However, it is important not to dwell too much on these challenges. We should instead look at the EU ETS as a real opportunity to take a decisive leap forward for shipping’s decarbonization, as by putting a price on carbon, the system directly incentivises emissions reductions.
This will encourage companies to invest in cleaner technologies and practices, improve vessel design, optimise operational efficiencies, and explore alternative fuels, fostering innovation and supporting both the EU’s climate goals and shipping’s journey towards zero emissions.
This outlines the opportunity that regulation brings, as it forces industry players to start thinking smarter about how they can drive more sustainable operations.
The good news is, there are solutions currently available on the market that can provide data-driven insights and analytics to optimise vessel performance and reduce emissions.
By connecting multiple data points across a single interface, software can interpret data to generate thousands of recommendations to optimise voyage plans and increase earnings. Organisations can therefore better predict and forecast performance, making decisions that will optimise the voyage, vessel, bunker, costs, and emissions. This means companies will also see the financial benefits that come from optimising their operations, such as reduced fuel consumption and costs, benefitting both profit and planet.
Overcoming data fragmentation
Data will also play a pivotal role in managing EU ETS reporting, as accurate and reliable data is essential for assessing a vessel's environmental impact and progress towards sustainability. However, the maritime value chain still currently suffers from fragmentation when collecting and reporting data. Information is dispersed across the value chain, among various tech platforms, classification societies, and internal systems, leading to inefficiencies and challenges in obtaining a comprehensive view of the industry's operations.
Moreover, many companies employ single-function or in-house systems, which only address certain aspects of the emissions reporting process. As the diversity and number of data sources involved increase, so does the risk of errors in analysis and compliance.
Failing to collect and validate emissions data throughout the year will lead to significant work burdens to meet end-of-year mandatory, regulatory reporting, and voluntary reporting requirements. Shippers and operators will then be forced to navigate complex data sources to ensure accuracy and compliance, which can be time-consuming and prone to human error. This burden not only hampers operational efficiency. It also diverts resources from core activities and undermines the ability to proactively manage emissions and EU ETS compliance.
By adopting a continuous data collection and validation approach, shippers can streamline workflows, alleviate year-end pressures, ensure compliance with the EU ETS, and focus on wider sustainability strategy planning.
Maximizing progress
As shipping finds its feet, it must seize the opportunity that the EU ETS presents to ensure the adoption of long-lasting processes and tools. This will prepare us for the future, as regulations tighten further, and more rules for reaching zero emissions come into force. It is critical that solutions that bring together information across the value chain are prioritized, to deliver a comprehensive view of the industry's operations and enhance collaboration as we work together to make global trade green.
Website:
https://zeronorth.com
THE REPORT | MAR 2024 | ISSUE 107 | 107
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