Key takeaways from “Everything you need to know about maritime decarbonisation” Norton Rose Fulbright event.

Norton Rose Fulbright hosted a panel of industry experts to discuss the latest developments in maritime decarbonisation: Edwin Pang, Arcsilea, Martin Crawford Brunt, Lookout Maritime and Christos Kottas, J.P. Morgan moderated by Philip Roche, a partner in our London disputes team who deals with shipping decarbonisation issues. 

The discussions were insightful and informative and examined some of the most pressing issues the industry is facing. Some of the key takeaways from the session were:

• Regulation
  An acknowledgement of the challenge that shipowners and operators face navigating changing regulation, coupled with having to adapt to new areas of expertise – for example, the trading of EUAs under the EU ETS, something that very few, if any in the shipping industry will have had experience of.
• A united industry
  Whilst there is much change afoot for shipping, there was also a clear message that ‘we are all in it together’, with a noted improvement of transparency in communication and co-operation in some contractual relationships. The importance of feeding back to legislators and, industry groups on how schemes need to adapt to work to meet the commercial realities of the industry was stressed. All these regulations are either developing with use or being developed and we are all learning together. There was also an expectation that the EU would provide further guidance on FuelEU Maritime which would be useful for shipping companies (see FuelEU Maritime for more information on this).
• Alternative fuels
  The issue of alternative fuels was discussed, with the view that it was too early in the process to ‘pick’ a fuel. Whilst biofuels look promising, there was some concern that these might not be the silver bullet that the industry is hoping for: aside from issues around availability of the fuel in the quantities required by the industry (other industries are ahead in the demand queue) there was also discussion about whether engines could tolerate fuels with higher percentages of biofuels. The suggestion was, at the moment, that the sector should look to operate vessels more efficiently and consider vessel adaptations such as installing sails and using wind power. It was probably still too soon to go for an expensive solution.
• Uncertainty
  Regulations are being developed and introduced at a far greater rate than ever before, regulators are learning on the job, and regulatory certainty and clarity are in short supply.
• Overlapping regimes
  The panel discussed the difficulties with having different, overlapping regimes under the EU’s initiatives with the EU ETS and FuelEU Maritime and the recent proposals from MEPC83 by the International Maritime Organisation. The panel agreed that it would be helpful to have these initiatives aligned but also acknowledged the practical challenges with ensuring such alignment.
• Regulation and sustainability alignment
  The industry needs access to both regulatory and sustainability functions, whether in house or externally, and they need to work closely together – sometimes what complies is not sustainable economically or practically. 
• New legislation incentivising industry to decarbonise
  One positive which the panel highlighted was that, facing the new legislative developments, the industry has shown willing to buy better ships with lower emissions and to invest in software to help capture and exchange data, all of which will have an important part to play in shipping’s decarbonisation journey.

An evolving regulatory landscape

In summary, the panel described regulation as a meandering river – owners, operators and charterers must work out how to deal with the imperfect regulations in a sustainable and economic way bearing in mind the ‘three laws of decarbonisation’: 1) you can’t cheat physics, 2) you can’t cheat chemistry, 3) you can’t defy economic gravity  and you should ignore those that offer solutions that suggest you can.

If you have any questions on this summary, please contact Philip Roche or Kelli Bodal Hansen.