The ongoing uncertainty around both new “sustainable” shipping fuels and different regulatory approaches means shipowners face additional risks that deter them from commissioning new vessels (“Older vessels ply on amid green fears and war”, Report, January 8).
It is concerning that the maritime sector still faces such uncertainty around the future availability and price of alternative fuels and, indeed, which fuel is likely to emerge as the default fuel of the future in shipping. Clarity on those issues is needed to shape the specifications for new ships and, in turn, accelerate the investment in those ships.
The regulatory picture is similarly cloudy and uncoordinated, as illustrated by the way the sector has been grappling with the application of the EU’s emissions trading system, which took effect from January 1.
Shipowners remain uncertain about the regulatory approach to maritime emissions from other key economies and regions, complicating decisionmaking around sustainable investment. Consequently, shipping investors these days are faced with a trilemma: should they invest in a cheaper but (much) more polluting conventional ship or in a more expensive but eco-friendly one or postpone their investment decision for when this technological and regulatory uncertainty has been resolved?
This is particularly important for smaller shipping companies that have neither the required cash reserves nor access to affordable external financing.
Bayes’ research also suggests that while eco-friendly vessels typically cost around 20 per cent more than their conventional counterparts, the timecharter rates they can secure in the freight market are closer to 10 per cent more than the ones for conventional vessels.
Therefore, the long-term cash flows generated by this green investment do not currently justify the risk of undertaking it.
Ioannis C Moutzouris
Onassis Senior Lecturer in Shipping Finance and Analytics
The Costas Grammenos Centre for Shipping, Trade and Finance Bayes Business School, London EC1, UK
