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Trade bodies’ role in shipping decarbonization comes under spotlight after Maersk quits ICS board

21 July 2022 Max Tingyao Lin

The role of trade bodies in maritime decarbonization has come into the limelight after A.P. Moller-Maersk, one of the world's largest container lines, withdrew from the board of International Chamber of Shipping (ICS).

Last month, Maersk Executive Vice President Henriette Hallberg Thygesen quit as a board member of the industry association representing over 80% of the world's merchant fleet.

The Danish conglomerate, which had had a representative on the ICS board for over a decade, said: "We review our membership status once a year to ensure that the trade associations in which we are members lobby in alignment with the goals of the Paris Agreement as well as other key issues. This includes assessing how their approach and outreach reflect our views and values."

"Our choice to step down from the ICS board should … be seen in this context," Maersk said on its website, without elaborating.

ICS membership consists of national shipowners' associations, rather than shipowners themselves, and Maersk participated in the ICS board by being a member of Danish Shipping, which remains an ICS member.

Maersk has confirmed to Net-Zero Business Daily that it is still a Danish Shipping member. This means Maersk will continue to be represented at ICS through Danish Shipping.

Still, the high-profile withdrawal has raised some eyebrows. "In Pacific Environment's 10-year history of watchdogging the global shipping industry, this is the first time we've seen a major shipping giant [split from] a trade association citing climate concerns," the nongovernmental organization's climate campaign director Madeline Rose told Net-Zero Business Daily.

When contacted, ICS said its policy is not to comment on any individual member or company.

On its website, Maersk explicitly stated it holds memberships in BIMCO, European Roundtable for Industry, Getting to Zero Coalition, and the World Shipping Council (WSC), deeming the trade bodies to be aligned with the Paris Agreement, which has the ambition of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.

"There is no qualitative difference between ICS, BIMCO and the WSC in terms of their positioning on climate action," nonprofit Transport & Environment's Shipping Director Faig Abbasov told Net-Zero Business Daily, questioning why Maersk publicly withdrew from the ICS board but endorsed the other two.

Maersk said it does not have any comment on Abbasov's view.

The company aims to achieve net-zero direct and indirect emissions as a business by 2040, while both ICS and BIMCO commit to net-zero carbon emissions by 2050. The WSC has defined regulatory and economic pathways to zero-carbon shipping.

Heightened scrutiny

With decarbonization high on the shipping industry's agenda, trade associations have played a public role representing shipowners to NGOs and regulators in recent years.

ICS, BIMCO, and the WSC all have consultative status with the International Maritime Organization (IMO), the UN agency responsible for regulating shipping globally.

"Trade bodies are critically important since the IMO and NGOs look to them as articulating the views of the sector they represent," said Peter Tirschwell, vice-president for maritime and trade at S&P Global Market Intelligence. "Decarbonization is only getting ever greater attention and must increasingly be taken into consideration by any company in regards to the trade groups it participates in."

BIMCO, whose members are shipowners controlling over 60% of global fleet, has vowed to help achieve industry-wide decarbonization by participating in IMO discussions.

"Sometimes we provide information to member states to help them better understand an issue from the shipowner's perspective," Chief Communications Officer Charlotte Lord said. "This is an important part of the regulatory process, because it means that when regulations are being formulated there is a better chance of success that the regulation can be practically implemented by the industry."

"Conversely, we use our knowledge and experience in the regulatory space to update our members on what is happening and explain some of the complexities which in turn makes it easier for the industry to be compliant," Lord told Net-Zero Business Daily.

Meanwhile, Abbasov called on industry bodies to lead their members in pursuit of decarbonization rather than simply reflect their interests.

"Today most trade associations just play a role of a mouthpiece for shipping companies. Given the association memberships usually have widely different ambition levels, any consensus on climate action tends to reflect the lowest common denominator approach," Abbasov said.

"Instead of parroting the positions of member companies, trade associations should play the role of an illuminated guide helping to convince shipping companies of the benefits that progressive climate policies can play in enabling transition to sustainable operations," he added.

Divergence among shipping firms

Shipping is a highly fragmented industry with a large number of shipowners of various sizes in multiple sectors, and their approaches to decarbonization can often differ.

Under the auspices of the nonprofit Global Maritime Forum, which Maersk helped establish, more than 150 companies have formed a partnership to develop commercially viable, zero-emission vessels in deepsea trade by 2030 via Getting to Zero.

Aside from some energy, infrastructure, and finance players, Getting to Zero's members including some of the largest shipping conglomerates like Maersk, Mediterranean Shipping Company, and NYK Line.

For its part, Maersk has ordered 12 16,000 TEU containerships that can run on methanol and conventional fuels while investing in green methanol supply infrastructure.

"A large shipping company like Maersk can possibly manage its own transition by investing in clean ships, investing in green fuel bunkering infrastructure in their own terminals and investing in green fuels production," Abbasov said.

Different shipping sectors could also face different decarbonization requirements. The WSC represents container shipping lines, and Maersk stated that it will support the trader association's "strengthening" and "dedicate internal resources hereto."

Many container lines' customers are retailers that are under pressure from eco-conscious consumers. Last October, IKEA, Amazon, Unilever, and six other major shippers pledged to achieve zero-carbon shipping by 2040.

"The CO2 emissions created by international ocean transportation would be part of the carbon impact of consumer products. This is why the WSC has taken a more aggressive position on decarbonization and was behind Maersk's decision," Tirschwell said.

"It's possible to see different industry associations taking divergent positions reflecting underlying diversity of views within different industry sectors," he added.

Merits of a uniform approach

Still, some shipping players believe an industry-wide approach has its advantage, given that shipowners often face the same set of emissions rules and the same obligation under the Paris Agreement.

BIMCO, ICS and the WSC have joined hands with six other trade bodies to push for a $5 billion research and development fund for maritime decarbonization at the IMO, though discussions at the UN body have been slow.

"There is a significant level of alignment across the shipping industry," WSC President and CEO John Buter said. "There is broad agreement that a global carbon price is necessary, that lifecycle analysis [for marine fuel emissions] is important, and that a significant expansion of applied R&D is vital to improving the technology readiness levels of different fuels and technologies."

"A few years ago there was no broad agreement on these actions, but all of the shipping organizations have done a very good job in working together to reach agreement on a number of things that are essential to the climate challenge," Butler told Net-Zero Business Daily.

ICS Director of Strategy and Communications Stuart Neil, whose organization represents shipowners with a wide range of interests, suggested a decarbonization approach based on any particular shipping sector would be insufficient to overcome climate challenges.

"Ships operate across the globe. There will be certain sectors that will be exposed to different challenges. But ultimately we have to decarbonize the whole lot," Neil told Net-Zero Business Daily.

"You can't just decarbonize one sector and think you're done … If you're going to decarbonize, you need to do it properly, you don't want to have fragmentation," Neil added. "Ultimately, everyone has to move at a very similar pace."

Posted 21 July 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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