BCG advises on opportunities for Green Shipping

Cargo owners are quite willing to pay a premium for green shipping options, but not nearly enough to fund the necessary rapid decarbonisation of the sector.

Despite the fact that shipping is struggling to turn commitments into action, ship owners and operators can grab a share of the expected huge future revenues in green shipping by actively developing untapped demand and taking action early.

Those are the key findings of the latest research on decarbonising shipping, conducted by business consulting giant Boston Consulting Group (BCG). “Long-term success will not be easy, of course,” says the report’s lead author Peter Jameson, BCG managing director and partner in Copenhagen. “It will require bold leadership and pioneering work.”

Premiums inadequate

In its third annual survey of shipping customers’ willingness to pay for green transport, BCG found that more than 80% of supply chain directors and logistics buyers were willing to pay a premium. However, the average premium paid was only 4% compared to a 10% to 15% premium that previous surveys suggest would be needed to achieve full decarbonisation. In the first two years of the survey, the survey of about 125 freight professionals saw the size of an acceptable premium rise from 2% to 3%.

Dates pushed back

“One of our key findings is that the shipping industry is still struggling to turn commitments into measurable actions,” the report said. A Bain & Co survey among more than 600 oil and gas industry executives published this week showed that they are pushing back their expectations on when the world’s carbon emissions will reach net zero. Energy company Shell said this week that CO2 reductions would be slower than previously planned as it expands its gas operations.

Breakthrough after clearer rules

Jameson said he saw a solid acceleration in commitment to low-carbon strategies over the past six months following the breakthrough at the International Maritime Organisation towards clearer rules for low-carbon ships and the implementation of the European Union’s Emissions Trading Scheme for shipping. Despite this, three major obstacles remained standing in the way of green shipping: the slow production of alternative fuels, changing regulations and a budget gap between cargo owners’ ambition to reduce emissions and their budget to achieve it.
“Although more than 60% of our respondents have committed to reducing Scope 3 shipping emissions – emissions for which a carrier is indirectly responsible in its value chain, but which it does not generate itself – less than half say they have an adequate budget to achieve their goals.”

Crucial phase

Jameson said the real challenge now lies in turning these commitments into concrete actions. “We know that huge revenues will be created in green shipping over the next few years, but also huge revenues will be destroyed,” he added. “At this crucial stage, freight operators cannot wait for optimal regulations to take shape or for customers to take the lead. They must proactively identify and seize growth opportunities for green shipping,” the report said. Read the much fuller article on the Tradewinds News website.

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