Page 26 - European Energy Innovation - Spring 2016 publication
P. 26
26 Spring 2016 European Energy Innovation
SHIPPING
EU Maritime Environmental Regulations
– Who pays?
By Mark Clintworth (pictured), Head of Shipping, European Investment Bank
In line with EU transport policy However, small and medium depending on the abatement
the EIB provides financial (SME) sized EU short technology chosen.
support to the EU Maritime sea ship-owners are
sector including for the increasingly facing serious FUNDING CHALLENGES
purposes of this paper, EU difficulties funding ‘green shipping’ The economic crisis has drastically
commercial shipping. As regards investments required to meet both reduced ship values and freight
the EU Shipping sector, the current and impending environmental rates making it difficult for many ship
Bank gives particular attention regulations and reduce harmful owners to finance either the necessary
to projects that better assist air emissions. Furthermore, due to environmental upgrade of existing
the sector in dealing with the ever decreasing availability of ships or the acquisition of new vessels
environmental challenges and commercial funds, which are required which are required to meet ever more
encourage, in line with EU to meet these regulations, the EU stringent environmental regulations.
legislation, the development of shipping industry is under even This situation has obvious negative
clean technology and increased greater financial pressure. This has effects on short-sea shipping and
fuel efficiency1. This not only led to requests from the industry and ferry operators who have with limited
benefits EU ship owners and ship the EC within the framework of the funding capacity when confronted with
builders but also supports the European Sustainable Shipping Forum substantial investment costs for clean
multitude of SME’s and midcap (ESSF)³ as to how the EIB can widen technology investments.
equipment suppliers involved its financial assistance in order to help
in the EU’s maritime knowledge to reduce the funding gap required to In addition, the financial sector is also
economy. In 2012², the EU meet these increasing environmental under severe pressure and financial
shipping industry is estimated demand on the industry. assets are ‘on sale’ in some banks
to have directly contributed €56 which means that risk appetite is
billion to EU GDP, employed ENVIRONMENTAL REGULATION severely limited for new shipping
590,000 people, and generated The immediate major regulatory investments. Furthermore, the
tax revenues of €6 billion. challenge to the EU Shipping industry introduction of new European financial
is the 2015 regulation which limits regulations is expected to render the
the sulphur content of emissions from financial system even more shipping
ship’s exhaust gases to 0.1%. This risk averse.
affects all vessels operating in the
North sea, English Channel and Baltic Various European banks are under
sea areas. These areas are collectively pressure to reduce shipping
known as Sulphur Emission Control exposures4 due to capital and funding
Areas (SECA). constraints, de-risking, the need to
focus more on core businesses and
The effect of this rule has been either regulatory impacts. Less funding is
the burning of expensive low sulphur available from the traditional shipping
fuels or the adoption of abatement banks and this will remain so in the
technologies such as sulphur exhaust near future. This means that alternative
scrubbers or retrofitting LNG engines sources of capital will need to be
for example, in order to meet these found.
regulations.
With regard to the impact of
There are an estimated 5,000 ships regulations on the sector, Basel
operating in the proposed SECA, II introduced a rating-dependent
of which 2,000 operate exclusively approach to capital requirements. For
in SECA waters. Up to 71% vessels example, the rating of a containers
operating in this area belong to vessel of 3,500 “boxes”, constructed
European operators. This could mean in 2007 during Basel II makes 4 on the
a potential overall cost of between rating grid. In a Basel III environment
10 to 40 EUR billion to the industry and due to the crisis the rating for
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