Page 27 - European Energy Innovation - Spring 2016 publication
P. 27

Spring 2016 European Energy Innovation    27


this vessel can go up to 15. This       announced the creation of the             lack of risk appetite by commercial
is the impact of the crisis on deal     ESSF to assess developments               lending institutions. Any new tools
parameters.                             towards compliance with the new           would have to be designed with this
                                        regulations. The ESSF acts as a           in mind and as such the EC and the
In short, the market is not able to     dedicated expert group, bringing          Bank have derived scheme aimed at
respond, effectively leading to         together representatives of member        encouraging commercial lenders to
higher external costs. This has the     states, as well as private and public     return to the ship finance market. After
effect of waterborne transport losing   organisations including the EC            much deliberation the idea of a ‘Green
competitiveness, even though by         and EIB. Its six working groups will      Shipping Guarantee Scheme’ (GSG)
complying with the ever increasing      deal with abatement technology            was developed with the EC using
environmental regulation it creates     implementation, LNG process and           the CEF. This GSG is as yet only in
positive EU added value.                implementation, competition issues,       ‘pre-pilot’ phase with a small number
                                        finance and R&D.                          of EU national shipping entities and
According to various studies, any                                                 banks. Depending on the success
increase in vessel operating costs      There are several EU-funds available      of these pilots the intention is to roll
and a lower competitiveness of          for shipping industry, each with its own  the scheme out EU wide as soon as
shipping could lead modal shifts        characteristics, goals and selection      practical.
from short sea shipping to road         criteria. EC policy in the domain of
transport in these areas. Stated in an  Maritime environmental development        The GSG in short is a first loss
EU context, the increasingly negative   is demonstrated and defined within        guarantee provided to commercial
outlook, European Added Value           various funding schemes including         lending institution partners of the EIB
and potential market failure or sub-    Connecting Europe Facility (CEF),         in order to cover their investments
optimal investment conditions may       TEN-T (including Motorways of             in the environmental retrofitting
be addressed through consideration      the Sea), European Structural and         of vessels and in some cases the
of market oriented instruments          Investment (ESI) Funds and Horizon        investment costs of fitting these
using a risk-sharing approach to        2020. All of these schemes set            technologies onto new build vessels.
accommodate adaptations to respect      objectives, define eligibility and
SECA and other environmental            budgets aimed at assisting various        It is important to state here that it
standards.                              sectors including maritime. However,      is not intended to be prescriptive
                                        they are naturally limited as to the      of the EC or the Bank as to which
It should be noted that commercial      amount of financial assistance that       individual technologies are supported.
financial institutions are not          can be provided and indeed, within        The scheme will cover any proven
incentivised to lend against ship       the context of the current maritime       technology.
upgrades that improve environmental     environmental regulations, can only
performance but which bring no          provide very high level support and       Finally, it must be added here that the
additional revenues or cost recovery    limited funding.                          greatest barrier to uptake of green
opportunities. Furthermore, both ship                                             technology investments, besides
brokers and commercial Bankers do       It is within this context that the EC     commercial risk aversion, is the
not consider the installation of air    had been engaging with the Bank to        current low fuel price. Ship owners
abatement technology or clean fuel      identify ways in which it can develop     are current discouraged in making
burning engines, as adding to the       EIB financial assistance in order to      these expensive investments whilst
value of the asset as generally the     better address the funding gap faced      the price of Marine Gas Oil (MGO)
secondary market for these vessels      by the industry.                          low sulphur fuel is so low. However,
is outside SECA areas and therefore                                               this can change and furthermore, it
of little business relevance. In other  GREEN SHIPPING GUARANTEE                  is the intention of the EU and other
words, the new clean technologies do    SCHEME                                    international regulatory bodies to
not necessarily ass to second hand      The EIB has already an array of           continually introduce more stringent
ship values.                            financing tools available for such        environmental regulation which in
                                        environment investments but as            turn will maintain upward momentum
EIB/EU RESPONSE                         mentioned earlier, the issue is not a     for adoption of such environmental
In 2013 the European Commission         lack of liquidity in the market but a     technologies. l

1  The EIB Transport Lending Policy states that lending for inland waterway, port, logistics and maritime projects are also prioritized in support of sustainable
transport solutions.
2  Oxford Economics Report, 2014, commissioned by the European Community Ship Owners Association.
3  The ESSF is a platform for the communication and coordination of structural, financial and technical dialogue amongst relevant EU maritime industry stake
holders, the Commission and the EIB to better address environmental sustainability challenges confronting the EU maritime transport sector.
4  For Bank’s who were traditionally major players in the shipping sector, these problems were caused by failing shipping portfolios.
   22   23   24   25   26   27   28   29   30   31   32