Harry Theochari, Senior Consultant, Norton Rose Fulbright, praised the gentleman for his frankness, but then challenged the conference panel as to how shipping was going to finance its huge decarbonisation bill.
“Any of you who have read Martin Stopford’s reports on decarbonisation will know that if we use the IMO lower numbers, by 2050, we’re going to need something between $1.1 trillion and $1.5 trillion. If we go for Net Zero in 2030, it’s going to be somewhere between $1.5 trillion and $2.5 trillion. There’s nowhere near enough market by any calculation for us to decarbonise,” Theochari said.
“We owe a duty of care as a shipping industry to decarbonise totally. We’ve somehow got to find the money from somewhere. In my view, it’s going to come from governments. I think the Chinese certainly have the money to do this, but I would ask you—and I make no comment—but from a geopolitical perspective, do we want our industry beholden to China?”
What could panel participants, as important people in the financing of the industry, do to take decarbonisation forward, which it was incumbent on it to do, the lawyer asked.
Iraklis Tsirigotis, Director of Origination, Neptune Maritime Leasing, said his company’s focus was on carbon capture and storage (CCS) and retrofit. “Building a new vessel—a green vessel—takes so much more energy than just retrofitting and extending the life of existing vessels by another 10, 15, or 20 years,” he said.
“We get quite a bit of support in Europe specifically related to the capital that can become available for these things. There’s plenty of capital available. It’s more about the willingness, I think, to focus on it and also the owners, I have to say, to start becoming more open to set ideas.”
Richard Moore, Managing Director, Ascension Finance, said that Theochari was setting out a macro view which everyone agreed on and was aiming to achieve, but at a micro level, several complexities needed to be dealt with.
“The micro view is that still you can’t scrap, get rid of, or not finance a fleet which is older than 12 years old. It’s just not sustainable in the economic sense. It would drive up costs and create a lot of other issues. I think everyone subscribes to that perspective, but it’s a big strategy and we’ve got to get through an awful lot of other micro business points before we can hit that.”
Another ship financier said capital would always be available for the right project whether “green, not green, no matter what you call it. Capital is primarily driven by economic analysis,” he said.
“What is it that drives the skepticism of owners? It’s their clients. Is the client ready to pay a significantly higher cost to employ a vessel that will cost more to build and run? If the client is ready to pay, are they going to transfer the cost to retail end-users, at a time when we’re running at 10% inflation in the UK, for example. I think these are more important questions to answer first before we go to whether there is capital available.”
At this, Theochari reiterated his point.
"The real issue is: where’s the money going to come from? The money isn’t there. We saw from the graphs that the money simply isn’t there and it’s not up to the owners,” Theochari said.
“I was greatly ashamed to be sitting in Maritime Cyprus just a few months ago where two Greek ship owners stood up and said: ‘We’re not going to do anything about this. Why should we? We only put in 3%.’ That’s just simply not an answer. The question is where is this money going to come from, the $2 trillion, $3 trillion that we may need to decarbonise our industry, whether through retrofits or any other way? That’s all fine. We haven’t really got an answer to this.”
Erlend Sommerfelt Hauge, Managing Partner, Oceanis GmbH, said the money had to come from the retail sector, the end-users. But if they were given the option of paying for shipping at true cost with green premium added on, or in the traditional way, research showed that very few were actually willing to pay for greener alternatives.
“A couple of liners have tried to do this. You’ve seen it a bit in car carriers, and in container. The fact is that the real end users are not really there to pay the green premium,” he said.
“Of course, regulators can come in and say: ‘Everyone now has to pay the green premium. Shipping is now green.’ That’s one way to do it. Then we’re looking at quite substantial systemic inflation, of course, with everything that relies on shipping.
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