Benchmarking key to shared decarbonisation drive

In its latest annual review DSF said that the short-term decarbonisation targets for the sector are achievable but the long-term aims remain a challenge, that is because 2050 targets require alternative fuels that can only be produced through the investment and regulation from governments.

“Historically, no alternative energy source has achieved global prominence without some form of strong governmental support. Governments play a pivotal role in mitigating risks, providing financial incentives, and creating a regulatory environment conducive to the adoption of new energy technologies,” said DSF.

With maritime an effective niche player in the energy market, it was not possible for the industry to lead on the development of alternative fuels, according to DSF, however, the group believes the sector could incentivise decarbonisation through proper benchmarking and sharing the benefits of efficient fuel use.

“The industry's lack of transparency and benchmarking is currently hindering large-scale adoption of emission reduction tools with long repayment periods,” according to DSF.

These two elements are critical “catalysts” that will drive investors and employees to buy into the energy transition.

“When competitive analyses are made public (e.g. improved Carbon Intensity Indicator (CII) ratings), it further motivates shipowners and operators to enhance their practices to meet or surpass benchmarks, fostering industry-wide improvements.”

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As such the industry must embrace the transparency that benchmarking can bring to “establish what good looks like,” allowing carriers and shippers to agree a fuel budget for a voyage, and then to create a strategy that will reward operators that achieve better performance than the industry measure for a particular route.

Under a fuel budget regime, “Cargo customers are offered a fixed price for a voyage, although they still assume some risk from unpredictable weather conditions,” explains DSF.

Ship operators are still responsible for operational implications of retrofits, new technologies, and fuel types.

However, any “fuel not consumed” would be an “equity kicker” that rewards operational efficiency.

“Such a simple mechanism may foster a changing mindset around value creation and eventually spark vessel ownership consolidation towards the most energy-efficient operators,” argued DSF.

Given that the maritime sector cannot lead the way on which fuels to invest in, DSF believes that a fuel budgeting system, operating on a per route basis, would benefit both carriers and shippers in the period where the new fuels and their infrastructure requirements are evolving.

“Such a framework would promote long-term collaboration and distribute financial risks and incentives more equitably. This approach would also encourage sustained improvements in energy efficiency. Fuel budgets should be reviewed and tightened annually to align with global climate targets,” concluded DSF.