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Live from Posidonia

Greek shipowners take on the regulators

Photo: Marcus Hand George Procopiou - Dynacom, Dynagas and SeaTrader during Posidonia 2018
George Procopiou - Dynagas during Posidonia 2018
Actions, they say speak louder than words. And if shipping industry events such as Posidonia are to have any useful meaning in terms of our understanding of the direction that an industry is moving, then it is important to take stock after the event.

One view that was expressed loud and clear by at least two owners was that the EU environmental regulations, and the expected global rules from the IMO are not enforceable. Green issues were definitely front and centre of almost all the debates.

Evangelos Marinakis and George Prokopiou, the founders of Capital Maritime and Dynacom Tankers respectively, did not express this explicitly, but through their actions, both admitting to having ordered some $8 billion worth of tonnage each, of mainly conventionally powered ships.

It is a challenge, albeit an indirect challenge, to the authorities who will need to enforce the regulations that the EU has enacted and the similar international statutes that the IMO is committed to introducing by 2027.

The tone of the major panel discussion at the Capital Link conference was set by moderator ABS CEO and chairman Chris Wiernicki, with the very first question to the panel: “Is decarbonisation putting your business at risk?” It was an invitation to rail against green regulation.

Alongside the Greek owners on the panel was Captain Abdulkareem Al Masabi, CEO at ADNOC Logistics, who argued that the current prices of conventional vessels “are very competitive”.

However, Capt Al Masabi said he was comfortable with paying the premium for dual fuelled ships, namely the less polluting LNG vessels. With 570 of these vessels on order, it is “definitely an opportunity for us” with the energy already widely available.

Next up was Marinakis, who made the very cogent point that the reality is that no-one wants to pay the premium for dual fuel vessels, “whoever is cheaper gets the business”.

In his response Prokopiou raised the well chewed red herring of the trucking industry, and others being worse, and that shipping is the most efficient form of transport. He gave the impression that shipping was somehow being unfairly targeted by regulators.

He also spoke eloquently of how US LNG had replaced Russian gas at five times the price. This was noted by former Greek Minister of Finance and Economist Yannis Varoufakis in a recent interview alleging this was facilitated by the US Government being complicit in the destruction of the Nordstream pipelines, which transported Russian gas to Germany.

Prokopiou called the European stance on emissions “a great hypocrisy”, because of the pollution from industries such as energy and farming, ignoring that EU regulation is being imposed on them too.

Essentially, Prokopiou was focused on the immediate future: “As Chris mentioned, and perhaps the underlying theme of this panel is not the safety, availability and scalability of all these [alternative] fuels, I think it's no mystery that these fuels are certainly not available. Some of them are not safe, and the scalability is insignificant.”

In addition, Prokopiou pointed out that owners buy the best available technology at the time that they order ships.

This a widely held view within the industry, it seems, and it remains a fact. It is also a fact that oil and LNG, or the burning of these fuels is suffocating the life on the planet and to prevent that all major polluting players must play a part.

But it is also possible for owners to plan for the future by ordering dual fuel ships, with a figure not available, on how many conventional versus dual fuel are currently on order.

Shipping companies have raked in billions of dollars over the last four years, the tax they pay is negligible, with tonnage tax breaks offered as a sweetner for owners to join registries. It is not a major stretch to believe that those tax breaks should be repaid with investment from increasingly wealthy owners into fixing the problems they have helped to cause.

Of course, shipping is not the only industry this applies to, the fossil fuel industry has had a major role to play in the evolution of climate change, but the sins of one player do not forgive the sins of another. Our planet, and the emphasis is in ‘our’ here, does not distinguish between carbon emissions from Exxon and those from Maersk.

Martin Crawford-Brunt, the CEO at maritime consultancy Lookout Maritime, pointed out that the latest environmental regulations were far too complex and that these would prove impossible to enforce.

He pointed out that next January anyone burning conventional fuels will be paying an additional $70 per tonne for all FuelEU related voyages.

“With the level of complexity [of EU regulation] I’d question its impact and how will it be driving change? What you need is a blend of market forces and regulation to solve the decarbonisation challenge,”

Crawford-Brunt introduces the concept of “defying commercial gravity”, rendering regulation ineffective as companies find “workarounds” to avoid the worst impacts of the regulation.

While Crawford-Brunt, however, believes: “The commercial side of the business needs to have greater awareness and understanding of the new trading and market elements that EU ETS and FuelEU introduce, beyond avoiding cost surprises, to the opportunities they present to position oneself favourably.”

Some industry figures believe there needs to be a dialogue between themselves and regulators, so that the rule makers understand the impact of their regulations.

Regulators may view that position as undermining of their role. But as Crawford-Brunt pointed out the key to regulation will be its enforceability and regulators must pay as much attention to this area of their role as they do to the writing of legislation.

At the moment it seems the views of shipowners is that these new regulations will not affect them. And the applause from the audience spoke volumes.