Queens of the Sea

Shipping is far more carbon-efficient than aviation, let alone trucking. It also has other efficiencies, including that a single ship can transport up to 24,000 cargo containers. That efficiency, and ships’ ability to travel through space most people and vehicles don’t use, have made shipping the transport method for 80% of internationally traded goods. With that volume, shipping accounts for about 2-3% of the world’s carbon dioxide emissions, which makes it the world’s sixth-largest emitter. The figure needs to be slashed. Accelerating deglobalization won’t do the trick, because it mostly involves moving manufacturing from China to nearby countries. The shipping sector needs more carbon-efficient ships—but what can be done with the outgoing queens of the sea?

“Soon may the Wellerman come/To bring us sugar and tea and rum,” goes a famous sea shanty, a song traditionally sung by sailors. During the worst months of Covid-19, it became more famous still as people stuck at home started performing and recording it in every imaginable iteration. Sadly, that unexpected moment of fascination with the world of shipping didn’t translate into lasting interest. If all those singing “The Wellerman” had dived into the world of today’s Wellermen, they would have known that the world has about 103,000 merchant vessels crewed by more than 1.89 million seafarers, of whom nearly 860,000 are officers and more than 1,035,000 are ratings. They might also have learned that the majority of seafarers come not from America or Britain, as they often did in past generations, but from the Philippines, Russia, Indonesia, China, and India.

Those pursuing their newfound interest in shipping might even have learned that the ships that bring us a vast range of goods we use every day are not very modern and that they emit a great deal of greenhouse gases. Together, the world’s commercial vessels released around 1 billion tons of CO2 per year between 2007 and 2012. By 2020, the picture had improved a bit: shipping generated 635 million tons of CO2 emissions—but that was during Covid, when much of the global economy was immobilized. By 2021, the emissions had grown to 667 million tons. Such figures are insufficient if the world is to achieve its target of limiting global temperature increases to 1.5 degrees Celsius above pre-industrial average temperatures.

A number of the new ultra-large container vessels (ULCVs), which can carry up to 24,000 containers and are more efficient than smaller ships, are in operation on the world’s oceans. It was one of them, the 400-meters-by-79-meters Ever Given, that got stuck in the Suez Canal two years ago. But, UNCTAD (the United Nations Conference on Trade and Development) notes in its Review of Maritime Transport 2022, “since 2011, the total fleet has aged by 7 per cent, from 20.4 to 21.9 years—growing older for all ship types except for bulk carriers.” And, UNCTAD explains, “the fleet is aging partly because shipowners and operators, uncertain about future fuel and carbon prices, regulations and technological developments, have delayed investment and are keeping their older vessels in operation.”. The fleet is also aging because companies in some parts of the world keep their vessels for a very long time, in some cases until the ships cease to function and are simply abandoned at sea or in foreign ports. The average bulk carrier owned by a company in an African country is, for example, nearly 20 years old, while the average bulk carrier owned by a company in a developed country is less than 10 years old. Bulk carriers owned by companies in the developing part of Asia and Oceania (including China) are on average 11 years old, while bulk carriers owned by companies in the developing part of the Americas are on average nearly 15 years old. (Bulk carriers are ships that carry such cargo as grain and coal.)

That’s precisely the dilemma as the shipping industry tries to get with the times and reduce its carbon emissions: ships are so expensive that owners would rather wait to order new ones until they’re certain about what emission rules governments will introduce. Earlier this year, for example, the shipping company MSC ordered 10 new ULCVs from China’s Zhoushan Changhong International Shipyard at an estimated cost of more than a billion dollars. At more than $100 million per ship, owners would rather not misjudge upcoming regulations, which could require expensive retrofits or the purchase of new ships. Until they’re certain, they’ll keep going with their existing—insufficiently clean—fleet.

Yet the global shipping industry is aware that, with at least one fiftieth of the world’s emissions, it must do its part. Ship emissions include more than carbon dioxide—sulfur oxides and nitrogen oxides, the key part of carbon emissions, which are in turn the most important part of greenhouse-gas emissions. Ships also add to particle pollution (think dust and soot). The International Maritime Organization’s legally binding MARPOL treaty regulates emissions of sulfur oxides, nitrogen oxides, and “ozone-depleting substances”—but not of CO2.

Instead, the IMO, the United Nations agency in charge of maritime matters, in 2018 set itself a 2030 target. By that time, the IMO’s member states want global shipping to achieve a 40% efficiency gain in CO2 emissions. By 2050, the organization wants global shipping to have achieved a 50% cut compared to 2008. And in July this year, the organization’s member states took a more ambitious step, agreeing to “strive for” a 30% reduction by 2030 and an 80% reduction by 2040—and to strive for complete greenhouse-gas elimination by 2050.

On Jan. 1 this year, the IMO also introduced three emission-reducing rules. The Energy Efficiency Existing Ship Index will determine ships’ emission efficiency, and if a ship isn’t efficient enough, it may have to reduce its emissions. The annual operational Carbon Intensity Indicator assesses a vessel’s performance and efficiency based on its fuel consumption and gives a rating from A to E. Owners of ships that achieve a D rating three years in a row, or an E rating in a single year must present a plan for improvement. Companies receiving D or E ratings, or even C ratings, may face increased insurance premiums and loss of clients, especially since companies are acutely aware of shareholders’ and customers’ focus on ESG performance. In addition, the Ship Energy Efficiency Management Plan will assess technologies and practices to optimize ship performance.

Some countries, like Norway, have pushed for much more ambitious measures. But many developing countries have declared—at COP meetings and on other occasions—that they feel developed nations should carry the bulk of the burden in greenhouse-gas emissions reduction. And in July this year, the EU adopted measures aiming to decrease the greenhouse-gas intensity of shipping fuels: by 2% in 2025 and up to 80% by 2050. Such binding carbon-reduction rules can’t be expected from the IMO, though, especially since IMO members get more weight the more ships are registered under their flag—which makes flag-of-convenience states decidedly powerful. Smaller actors, meanwhile, have also taken measures to cut emissions: the Port of Los Angeles, for example, incentivizes ships to cut CO2 emissions through its “Voluntary Speed Reduction Program”; slower speed cuts CO2 emissions and improves air quality. Last year, the Port of LA cut 31,000 tons of carbon dioxide, 66 tons of diesel particulate matter, and more than 500 tons each of nitrous and sulfide oxide this way. The massive ports of Rotterdam and Singapore, for their part, are working on a “green and digital shipping corridor” for vessels using sustainable fuels.

Some had hoped deglobalization, too, could help solve the problem. The United States (mostly backed by the rest of the Western world) is in the midst of an increasingly dramatic confrontation with China. It’s already clear that the confrontation is accelerating the exodus of Western companies from China—the country that was globalization’s big prize and became for many companies indispensable both for manufacturing and sales. That, one might assume, would prompt at least some companies to move their production home—to reshore, which would lead to shorter supply chains and thus less shipping.

Such hopes are already being quashed. Instead of reshoring, Western companies are mostly “friendshoring”—gradually moving manufacturing and supply chains to countries friendlier than China. Apple is moving some of the production of its latest iPhones to India (though it’s also moving some of its semiconductor production to Arizona). Its archrival Samsung is moving some of the production of its latest Galaxy to India. Vietnam, too, is a popular destination for companies seeking to reduce their dependence on China; Apple is moving some of its MacBook production there. Other countries well positioned to attract manufacturing leaving China include Mexico, Indonesia, Malaysia, Turkey, and Serbia. Deglobalization—which in effect means reducing Western dependence on China—won’t significantly reduce shipping. Nor will the retrofitting of technology in existing ships. According to a study by the consultancy CE Delft, technical measures won’t improve carbon-intensity enough to meet the IMO’s target.

Shipping’s carbon emissions will have to be achieved through the introduction of more carbon-efficient ships and low-emission fuels; 99% of commercial ships run on diesel. “Most emission reduction efforts would require changes in technology and adoption of low- and zero-carbon fuel alternatives to fossil fuels, not least because over 90% of the industry’s emissions come from fuel use,” said Andreea Miu, head of decarbonization at the Sustainable Shipping Initiative. “But the shipping industry is up for it. We can move to sustainable ammonia, methanol, biofuels, and other sustainable options. Yes, controversies exist around conventional crop-based biofuels, but there are advanced biofuels based on residue streams and non-food crops grown on less-productive and degraded land with potential for applications in shipping.” Biofuels made from crops are increasingly unpopular precisely because they use large quantities of crops that could otherwise be used for food. In Germany, for example, about half the rapeseed harvest is used for biofuels.

Researchers are making rapid progress. The year 2021 and the first quarter of 2022 saw the launch of more than 85 zero-emission vessel development projects, of which 45 focus on hydrogen technologies, 40 on ammonia technologies, and 30 on battery-powered vessels. The European Union has helped fund the development of a ship engine that runs on liquefied natural gas rather than diesel, halving the carbon emissions. The initiative, known as Nautilus, is viewing LNG as merely the first step; it also aims to develop green methane, which would be generated by solar and wind power and could be used in the same engine. Research and development is making a very tangible difference: in the first half of 2022, 61% of all newly ordered ships were capable of burning alternative fuels. “There are quite a few ship owners that are betting on green methanol, and a few have ordered such vessels,” Miu said. “They are equipped with dual-fuel engines, which would allow the ship to be operated on an additional fuel type as well.” In August this year, the world’s first cargo ship fueled by green methanol, a container ship ordered by the Danish shipping giant A.P. Møller—Mærsk, made its maiden voyage from South Korea to Denmark.

If companies bought more of these ships, possibly subsidized by their home governments or an international body, shipping’s greenhouse-gas emission problem would drop faster and help the world achieve its target of a 1.5-degree Celsius maximum temperature increase. That, the leaders convening at the COP26 summit in Glasgow last year agreed, means carbon emissions have to be reduced by 45% by 2030. If the world doesn’t achieve this target, it will cause an increase in extreme weather. That increase would also harm the shipping industry.

This good news poses a dilemma, because the world of shipping doesn’t have proper recycling that would see ships broken down in a manner that doesn’t harm people or the environment through the release of toxins, like asbestos, and that facilitates the reuse of the massive amounts of steel, iron, aluminum, and plastics contained in shipping vessels. Or rather, it does, at sites in the United States, Canada, Mexico, Puerto Rico, Norway, the UK, Finland, the Baltic states, the Netherlands, Belgium, France, Italy, and Spain. But because the disassembly of ships (a process known as shipbreaking) in a safe manner that recycles materials is expensive, a mere 3% of the world’s ships end their days at one of these sites.

Instead, the vast majority of disposed ships—some 70% of them—see their end at unregulated sites that cause extraordinary harm to the environment and to the unskilled workers (including children) who disassemble them. Most of this activity takes place at three sites: Alang-Sosiya in India, Chattogram (a city formerly known as Chittagong) in Bangladesh, and Gadani in Pakistan. This is where ship owners habitually send their dying ships, knowing full well that the beaching will release toxic substances into the water and cause injury or even death to the workers involved. The NGO Shipbreaking Platform, which monitors unsafe ship disassembly, notes that extremely heavy steel beams and plates often fall and crush workers; the workers also face explosions, fire, and suffocation. In August 2021, for example, five workers were killed and three severely injured in seven separate accidents in Chattogram. The vessel sellers include respectable companies, like A.P. Møller - Mærsk, the world’s largest container-shipping company, which in 2016 sold its oil vessel Dagmar Mærsk (co-owned with the Brazilian firm Odebrecht) to scrap dealer GMS, which in turn brought it to Chattogram.

Since the 1980s, more than 1,000 Bangladeshi workers have died in shipbreaking accidents, while more than 434 Indian workers died in such accidents between 1991 and 2012, and many more since then. “Shipping exists the way it does because it’s cheap for all of us,” noted Cormac Mc Garry, a maritime analyst with Control Risks, a crisis consultancy. “I can go to the supermarket and get cheap avocados because shipping is cheap. And part of the reason shipping is cheap is that decommissioned ships are often sent to unregulated junkyards in Southeast Asia. The way global shipping works, it’s very easy to hide certain activities. Just as you can hide your shipping activity, say from sanctions watchdogs, by confusing the ownership structure of a vessel, you can do the same thing as you decommission a ship.”

When developed nations strengthened their shipbreaking rules in the 1970s and '80s, they thought it would lead to safer disassembly. Instead, the opposite happened. Shipowners sent their ships to die in unregulated countries, and because they didn’t want the reputational damage associated with such activities, they began first selling their dying ships to middlemen. “It’s very rare that a shipping company owns the ship when it’s in a junkyard in Asia,” Mc Garry pointed out. “The owner sells the ship to another owner a few days before the end of the ship’s life and the buyer scrapes off the IMO registration number, and suddenly the ship can no longer be so easily traced. And then it’s disassembled.”

The middleman typically changes a ship’s name and gives it a post-box-company owner. The middleman also changes the ship’s flag registration. Even the rules of popular flag-of-convenience states, like Panama and Liberia, are considered too strict for these operators, who instead register their ships with last-voyage flag-of-convenience states (or “end-of-life registries”), like Comoros, Palau, and St. Kitts and Nevis. After these steps, the ship is so hard to link to an owner that it can be disassembled in one of the Southeast Asian junkyards, spewing toxins into the waters and maiming workers, without anyone intervening.

That doesn’t mean that the practice is secret. “If shipping companies want to investigate where their ships go, they’ll probably find that the ships go to a human-rights-abusing, environmentally toxic junkyard,” Mc Garry said. Shipbreaking Platform, meanwhile, finds that end-of-life registries “compete with each other by offering low-cost ‘last voyage’ packages and expressly state that no nationality requirements need to be fulfilled in order to register under their flags—not even the setting up of a shell company”.

There have been international efforts to regulate ship disposal. In 2009, the IMO’s member states agreed on the Hong Kong Convention, which would have introduced minimum safety standards. The convention will enter into force after being ratified by 15 IMO member states representing 40% of world merchant shipping (as measured by gross tonnage) and an annual ship-recycling volume not at least 3% of their combined tonnage. Norway, Congo, France, Belgium, Panama, Denmark, Turkey, the Netherlands, Serbia, Japan, Estonia, Malta, Germany, Ghana, India, Croatia, and Spain have ratified it. That’s 17 countries—but they represent only 90% of tonnage and 2.6% of recycling volumes. Despite not being ratified, the convention has made some difference. The Ever Given’s 25-year-old sibling Ever Diamond recently embarked on her final journey to a convention-compliant recycling site in India. The EU, meanwhile, maintains the world’s only international legally binding set of rules governing shipbreaking—but shipowners based in the EU often sell their ships just before the vessels’ final journey.

When it comes to greenhouse-gas emissions, meanwhile, the fact that Norway—joined by the EU—wants to further tighten its rules would indisputably help the shipping industry achieve faster reduction in emissions. That, though, could prompt even more companies to simply reflag their vessels in flag-of-convenience states, where the vessels join the majority of the world’s shipping vessels. “We’re heading toward a two-tier shipping industry,” Miu said. “We’ve got ambitious companies that are switching but we need legislation and regulation to push the laggards. But the IMO is driven by member states. Some are more ambitious and some are less so.” Greece, China, Japan, Singapore, Hong Kong SAR, Germany, South Korea, Bermuda, Norway, and France are the world’s largest shipping countries based on where the vessel-owning companies are located. But measured by the flags ships sail under, the leaders are Panama, Liberia, the Marshall Islands, Hong Kong SAR, Singapore, China, Malta, Bahamas, Greece, and Japan. The first three have cornered the ship-registration market.

This reality creates an obvious dilemma: if some countries introduce stricter greenhouse-gas emission rules, and if the IMO doesn’t concurrently introduce stricter ship-disposal rules, this would be likely to prompt even more shipping companies to register their vessels in flag-of-convenience states and unsafely dispose of them. Any gains would rapidly be undone.

But there’s a paradoxical upside. The consequences of climate change are felt most dramatically in emerging economies—countries like Pakistan, Bangladesh, and India, not to mention the flag-of-convenience states and the end-of-life-journey ones. In Bangladesh, average tropical cyclones already cost the country some $1 billion each year. By 2050, the World Bank reports, a third of the country’s agricultural GDP risks being lost and 13 million people could become internal climate migrants. Severe flooding poses the risk of causing a severe GDP decline. In the summer of 2022, Pakistan, in turns, was hit by apocalyptic flooding that claimed the lives of more than 1,000 people, displaced millions, and harmed a total of more than 30 million. More than 700,000 livestock were killed, and thousands of kilometers of roads and bridges were destroyed. As practical as the flag-of-convenience and end-of-life-journey system may be, some of the countries that benefit most from it also stand to suffer dramatically if CO2 emissions are not significantly reduced. It’s in everyone’s interest to be part of global shipping’s transformation to low carbon and zero carbon.

Indeed, some of the countries benefitting from flag-of-convenience and end-of-life-journey arrangements could make sustainability a commercially winning formula. India, Pakistan, and Bangladesh could set themselves up as state-of-the-art ship-disposal nations. Yes, investing in the training of workers to carry out this risky work, the necessary equipment for the safe disposal of toxins, and the safe recycling of crucial materials would be costly. Western governments or global institutions, though, could subsidize such investments. The availability of safe and sustainable shipbreaking matters because shipping companies’ shareholders are likely to begin paying closer attention to it. In an era of ESG, it would be extremely embarrassing for a respectable shipping company to be caught sending its old vessels to a toxic junkyard. CO2 reductions and safe ship disposal aren’t just annoying obligations heading shipping companies’ way: they could be an opportunity to stand out.