Paul Taylor: Shipping must embrace the future now
Paul Taylor, Global Head of Shipping Finance, says the industry needs to be ready for impending regulations
The problem with the future is, by the time it happens, it is too late to do anything about it.
We live in a world of breath-taking technological advance. Driverless cars, 3D printers and even electric vehicles in space all feel like the stuff of science fiction but in fact, all are already here. They are not the future, but the now.
Similarly the coming IMO (International Maritime Organisation) regulations, which will change the way ships are fuelled from 2020, may seem a long way off, but they are part of an irreversible global shift that is already well under way and the shipping industry needs to be ready.
Despite recovery in some sectors, the shipping market remains generally weak and many shipowners are understandably reluctant to make the sizeable investment required, whether adapting existing ships to be powered by Liquefied Natural Gas (LNG), switching to other approved distillates, or fitting ‘scrubbers’, which will filter out pollutants.
But rather than being an imposition, the new regulatory landscape should bring a wealth of opportunities. LNG brings challenges – the infrastructure required to accommodate it is still a work in progress and engines powered by it take up more space than traditional fuels - but it is an abundant natural resource that is also considerably cheaper than traditional carbon-based fuels.
It is important that shipping as a whole embraces these changes. The way shipowners and their financiers view opportunities to grow will evolve significantly. And this will bring possibilities for banks in the shipping space to introduce innovative, positive impact financing solutions.
This change is driven as much by responsibility as necessity, and we will play our part in helping the shipping industry contribute to a cleaner environment.
The change reflects what is happening in the wider world beyond shipping. You often hear speculation about when oil supply will peak; it is more pertinent to ask when oil demand will peak. Global sentiment is already moving towards sustainable fuels and the demand for oil is likely to die out well before the supply.
Shipping needs to reflect this shift in values. It is claimed that annual emissions from one large container ship running on low grade ship bunker fuel are equal to those of 50m cars. And according to IMO figures, today shipping is responsible for 3% of global CO2 emissions. Unchecked, this figure is anticipated to rising into the teens by 2050.
Societe Generale’s commitment to sustainability was underlined by our joining SEA\LNG last month as the first bank to be involved. The coalition aiming to accelerate the widespread adoption of LNG as a marine fuel features representatives from across the shipping industry and all stages in the LNG supply chain.
We are proud to be the only financial institution involved in SEA\LNG, but we want nothing more than for other banks to join us.
Change is coming, but we can not afford to wait and see what the impact will be. We can still influence this change, and we all need to be ready to embrace it so we can remain at the heart of a flourishing shipping industry.
Paul Taylor is Global Head of Shipping Finance at Societe Generale
- For a more detailed outline of Paul’s views on the future of shipping finance, read his opinion piece in Tradewinds.