Over the Horizon I/II: Green Ships

On a clear day you can see the Cape. Well, not quite, but it feels that way. In early Fall, when the cold air is crisper, you may look out from one of the Boston financial district’s few skyscapers at the bay-wide view. The vista from the main boardroom at private wealth manager Atlantic Trust offices in Boston offers fantastic views of the Charles River and the rolling tree-covered suburbs of greater Boston stretching to Winchester, Arlington and Newtown. Across the floor, the view is of Boston bay dotted with 34 small islands, the bay tracked with small craft wakes, the busy ferries [including the airport water taxi] and the few steady large ships. Logan Airport lands and launches jets on 2 minute intervals. The Atlantic Ocean is hardly seen to roll waves toward shore, at the far end of the view [see also the real-time harbor hazeview shots]. Cape Wind, the offshore wind farm buffeted by local politics, is too far away to see, over the horizon in Nantucket Sound.

The maritime shipping industry has many players. A large portion of the industry remains in the hands of privately owned firms and patriarchs [just two shipping firms are in the FTSE4Good ethical index], and like the fishing industry, directly links into the livelihoods of villages and individual entrepreneurs from Anchorage to Zanzibar. Investment bank, Jeffries, will host their 5th Annual Shipping, Logistics & Offshore Services Conference on September 16-17, 2008 in New York with more than 60 companies in crude tankers, dry bulk, gas & chemical carriers, inland barges, logistics, product tankers, offshore services and offshore supply vessels. Shipping still moves the bulk of global trade; it literally carries globalization's hopes. The prices of shipping have soared lately, driven by increased operating costs because most ships are oil-powered, and oil has jumped from US$10 to 140 and back to 100 in the space of 2 years. FT reports Brazilian iron ore miner Vale this week notified Chinese steel mills of a 20% price hike midway through the 2008/9 contracts, following a negotiated 96% price increase by Australia producers, citing transportation costs. So the German Gerolsteiner water and Costa Rican-grown Starbucks coffee will surely follow prices north. Personally, I wonder what mixed freighter is shipping back the cubed meters from the Geneva apartment, and where it is dropping its ballast water?

A “green” ship was one of the most interesting items I picked up at the excellent interactive sustainability program offered by World Wildlife Fund in Gland. Switzerland in 2007-2008, the One Planet Leaders [OPL] program. One colleague in the cohort presented a digital animation of a projected container ship in 2025, “the E/S Orcelle, Wallenius Wilhelmsen Logistics' visionary concept car carrier with a ‘zero emissions’ capability which carries no ballast water on board” [“E/S" = environmental ship, nice touch!]. Originally unveiled by Wallenius Wilhelmsen Logistics at the World Expo 2005 in Japan, the E/S Orcelle

“was designed for the year 2025 using only renewable energy sources, including the sun, wind and waves as well as fuel cell technology, to meet all its propulsion and onboard power requirements”.

The privately-held firm was motivated not by activist sustainability investors like CalPERS, Walden, AP2 or Winslow Green, but by the impetus of enlightened owners and rare talent, seeking to attract the brightest new maritime engineering minds of Gen X and Y with their greater concerns for sustainability. The “green flagship” plays with design concepts in the same way as concept cars at auto shows, hoping that some – like the Chevrolet Volt – may attract sufficient interest to be built, against expectations of engineers and marketers calculating costs and benefits using extrapolations of current states of play. Like Steve Jobs and Apple, sometimes one does not need focus groups; just build a cool widget that works. In a similar way to a current engagement we are am working on in Geneva, Wallenius Wilhelmsen Logistics in 2007 launched the Orcelle Fund as the philanthropic arm of that supports the development of alternative energy initiatives aimed at making shipping more sustainable [pitch for grants here], funded by the award money that Wallenius Wilhelmsen Logistics received as the 2007 recipient of the Thor Heyerdahl International Maritime Environmental Award, named for a legendary seafarer of recetn times. The Orcelle Fund is a grant-awarding body will provide seed capital for high-risk development projects for alternative maritime energy sources and energy-efficient technology. Last week W&WL launched M/V Aniara claiming "the world's largest and most environmentally adapted car and truck carrying ship" in Bremerhaven, Germany built at the Daewoo Shipbuilding and Marine Engineering yard in Korea.

Another development this week was news of a solar ship. Driven less by concerns of environment than saving on the high operating costs of bunker oil today [NYKK reported 11% increase in Q2, 2008], Japan's largest shipping company outfitting its ships with solar panels for propulsion. Nippon Yusen KK announced plans to spend $1.37 million to have Nippon Oil Corp develop a 40-kilowatt solar panel system, with 328 panels, for its ships to be finished in December, 2008, to provide 0.2% of the ship's power from solar. NYKK want to have a finished commercial system that produces 2% by 2010, at similar costs. NYKK expects to reduce ships’ carbon dioxide output by as much as 2 percent, equal to 20 tons a year. Unsurprisingly, the lead client is Toyota. Hopefully, that will include Sir Paul's next Lexus hybrid, so Huffingtonpost.com will not be covering his embarassment!

The maritime industry has a material impact on the sustainability solution. The European Community Shipowners’ Association (ECSA) produced a paper earlier this year with the support of the International Chamber of Shipping (ICS), describing the industry as the “backbone of globalization” (Climate Change and Shipping ECSA Position Paper, January 2008) estimating that shipping carries some 90% of world trade. European shipping makes up 41% of the global total. Estimates in 2006 by the International Energy Agency (IEA) and the Stern Review on the Economics of Climate Change that the industry’s global share of CO2 emissions is around 10%, compared to 76% from road transport, and 12% from aviation. The industry is seeking sustainability solutions, including the upcoming Seatrade Sustainability Seminar in Singapore next month. This week the EU pressed with a new warning that the International Maritime Organization (IMO) must act quickly to find consensus of ways of reducing carbon dioxide (CO2) emissions. IMO’s Marine Environment Protection Committee (MEPC) is meeting in London next month. See also the Green Atlantic for Sustainable Development. My impression is that the environmentally sensitive Scandinavian countries like Sweden, Denmark and Norway are near the forefront of sustainability moves, but players from other countries prefer business as usual. Pressing the regulatory angle to the political spectrum is the SustainableShipping Forum in late October in Washington D.C. ACI’s 3rd Green Shipping conference agenda is how ship owners and managers are now driving environmental programs forward. Pressure at an international level has added a line item to the signature coding for each ship to now include their status on “green” criteria. The ISO 30000 series standards cover ship recycling management systems.

I am awaiting news of a green shipping-themed private equity fund from my brother-in-law in NY. A former colleague has stepped out to seek his niche in developing this theme for private equity owners, similar to Green Maritime Partners [read the comments to the IHT posting for a priceless illustration of the sustainability paradox we deal with on sustainability+investment engagements]. There is a market. Perhaps from cool new inventions like the ship-scale kitesurfing [see MV Beluga Skysails] Under German captain Lutz Heldt the vessel completed a 12,000 mile round-trip maiden voyage from Bremen, Germany to Venezuela, the United States, and then to Norway [see video], arriving on March 13, 2008 well-reported by Treehugger.com. The ship was at sea for nearly two months, giving the “skysail” concept ample opportunity for testing and tweaking. Inventors are exploring other examples of “windships” are being explored, with modular sailing rigs for larger vessels.

So once my mate Lodewyk has practiced not face-planting while kitesurfing off Cape Cod, he has a new place to take his MIT-quality engineering skills!