Abstract
The transportation service provided by the global shipping industry contributes substantially to the phenomenon of climate change through vessel greenhouse-gas (GHG) emissions. This paper discusses the developing regulatory framework on green shipping finance and the role of capital providers in reducing the environmental footprint of the industry. Several initiatives by regulatory bodies and private companies are examined, whose purpose is to reduce shipping-related emissions through green financing schemes. The paper also provides a critical discussion on the progress so far and the road ahead.
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Notes
- 1.
Source: URL (last access 6th of September 2020): http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Pages/Greenhouse-Gas-Studies-2014.aspx. According to IMO: “Based on the recommendations from an Expert Workshop held in March 2019, the Marine Environment Protection Committee (MEPC 74) approved the terms of reference of the Fourth IMO GHG Study, submitted to MEPC 76 in Autumn 2020.”
- 2.
The Kyoto Protocol, adopted in 1997 and entered into force for its 192 parties (states) in early 2005, is an international treaty extending the 1992 UN Framework Convention on Climate Change (UNFCCC), which commits participating countries to reduce GHG emissions.
- 3.
On 20th of November 2020 new mandatory regulations to cut the carbon intensity of existing ships were approved by IMO’s Marine Environment Protection Committee (MEPC), which are in line with the IMO’s (2018) strategy on GHG emissions and are expected to be enforced by 2023. Specifically, a new Energy Efficiency Existing Ship Index (EEXI) is introduced whose standards will be largely equivalent to the current Energy Efficiency Design Index (EEDI) for newbuild ships in 2020. Furthermore, a new operational Carbon Intensity Indicator (CII) will be used to rank vessels in terms of fuel efficiency (ranging from A and E, with ships rated D and below falling under the minimum standard). These measures aim to address both the technical and operational aspects of vessels’ environmental performance.
- 4.
- 5.
For details see, “TCFD-based reporting to become mandatory for PRI signatories in 2020” at the following URL (last access 14th September 2020): https://www.unpri.org/news-and-press/tcfd-based-reporting-to-become-mandatory-for-pri-signatories-in-2020/4116.article.
- 6.
This Action Plan also introduced a number of changes to earlier regulation on carbon impact benchmarks, see EU Regulation 2019/2089, available at (last access 23rd October 2020): https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R2089&from=EN.
- 7.
PFI’s participating in the GSG Programme include: Societe Generale, BNP Paribas, ANB AMRO, ING, Credit Agricole, etc. For more details see the following URL (last access 30th November 2020): https://www.shortsea.gr/wp-content/uploads/2019/06/Maria-Tzoumanika-European-Investment-Bank.pdf.
- 8.
More details on the financing of this specific LNG bunkering vessel may be found in the following URL (last access 30th November 2020): https://www.eib.org/en/projects/pipelines/all/20190313.
- 9.
The 18 ‘Poseidon Principles’ participating banks represent jointly US$150 billion of investments in shipping finance. They include ABN-AMRO, Amsterdam Trade Bank, BNP Paribas, bpi france, CIC, Citi, Credit Agricole, Credit Suisse, Danish Ship Finance, Danske Bank, DNB, DVB, EKSPORTKREDITT, ING, Nordea, Societe Generale, Sparebanken Vest, Sumitomo Mitsui Trust Bank.
- 10.
Europe, Middle East, and Africa (EMEA) countries are a geographical division used by many multinational corporations. The acronym is popular among North American companies.
- 11.
APLMA is a professional not-for-profit trade association which represents the interests of institutions active in the syndicated loan markets in the Asia-Pacific (“APAC”) region.
- 12.
Loan Syndications and Trading Association (the “LSTA”) is a financial services trade group which exists to enhance the development and running of the North American syndicated loan market.
- 13.
The GLP documentation is available in the following URL (last access 24th October 2020): https://www.lma.eu.com/application/files/9115/4452/5458/741_LM_Green_Loan_Principles_Booklet_V8.pdf.
- 14.
For more details see the following URL (last access 18th September 2020): https://www.globalmaritimeforum.org/getting-to-zero-coalition.
- 15.
Details on EIB’s green bond issue may be found in the following URL (Last access: 20th November 2020): https://ec.europa.eu/commission/presscorner/detail/en/BEI_13_109.
- 16.
The source of these data is in the following URL (Last access: 20th November 2020): https://www.climatebonds.net/2020/01/record-2019-gb-issuance-255bn-eu-largest-market-us-china-france-lead-top-20-national.
- 17.
A group of industry experts contributed to the development of the CBI shipping climate bond criteria, such as, the NYK, Nordea, Citi, ABN AMRO, etc.
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Acknowledgements
The authors would like to thank Ms. Stergiani (Stella) Moysiadou for excellent research assistance. Any remaining errors or omissions are the authors’ responsibility.
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Kavussanos, M.G., Tsouknidis, D.A. (2021). Green Shipping Finance: Existing Initiatives and the Road Ahead. In: Ko, BW., Song, DW. (eds) New Maritime Business. WMU Studies in Maritime Affairs, vol 10. Springer, Cham. https://doi.org/10.1007/978-3-030-78957-2_6
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