The Signal Ocean EU Shipping Emissions Report

As the maritime industry navigates towards a more sustainable future, the focus intensifies on the pivotal contributions of dry bulk and tanker vessel size segments in the European Union's efforts to combat climate change. With the EU leading the charge in implementing stringent environmental policies aimed at reducing carbon emissions, the need for comprehensive analysis and decarbonization within the shipping sector becomes ever more pressing.

From the adoption of cleaner propulsion technologies to the optimiation of vessel design and operational efficiency, stakeholders across the maritime supply chain, including shipowners, operators, and, are compelled to innovate and collaborate in pursuit of sustainability objectives. By identifying key areas for improvement and leveraging advancements in alternative fuels, vessel optimiation, and regulatory compliance, the industry can chart a course towards a greener, more resilient future.

This exclusive report dive into the critical role of dry bulk and tanker vessel size segments in curbing emissions within EU waters, aligning with the progressive environmental policies aimed at carbon reduction.

Let's initiate our analysis  with a broader perspective and juxtaposing EU shipping emissions against the total CO₂ tons emitted to evaluate the scale and environmental implications of maritime activities within the European Union.

EU vs Global CO2 tons emitted

When examining the overall EU emissions in comparison to global emissions for both dry and wet segments, as depicted in Image 1, it's evident that less than 4% of global tanker emissions originate from Europe, with dry vessels contributing less than 2%. However, it's essential not to interpret these figures as a justification for European shipowners to remain passive. Instead, European shipowners have made a commitment to themselves starting from January 2024 to uphold their dedication to implementing and championing initiatives that promote cleaner and more sustainable practices within the maritime sector. By taking proactive steps, they will not only play a pivotal role in shaping a greener future for the EU but also contribute significantly to global sustainability efforts. 

In the past year, global voyages by dry bulk vessels outnumbered those by tankers by 70%, resulting in over 160 million tons of CO₂ emissions from dry bulk vessels and approximately 100 million tons from tankers (Image 2). However, within EU waters, tankers seem to have a more pronounced environmental impact. This is primarily attributed to Europe's substantial reliance on imported crude oil and refined products, which necessitates extensive tanker operations, consequently contributing significantly to emissions. In 2023 alone, tankers emitted nearly 4 million tons of CO₂, approximately 30% more than dry bulk vessels. This shift in emission dominance between the two vessel segments when transitioning from a global to a European perspective underscores the dense and vital role of tanker traffic in European waters. It highlights the imperative for tailored strategies for each vessel segment to effectively reduce maritime emissions in Europe, considering the distinct operational characteristics and environmental footprints of tankers and dry bulk vessels.

Assessing the Impact of EU shipping emissions per Vessel Size Segment

When examining the 2023 emissions data by vessel size segment, it's evident that Handysize vessels in the dry bulk sector (as depicted in Image 3) and Aframax vessels in the tanker sector (as shown in Image 4) are subject to the highest carbon intensities.

In the dry bulk segment, handysize vessels are renowned for their agility and versatility, holding a pivotal position in European maritime trade. Their ability to navigate smaller ports and versatility across various cargo types solidify their position as the backbone of the dry bulk sector. The prevalence of these smaller vessels highlights a crucial energy aspect of maritime emissions: it's not just the vessel size that determines its environmental impact, but also the frequency of voyages and their geographic specificity within the European context.

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In contrast, Aframax tankers, with their mid-size stature, emerge as pivotal in the tanker segment, primarily transporting crude oil and petroleum products. The Aframax class strikes a compelling balance, offering large enough capacity for economic viability while maintaining access to a wide range of ports. This delicate equilibrium enables Aframax tankers to operate efficiently within Europe's complex port infrastructure, underscoring their significance in the region's emissions narrative. Despite their larger size compared to Handysize vessels, Aframax tankers dominate operations within Europe, reflecting the nuanced interplay of cargo type, vessel efficiency, and route optimization in shaping the emissions footprint of different shipping sectors. Thus, one could argue that if tankers, like the Aframax, can achieve substantial reductions in CO₂ emissions through efficient operational practices, then similar strategies could be applied to dry bulk transportation. This notion opens the door to exploring the feasibility of transitioning towards larger vessel sizes, such as Supras or even Panamaxes, in the context of reducing carbon footprint.

The above insights into Handysize and Aframax vessels shed light on the intricate dynamics involved in reducing maritime emissions within Europe. They underscore the necessity for emissions reduction strategies that consider the unique operational profiles of different vessel classes, tailored to the specific logistical and environmental characteristics of European waters.‍

Average Age of the Fleet : An important element for the Carbon Intensity Indicators

The environmental ramifications stemming from smaller vessel sizes within the dry bulk segment present a concerning trend, particularly pronounced in vessels exceeding a decade in age. A closer examination, exemplified in Image 5, illustrates in the Supramax category, for instance, a significant percentage approaching more than the 20% mark, categorised at level C, denoting vessels aged between 10 to 15 years. Similarly, Handysize vessels exhibit percentages surpassing 15% at level C. These findings underscore a pressing need within the smaller vessel size categories of the dry bulk segment: a substantial influx of new orders for fuel-efficient vessels seems imperative to align with net-zero targets within the next five years. Such a transition is crucial not only for achieving environmental sustainability but also for reducing the overall Carbon Intensity Indicator (CII) until the aging vessels are gradually phased out and redirected towards scrapyards.

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In contrast, a noteworthy pattern emerges within the Aframax category (Image 6). Here, the highest percentage shares at level A are found among vessels aged between 5 and 10 years. This suggests that newer Aframax vessels within this age range demonstrate commendable efficiency levels, possibly due to advancements in technology and adherence to stricter environmental standards. Particularly striking are the frequencies of levels C and D within Aframax vessels aged 15 years and older, as well as in the MR1 segment. This highlights a substantial presence of vessels operating at less efficient levels, warranting attention for environmental improvement efforts.

Overall, the above findings underscore the diverse landscape of CII ratings across different vessel ages and segments within the dry bulk and tanker industry and the need for targeted strategies to address inefficiencies in older vessels while acknowledging and encouraging the positive strides made by newer ones. 

The data presented in the Signal Ocean Platform's vessel emissions report offers valuable insights into the environmental performance of a 9-year-old Aframax tanker, graded with a B level CII rating. In addition, analysing the regional breakdown of CO2 emissions provides further insights into the vessel's performance as it enables targeted strategies to optimise environmental performance. By identifying areas with higher emissions and implementing tailored measures to reduce carbon emissions, shipping companies can make an important contribution to global sustainability efforts while ensuring operational efficiency. Overall, for the shipping example below, it is worth noting that the Aframax tanker has a commendable reduction in CO2 emissions globally, with a 16% decrease over the past year. This reduction is particularly striking given the vessel's age, highlighting the efficacy of sustainable practices and efficient operational management in mitigating environmental impact.

Parameters on potential reduction of the carbon footprint for EU and non EU waters

Navigating the path toward green shipping presents significant challenges for EU shipowners as they strive to meet the ambitious climate goals set for 2030 and 2050. While the ultimate objectives may seem daunting, there are crucial short-term considerations that can profoundly influence the industry's progress. Instead of solely awaiting the establishment of challenging milestones, proactive measures can be taken to enhance the performance of the Carbon Intensity Indicator (CII) rating system.

Short run

‍ - Scrapping Activity / Operating Speed

Scraping activity and operating speed measures are two strategies that can be employed to reduce shipping emissions. Older ships often have outdated technology and are less energy-efficient, leading to higher emissions per unit of cargo transported. By scrapping these vessels and replacing them with newer, more eco-friendly ships equipped with advanced technologies, emissions can be significantly reduced. In parallel, adjusting the operating speed of vessels is another effective method to mitigate emissions. Slowing down ships can reduce fuel consumption and emissions, as fuel efficiency generally improves at lower speeds. This approach, known as slow steaming, involves operating vessels at speeds below their maximum capability. While slow steaming may extend voyage times slightly, the fuel savings and emissions reductions can be substantial, making it a cost-effective emissions reduction measure.

In the image below, we observe notable examples for a recent increase of ballast speed knots in both dry and tanker vessel segments. The recent surge in these speeds, surpassing last year's levels, stands out prominently. Interestingly, the recent decline in the bunkering price index has contributed to this increase in ballast speed knots. Ship & Bunker's G20-VLSFO index reveals that prices across 20 major bunkering ports remained at their lowest levels since April 2 as of the end of the week on April 12, 2024.

- Asset Prices

Asset prices and fleet renewal are critical components of the maritime industry's decarbonisation efforts. As the industry transitions towards sustainability, there's increasing pressure on shipowners to invest in greener technologies and vessels. This entails not only considering the upfront costs of acquiring new, low-emission ships but also evaluating the long-term financial viability and operational efficiency of these assets. Additionally, fluctuations in asset prices, driven by factors such as market demand, regulatory changes, and technological advancements, can significantly influence investment decisions and fleet renewal strategies. Therefore, shipowners must carefully assess the economic implications of decarbonisation initiatives and navigate the dynamic landscape of asset prices to effectively transition towards a more sustainable fleet.Over the course of the past year, there has been a noticeable uptick in asset prices for secondhand ship sales. This increase has provided shipowners with incentives to retain overaged vessels in their fleet portfolios. Concurrently, the rise in newbuilding prices, coupled with a decline in ship recycling rates, has resulted in subdued scrapping activity and a reduction in orders for new units. This dynamic interplay of factors has influenced the decision-making processes of shipowners, prompting them to carefully evaluate the economic implications of retaining existing vessels versus investing in new ones. To illustrate this trend further, let's dive into the evolution of secondhand ship prices in the Aframax size segment, as depicted in the image below, starting from 2022 onwards.

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Long run

- The role of bio-methane / port optimisation / green technology

One critical aspect is the development and optimisation of the alternative fuels supply chain. Investing in the infrastructure and technology needed to produce, store, and distribute sustainable fuels like biofuels, hydrogen, and ammonia is paramount. By fostering the growth of these alternative fuel sources, the maritime sector can reduce its reliance on traditional fossil fuels and make significant strides toward decarbonisation. In the EU, there is growing support for bio-methane as a renewable and low-carbon fuel for transportation. It offers several environmental benefits, including significant reductions in greenhouse gas emissions compared to conventional fossil fuels. 

The EU has established policies and initiatives to promote the production and use of bio-methane, including renewable energy targets, financial incentives, and regulatory frameworks to facilitate its deployment. Additionally, the EU's Renewable Energy Directive sets sustainability criteria for biofuels, including biomethane, to ensure that they are produced in an environmentally sustainable manner.

Overall, bio-methane has the potential to play a significant role in the EU's transition to a low-carbon economy and the achievement of its climate goals, particularly in the transportation sector where it can help reduce reliance on fossil fuels and mitigate the environmental impacts of road transport.

Furthermore, port optimisation plays a pivotal role in advancing green shipping practices. Ports serve as vital hubs in the global maritime network, and optimising their operations to prioritise sustainability can yield substantial environmental benefits. Implementing green smart port initiatives, such as shore power infrastructure, efficient cargo handling processes, and emissions monitoring systems, can help minimise the environmental footprint of vessel operations during port calls.

Additionally, embracing and deploying enhanced green technologies onboard vessels is essential for improving energy efficiency and reducing emissions. This includes investing in innovations such as fuel-efficient propulsion systems, hull designs, waste heat recovery systems, and advanced monitoring and control systems. These technologies not only contribute to lowering fuel consumption and emissions but also enhance the overall operational efficiency and competitiveness of the maritime industry.

By proactively addressing these important parameters in the short term, EU shipowners can make meaningful progress toward achieving their long-term climate goals. Adopting a holistic approach that combines regulatory compliance, technological innovation, and industry collaboration is key to realising the vision of sustainable and environmentally responsible shipping in the European Union and beyond.

Stay tuned with the Signal Ocean Platform to track emissions metrics for an entire fleet or for each individual vessel.