Business of Climate Change Conference
Panel Discussion - Supply Chain Decarbonization
A speech by Gerry Carter, President of Canada Steamship Lines (a division of The CSL Group Inc.), at the 4th Annual Business of Climate Change Conference, held on September 29, 2009 in Toronto, Canada, at the Fairmount Royal York Hotel.
The Annual Business of Climate Change Conference brings together public policy experts and leading corporate executives to discuss Climate Change scenarios and implications for Canadian business.
I would like to take this opportunity to thank the WWF for inviting me today to participate as a panelist.
The transportation industry is definitely a major factor in the supply chain and Canada Steamship Lines, as one of the largest Canadian Marine Carriers must assume its responsibilities when it comes to the environment and sustainable development.
Marine transportation offers a preferred alternative as far as the environment is concerned because it generates less of an environmental imprint than other modes of transportation in terms of atmospheric and greenhouse gas emissions (per tonne mile of cargo carried). The marine mode is also advantageous when it comes to noise, road and highway congestion, highway maintenance, social system costs, infrastructure costs and accidents.
On the subject of Atmospheric emissions, CO2 is the greenhouse gas that has attracted the most attention. It results from the oxidation of carbon contained in fuel. According to the Swedish Network for Transport and its Environment estimates, the marine industry’s position vis-à-vis greenhouse gases is highly advantageous, environmentally speaking.
Marine transportation handles almost 90% of the world’s cargo but represents only 3% (Marintex 2000) of the CO2 produced by burning fossil fuels. Energy wise, for one litre of fuel, one tonne of cargo is carried more than 241km by ship compared to 95km by train and 28km by truck (MTQ, 2007).
From an environmental standpoint, for the same distance traveled and the same cargo volume, rail transport and highway transport emit 2 and 5 times more atmospheric pollutants respectively than marine transport (ICS, 2008).
The CSL group recognizes its responsibility regarding CO2 emissions. To continue improving its performance, CSL’s Canadian operation has invested over 250M$ in its fleet renewal program. As well, we have adopted certain voluntary measures and initiatives such as taking tides, traffic and weather changes into account when planning trips, reducing speed in port zones and near sensitive shores, optimizing scheduling in order to reduce ballast time, as well as many more. As a result, we have reduced greenhouse gas emissions by 22% per tonne-kilometer between 1990 and 2008.
In 2006, Canada Steamship Lines adopted a Sustainable Development Strategy.
Sustainable development is a growth model that helps to ensure social equity and economic progress while preserving resources and ecosystems. It is like a three-legged stool where all activities aim at achieving a balance between the economic, social and environmental legs of the growth process. As a leader in the marine transportation industry and a corporate leader in environmental business practices, CSL measures its success first and foremost by this model
CSL firmly believes in bringing sustainable development to all levels of the marine industry. The time has come to pay greater attention to our environmental footprint, to examine our past successes and improve upon them for today and for the future. By doing this, and by continually seeking to improve its performance from an economic, social and environmental standpoint, the marine transportation industry can maximize its inherent advantages over other modes of transport.
The topic of today’s panel is supply chain decarbonisation and is intended to highlight both opportunities and challenges.
I have shown, in my previous remarks that the marine mode of transportation is by far the most energy efficient in the area of carbon emissions and that is despite the fact that the average age of the vessels in Canadian fleets are approx 38 years old and coming to the end of their useful lives.
This situation creates two opportunities. Firstly, embark on a vessel replacement program which would use the most recent technologies and therefore dramatically reduce our carbon footprint and secondly find ways to expand the usage of this mode of transportation and build ships to service that need thereby creating a modal shift to marine and reducing carbon emissions.
The major obstacle is the Canadian Federal Government which charges a 25% import duty on new foreign built vessels brought into Canada. This additional charge makes the introduction of these vessels into the Canadian market uneconomical. The Canadian Shipowners Association has since 2006, made numerous representations to the federal Government (Industry, Transport, Environment and Finance) to have this archaic and redundant tariff removed without any concrete results.
It would seem that this decision would be politically unpopular in Eastern Canada where there are two shipyards. The interesting part is that both of these shipyards are incapable of building these ships. I would have to conclude that decarbonisation of the supply chain is not a political priority.
Further compounding the situation is the fact that if we do not start rebuilding the existing fleets soon, we risk seeing a decline in marine transportation as ships retire which would generate a modal shift to other modes of transportation, which have a higher carbon footprint. This situation, rather than lessen global emissions, would result in a major increase.
The second challenge that I would like to discuss today is the recent environmental legislations concerning Ballast Water and Emission Control Areas (ECA’S), which have gotten to the point that it is out of control.
The US EPA in order to deal with the issue of Aquatic Invasive Species after many studies and a great deal of analysis with numerous stakeholders enacted Ballast Water legislation in 2008.
This legislation was very tough and onerous on shipowners both operationally and economically but was necessary in order to deal with the issue. The only problem is that the EPA left a trap door, which allowed each state to append to the legislation, which is where the wheels fell off.
Each Great Lake State without any science, analysis or expertise appended to the legislation by requiring ballast water treatment systems, which had to be implemented at different times (2012, 2013, 2014) and with different standards. IMO standard, 100 times IMO, and 1000 times IMO. The problem is that currently no system exists which works in fresh water to IMO standard.
The most ridiculous was the State of New York that required effective December 2008 that all ships entering New York waters must have their ballast tanks flushed 200NM of the east coast of Canada.
In order for Canadian lakers to transit from the St Lawrence to the Great Lakes, they must transit the St Lawrence Seaway, which enters New York State. They transit, they do not discharge ballast.
A Canadian Laker is built for St Lawrence/Great Lakes trading and as per Transport Canada regulations cannot sail 200NM into the ocean for risk of breaking in half.
The Canadian Government refused to take a position on the issue and the various shipping companies had to file an injunction against the State of New York.
We lost the initial hearing and have filed an appeal. If this legislation were upheld it would mean the end of Canadian Marine Transportation and the resulting modal shift would be devastating in the area of reducing carbon emissions.
Even if we were successful, it would just delay the inevitable as ballast water treatment systems to 1000 times IMO will not exist by 2012.
The other topic is the creation of an emission control area for the Great Lakes. The EPA has recently introduced new rulemaking processes that control the amount of sulphur allowed in residual marine fuels to 1% in 2012 and .1% in 2015.
This rulemaking effectively regulates the domestic fleets to use Marine Diesel for vessel propulsion, which not only doubles fuel costs but creates fuel stability issues on some of the older vessels.
One would assume that prior to making this legislation an analysis would be done in order to evaluate the impact of such a change and its long-term effects. CSL has done the analysis and the results are shocking.
Such a change would increase our fuel cost by 28.8 million dollars/year, which we would inevitably charge back to our customers and as we all know, this increase would eventually come out of the consumer’s pocket.
Such a change would create a modal shift in that cargo that currently travels on a ship would switch to either rail or truck.
Here are the facts: If 10% of shipments were to switch from marine it would most likely be absorbed 10% by truck and 90% by rail which would result in
Sulphur emissions being decreased by 1,759 tonnes / year
Greenhouse gas and particulate matter emissions would increase by 40,989-tonnes/ year
A non-sustainable change as the alternative is dramatically worse but the damage would be done.
Call me crazy but how about this idea. Rather than trying to shut down shipping, which is already recognized as the most environmentally efficient mode of transportation, maybe we could work together to make it even better.
Why not join the shipping industry in its efforts to have the Canadian federal government remove the archaic and punitive 25% import duty on new ships imported into Canada from shipyards in Asia as well as encouraging the government to take a more active role in representing Canadian shipping interests against recent non sustainable US legislation .
This would not only allow Canadian shipping companies to rebuild their ageing fleets with the newest state of art ships currently being designed but also substantially reduce our emissions and environmental footprints as well as provide jobs for Canadians in the years to come.
Same problem – reduce emissions
Different solution – new construction
Different result - sustainable
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