Page 27 - European Energy Innovation - Spring 2016 publication

Spring 2016 European Energy Innovation 27

SHIPPING

this vessel can go up to 15. This announced the creation of the lack of risk appetite by commercial
is the impact of the crisis on deal ESSF to assess developments lending institutions. Any new tools
parameters. towards compliance with the new would have to be designed with this
regulations. The ESSF acts as a in mind and as such the EC and the
In short, the market is not able to dedicated expert group, bringing Bank have derived scheme aimed at
respond, effectively leading to together representatives of member encouraging commercial lenders to
higher external costs. This has the states, as well as private and public return to the ship finance market. After
effect of waterborne transport losing organisations including the EC much deliberation the idea of a ‘Green
competitiveness, even though by and EIB. Its six working groups will Shipping Guarantee Scheme’ (GSG)
complying with the ever increasing deal with abatement technology was developed with the EC using
environmental regulation it creates implementation, LNG process and the CEF. This GSG is as yet only in
positive EU added value. implementation, competition issues, ‘pre-pilot’ phase with a small number
finance and R&D. of EU national shipping entities and
According to various studies, any banks. Depending on the success
increase in vessel operating costs There are several EU-funds available of these pilots the intention is to roll
and a lower competitiveness of for shipping industry, each with its own the scheme out EU wide as soon as
shipping could lead modal shifts characteristics, goals and selection practical.
from short sea shipping to road criteria. EC policy in the domain of
transport in these areas. Stated in an Maritime environmental development The GSG in short is a first loss
EU context, the increasingly negative is demonstrated and defined within guarantee provided to commercial
outlook, European Added Value various funding schemes including lending institution partners of the EIB
and potential market failure or sub- Connecting Europe Facility (CEF), in order to cover their investments
optimal investment conditions may TEN-T (including Motorways of in the environmental retrofitting
be addressed through consideration the Sea), European Structural and of vessels and in some cases the
of market oriented instruments Investment (ESI) Funds and Horizon investment costs of fitting these
using a risk-sharing approach to 2020. All of these schemes set technologies onto new build vessels.
accommodate adaptations to respect objectives, define eligibility and
SECA and other environmental budgets aimed at assisting various It is important to state here that it
standards. sectors including maritime. However, is not intended to be prescriptive
they are naturally limited as to the of the EC or the Bank as to which
It should be noted that commercial amount of financial assistance that individual technologies are supported.
financial institutions are not can be provided and indeed, within The scheme will cover any proven
incentivised to lend against ship the context of the current maritime technology.
upgrades that improve environmental environmental regulations, can only
performance but which bring no provide very high level support and Finally, it must be added here that the
additional revenues or cost recovery limited funding. greatest barrier to uptake of green
opportunities. Furthermore, both ship technology investments, besides
brokers and commercial Bankers do It is within this context that the EC commercial risk aversion, is the
not consider the installation of air had been engaging with the Bank to current low fuel price. Ship owners
abatement technology or clean fuel identify ways in which it can develop are current discouraged in making
burning engines, as adding to the EIB financial assistance in order to these expensive investments whilst
value of the asset as generally the better address the funding gap faced the price of Marine Gas Oil (MGO)
secondary market for these vessels by the industry. low sulphur fuel is so low. However,
is outside SECA areas and therefore this can change and furthermore, it
of little business relevance. In other GREEN SHIPPING GUARANTEE is the intention of the EU and other
words, the new clean technologies do SCHEME international regulatory bodies to
not necessarily ass to second hand The EIB has already an array of continually introduce more stringent
ship values. financing tools available for such environmental regulation which in
environment investments but as turn will maintain upward momentum
EIB/EU RESPONSE mentioned earlier, the issue is not a for adoption of such environmental
In 2013 the European Commission lack of liquidity in the market but a technologies. l

1 The EIB Transport Lending Policy states that lending for inland waterway, port, logistics and maritime projects are also prioritized in support of sustainable
transport solutions.
2 Oxford Economics Report, 2014, commissioned by the European Community Ship Owners Association.
3 The ESSF is a platform for the communication and coordination of structural, financial and technical dialogue amongst relevant EU maritime industry stake
holders, the Commission and the EIB to better address environmental sustainability challenges confronting the EU maritime transport sector.
4 For Bank’s who were traditionally major players in the shipping sector, these problems were caused by failing shipping portfolios.

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