Part 3 of CarbonChain's 'High-carbon Commodities' blog series.
Transport is a major part of the global commodities market, moving raw materials and finished products around the globe. Vessels, trucks, trains, ports and storage facilities all contribute to the upstream or downstream carbon footprint of your high-emitting products.
Read on to understand how shipping contributes to your supply chain emissions, so you can better calculate your carbon footprint and prepare for regulation.
What’s shipping’s carbon footprint?
Shipping contributes around 1,000 million tonnes of greenhouse gas (GHG) emissions a year.
That’s nearly 3% of global GHG emissions. Its carbon footprint is skyrocketing with the increase in global maritime trade. Without action, it could increase by 50-250% by 2050.
What causes shipping emissions?
For vessels to run, they need energy. They overwhelmingly depend on fossil fuels such as marine gas oil or heavy fuel oil, using around 5% of global oil production, and emitting harmful greenhouse gases as the fuels are burned. These gases are carbon dioxide (CO2), methane (CH₄) and nitrous oxide (N₂O). Ships also produce sulphur oxide (SOx) emissions; while not a greenhouse gas that contributes to climate change, SOx does carry environmental and health risks.
For example, if you ship an iron ore cargo of 170,000 tonnes from Newcastle, Australia to Rotterdam, Europe, traveling around 12,000 nautical miles (nm) on a bulk carrier vessel (for example, the MV AIPOS) this would produce around 8,000 tonnes of CO2.
How do shipping emissions vary?
The main factors that affect the carbon intensity of shipping vessels are: ship type, size of ship, type of fuel consumed, and deadweight capacity.
How to calculate your shipping emissions
The first step to managing your shipping emissions is to measure them, across your supply chain. Carbon accounting gives you an accurate picture of your high and low emitting voyages, and helps you set quantified targets to decarbonize and measure progress. Mapping your emissions reveals opportunities for reduction, so you can swap vessels where possible and engage with your suppliers or logistics providers on low-carbon alternatives.
It also lets you fulfill reporting requirements and get ahead of new regulations. For example, 100% of maritime emissions is set to become taxable under the EU ETS) and the IMO will require ships to report their Carbon Intensity Indicator (CII) from January 2023.
Whether you use time charters or voyage charters, follow these steps to calculate your shipping emissions:
Step 1: Gather information
- For the most accurate calculations, collect fuel bunker logs directly from noon reports (prepared daily by a ship’s engineer)
- If bunker logs are unavailable, use the actual distance traveled (from noon reports) to develop the transport work: cargo weight x distance in nautical miles (tonne.nm)
- If the noon reports are unavailable, estimate the port-to-port distance traveled, then estimate the transport work (tonne.nm)
- Identify the vessel by either the IMO number or name, ship size category and/ or type
Step 2: Select the appropriate emissions metric
If you have the fuel consumption from bunker logs, go straight to Step 3. If not, then apply one of the below emissions intensity metrics to the transport work (tonne.nm) to estimate the emissions from the voyage, if available to you:
- Energy Efficiency Operational Indicator (EEOI): The CO2 emissions per actual cargo tonne miles or passenger miles (sum of the product of payload and the corresponding distance traveled in nautical miles), in gCO2/tonne.nm.
- Annual Efficiency Ratio (AER): The CO2 emissions of a ship per unit of nominal transport work (the product of a ship’s deadweight capacity and total distance traveled in nautical miles), in gCO2/dwt.nm.
Then, go to Step 4.
Tip: You can use tools or software like CarbonChain to help. Our database of vessel-specific AER and EEOI factors covers over 100,000 ships worldwide. We provide ship ratings that align with the upcoming IMO regulations, which, from January 2023, will require low performing ships (D/E-rating) to prepare a corrective action plan to improve emission intensity. Ratings will be based on AER, as a Carbon Intensity Index. Knowing your ratings now will enable you to understand and compare the performance of the ships you charter.
Step 3: Apply the fuel emissions factor (skip this step if you completed Step 2)
If you have the fuel consumption from the bunker logs, apply the fuel emission factor (grams of CO2/tonne) to the tonnes of fuel consumed, to calculate the total carbon footprint of the voyage. Fuel emissions factors can be gathered from sources such as the IMO Fourth GHG Study.
Consider that there may be more than one type of fuel consumed within one voyage. Emissions for each fuel should be calculated separately and then combined for the full carbon emissions of the voyage.
Step 4: Prepare your report
There are typically two ways to use this data in your emissions reporting:
- Product supply chain emissions: Include the shipping emissions data in your carbon report for a specific product’s supply chain or a commodity trade. This may also involve setting KPIs with your customers or finance providers to reduce the carbon intensity of a trade or product.
- Corporate carbon footprint: Include the shipping emissions data in your company’s overall emissions reporting, which should be categorized according to scope. If you own the ship or have operational control, its emissions should usually be categorized as Scope 1. Otherwise, it’s Scope 3.
Step 4: Set targets to decarbonize
Rate your ships and trades against global standards like the Sea Cargo Charter and Poseidon Principles. Set KPIs and targets and measure progress against them.
Tip: On CarbonChain’s platform, you can view ratings aligned with the upcoming IMO regulation, set KPIs and track progress. We automate your entire shipping and supplier carbon accounting.
How are companies reducing their shipping emissions?
There are various ways to reduce the carbon intensity of vessels and voyages, from design to fuel to voyage efficiencies. For example:
- Run ships on 100% renewable energy. Where 100% renewables is not yet possible, alternatives fuels like liquified natural gas usually result in lower emissions.
- Optimize the designs of hull, rudder and propeller designs for efficiency.
- Avoid empty containers, and consolidate and optimize loads.
In Norway, Ampere, the first all-electric car ferry, is using battery-stored energy to generate zero emissions. The country has also produced the Yara Birkeland: the world’s first zero-carbon, fully electric, autonomous container vessel, replacing around 40,000 truck journeys a year.
There are huge leadership opportunities for logistics providers, brokers and commodity traders alike, as downstream customers and investors shine the spotlight on supply chain emissions.
Decarbonize your trade flows
Generally, shipping emissions are a small proportion of the end-to-end carbon footprint of commodity trades, compared to assets like mines and refineries. But this doesn’t make them insignificant, especially with tightening regulations — and reducing them can be a quick win.
If you need help with your shipping emissions calculations, get in touch. CarbonChain gives you an accurate carbon footprint for your supply chain — not just shipping but every asset, from mine to port and beyond. Book a demo to start with a sample freight overview.