INTERVIEW with Antonis Tsimplakis • atsimplakis@naftemporiki.gr
Professor Siri Pettersen Strandenes at the Norwegian School of Economics, who was awarded the 2023 Onassis Prize in shipping, expresses clear views on shipping's transition to the so-called "net zero" in an interview with "Naftemporiki" as published in 28-12-2023.
Ms. Strandenes underlines that:
Going net zero means a relatively short transition period with tight deadlines.
The increased switching costs will be borne by end consumers.
A global carbon tax is a more efficient and simpler solution than a regional emissions
trading system .
" Mrs. Strandenes, this year you were awarded the 2023 Onassis Prize in shipping. What does the selection of the jury, which includes distinguished colleagues from all over the world, symbolize for you?"
"It is a great honor to receive the prestigious Onassis Award 2023 in shipping. My selection by the distinguished colleagues of the Onassis Awards committee makes me feel proud, but also humbled. I am extrAntonis Tsimplakis)emely pleased that this award exists to recognize the work that is being done in our field and I hope to see some of today's young executives honored with it one day.”
Speaking of shipping and having a deep knowledge of the financial sector, how difficult do you think it is, financially, to transition the industry to the net zero era?
“The transition to the net zero era is a difficult transition for shipping. Different from previous transitions, such as the transitions from sailing ships to steam and the engine 100-150 years ago. Going net zero means a relatively short transition period with tight deadlines.
Unlike the previous transitions, the current one is imposed by the external environment of the industry. Also, the earlier transition to more efficient propulsion represented a transition to more efficient operations, as opposed to the higher costs that follow the transition to net zero.
That said, aiming for net zero emissions by or around 2050 and setting targets for 2030 and 2040 will require coordination and alignment of industry efforts. This coordination tends to reduce uncertainty for the pioneers and the banks financing the vessels.
Consequently, we are now seeing increasing investment in dual-fuel vessels. In addition, banks in recent years have been rewarding shipowners with better ESG performance.
Except in periods of oversupply of vessels or capacity, higher vessel costs will be reflected in charter prices – regardless of whether the extra cost is related to net zero or other reasons for increased investment costs.”
Which industries do you think should shoulder the burden? And who should bear the brunt of the transition? In the sense that shipping will need access to clean fuels around the world in the future.
“The increased costs will ultimately fall on the end consumers. In order to continue to operate all actors in the supply chain must be able to cover their costs in the long term. Thus, fuel prices over time must cover the cost of the fuel itself and the distribution infrastructure. Higher fuel prices will be reflected in fares and higher transportation costs will be passed on to end consumers. However, there may also be a timing issue, where a lack of infrastructure initially hinders the supply of clean fuels globally."
At EU level the inclusion of shipping in the ETS caused reactions at the international level. Countries such as Brazil, China and other emerging economies have expressed concerns about a possible distortion of competition. What is your position?
“A global carbon tax is a more efficient and simpler solution than an emissions trading system. A regional emissions trading scheme has additional distortions compared to a global ETS. The effects on competition and trade flows depend on the cost of the emissions trading scheme. The higher cost of transport to and from the E.U. may affect importers and exporters to the EU, but domestic EU industries they must also purchase ETS, which reduces the relative negative impact on tradable goods.
Therefore, the assessment of the effects on competition needs a closer analysis. Research published in 2021 shows that carbon pricing has a limited impact on transport costs and thus trade costs for countries' exports and imports. It may, however, adversely affect small island developing states and least developed countries."
Regulations at the global level
Should environmental regulation be adopted globally or regionally?
“Shipping is a global industry that facilitates global trade. This means that environmental regulations for shipping will have to be adopted globally."
The Onassis Awards
The Onassis Awards are presented every three years by the Onassis Foundation, Bayes Business School of the City, University of London and the Costas Grammenos Center for Shipping, Trade and Finance.
Winners are selected following evaluation by a jury of distinguished academics from around the world – including two Nobel Prize winners.
The aim of the institution is to broaden understanding and research in the fields of Finance, International Trade and Shipping, while aiming to address the most pressing challenges we continue to experience as a society.
In addition to the important distinction, the winners also receive a cash prize of 200,000 dollars. The 2023 Onassis Awards ceremony was attended by 350 guests from 20 countries.
source: naftemporiki.gr (Antonis Tsimplakis)
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