Scope 3 emissions and an end of asset plays: latest predictions from Danish Ship Finance

Decarbonisation of shipping is more than a discussion about fuels, warns Danish Ship Finance, in its latest market review published today.

 

In the report the company, which is focuses on asset loans to shipowners, warns that as the habits of global consumers (you, me and the millions of people on the high streets around the world) change, so will demand change in how scope one, two and three emissions are reported, and will define industry outlooks.

 

While a manufacturer or charterer of tonnage may be able to directly invest in scope one and scope two emissions, it is the scope three emissions that will become a key factor determining their environmental performance and choices, warns DSF. Scope three emissions are the emissions from their suppliers and service providers, including their transport providers like shipping. For some industrial companies, scope three emissions are up to 70% of their overall emissions.

 

 “Seaborne trade volumes are likely to change and fleet profiles may alter significantly when reporting of Scope 1, 2 and 3 emissions begin to define industry outlooks. Environmental performance is relative,” the report states. “The arrival of new high-performing vessels trading in green corridors will redefine the earnings potential for existing players that previously were forerunners.”

 

In short DSF predicts that as decarbonisation regulations kick in globally, the introduction of scope one, two and three emissions accounting will eventually reduce seaborne cargo flows and redefine the shipping industry.

 

Additionally, the changing shipping landscape will see shipping move away from the more traditional market of buying and selling tonnage depending on market cycles (second hand prices and charter rates) to one of long term cash flow yields, thus heralding a new ownership structure in shipping. In other words, value will be created in operating the vessel rather than selling it, creating a more competitive landscape for owners that favour long term planning to the operations of their fleets.

 

The full review can be accessed here

 

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