The offset, that’s not an offset, to help boost shipping’s first mover determination

What if a ship operator could get a cargo owner to pay for clean fuels, but not actually put the cargo on the ship, while the cargo owner could claim the benefit of using the green ship to clean its supply chain?

In my adopted country, Sweden, I can sign up for green electricity supply, even though the kilowatts of power coming into my house will come from any of the power sources fed into the electricity grid.

I don’t know, there’s no way of knowing, if the joules of energy I use are green, grey and black. That’s not the point. The point is I can be paying he utility company for green electricity to be produced.


In the electricity power industry there are renewable energy certificate schemes and are a type of ”Book and Claim” arrangement where an energy generator, say a wind farm operator, can secure a verified certificate that a certain megawatt of power comes from a renewable source, and a reseller of electricity can then buy and claim these certificates matching them with the megawatts they resell to customers. The revenues from the certificates help offset the increased energy generation costs of the wind farm compared to fossil fuel-based electricity generation.


This book and claim process could be applied elsewhere, and now experts are looking at how it can be developed for shipping so cargo owners can pay for and claim certificates for green vessel voyages.


One of the groups looking at this is the Copenhagen, Denmark, based Maersk McKinney Moller Centre for Zero Carbon Shipping. The centre has featured previously on Fathom World and the Aronnax podcast as it has been able to bring together hundreds of policy, energy, engineering, and shipping experts to look at how the transformation of shipping can be sped up.


While largely funded by the Maersk McKinney Moller Foundation the centre has experts from many other companies on secondment, and states categorically that it is fuel agnostic and works independent of its main funders and the shipping company it shares part of its name with.


One key idea of a book and claim system is that it can maintain a fuel agnostic approach to helping promote clean fuel use, and benefit early movers in their transition.


MMMCZCS wants to build up and run a trial project to see how such a book and claim would work and ensure it would be a much stronger tool than so called offsets which are gaining a bad press as having no teeth and sometimes being accused of contributing to global warming.

This is not an offset

I spoke to Fredrick Jakobsen at MMMCZCS about the idea and wanted to ask him first how book and claim are different to offsetting, as both seem to be based on making a claim of good behaviour (planting a tree, the use of green electricity or putting cargo on a vessel using cleaner fuels) while not actually doing so (maybe due to there not being any alternative).

A shipping Book & Claim model is not about offsetting emissions by paying for reforestation or enhancing CO2 sinks but about a verified accounting of emissions and keeping the system within the industry and so enhance first mover appetite

While there the ability to claiming green attributes is similar to both, this he says is where the similarities end pointing to a handful of key differences.


“The first is the book and claim is a “chain of custody” model, it’s tracking attributes through a physical supply chain, whereas offsetting isn’t necessarily a chain of custody model, there might be offsetting mechanisms that are chain of custody models, but not all of them are. So it can be a bit of a grey area. So that’s one difference”.


The other is that the book and claim process remains within one industry and therefore has much more direct accountability. The electricity REC scheme for example is between electricity producers and resellers, the shipping book and claim would work between cargo owners who buy and claim the certificates and the early mover ship operator who has a vessel with the clean fuel yet may find it difficult to being willing cargo owners to put sufficient cargo on the vessel.


And the third difference, and when one looks at this in detail it’s an important one, is the issue of offsetting avoided emissions.


Book and claim is a process against a physical use of a fuel, avoiding emissions is based on a business as usual benchmark and then an estimate of what the difference is. Basically, it lacks accurate accountability and could be seen as greenwashing.


“We avoid using any hypothetical baselines. All the emissions included on the platform are measured emissions based on primary data – no estimating is done”, says Jacobsen, adding that basically no one has a time machine or ability to verify what might have been. “What we have tried to do in this book and claim system that we’re developing is we’re trying to avoid these kinds of hypothetical scenarios.


This difference between offsets and hypothetical voided emissions is a key tenet even written into various guidance documents including the Greenhouse Gas Protocol which sets standards to measure and manage emissions, including scope two and three emissions.


In its scope 2 guidance a section the GHG Protocol details the relationship and difference between offsets, RECS (the electricity market’s book and claim system) and other energy attribute tracking, stating that where two energy generation methods are used (in this case coal and gas) both still generate emissions even though there can be a claim of avoided emissions.


The process would still apply for a book and claim process in shipping where the absolute emissions are the key factor, not the avoided emissions.


Knowing there are similar book and claim models in existence in other sectors, and a robust set of recognised protocols could be important for any potential book and claim system for shipping. It is also worth noting that these other systems work in conjunction with emissions trading schemes and other offsetting initiatives.

Proof in the pudding

The concept of a shipping book and claim system arose as the Centre looked at how to support early movers, shipping companies who make the decision to order or use vessels that use CO2 emission free, or net zero, fuels such as ammonia, biofuels and methanol.


Jacobsen explains the idea as allowing cargo owners to put their green money where it can make a difference by making a claim on verified  green fuel certificates, money which is aggregated and  go to the green ship operator to offset the fuel price differences and therefore a likely significant increase in operating costs compared to competitors using similar vessels running on fuel oils or diesels.


Companies claiming the certificates can then use these under their own reporting mechanisms and requirements, substantiating their own green claims and prove there is no greenwashing, while shipowners can send a positive signal to fuel developers that there is growing demand.


The system also means that cargoes do not need to be rerouted or wait for specific vessels to be part of a green supply chain.


“It’s the first step in trying to expand access to green shipping.”, he says. “I think it’s a step that’s needed, because there just currently aren’t any good options today, to address your shipping emissions outside of finding an owner operator who’s doing green shipping.”


But to get this rolling Jacobsen admits there needs to be a trial project and for this there needs to be a number of cargo owners and ship operators with green fuelled vessels willing to participate in a proof-of-concept trial.


Therein lies the first challenge. While the centre is fuel agnostic, thus LNG as a fuel is not ruled out, it remains to be seen how that part of the challenge will be met given the scarcity of commercial vessels running on clean fuels. Jacobsen belies this will happen, but with some leading owners, including Maersk placing orders for alternative fuelled newbuildings, this may not be a long wait.


“We think from the companies that we’ve spoken to that, that there are more and more companies investing in it, but they just they want to make sure that the investment that they made will be paid back and that they will be compensated,” said Jacobsen.


The fact remains that if the initial demand from early movers within the cargo owners, who are willing to pay a premium, cannot be aggregated towards the early movers amongst the shipowners, then neither part of this equation will grow and no demand signal sent to the fuel makers to increase production.


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