Climate change and GHG emissions in the shipping industry simply must be addressed as the sector delivers around 90% of global trade in the most efficient way and is a key driver of the world's economic engine. IMO's adoption of a GHG reduction strategy aims to reduce total GHG emissions from shipping at least by 50% in 2050, and to reduce the average carbon intensity (CO2 emitted per cargo tonne-mile carried) by 40% in 2030 and 70% in 2050, compared to 2008. This will not be possible without the development of low / zero carbon fuels in addition to the energy efficiency measures and speed reductions.
CNCo is both fully aware of, and cognizant of the concerns of global governments and the public about, climate change risks. We recognise that the use of fossil fuels to meet the world's energy needs contributes to the rising concentration of greenhouse gases in the atmosphere, which will result in further increases in global temperatures. We recognise the dangers of inaction and we are committed to reducing CNCo's environmental impact.
There is a growing demand for climate-related information by investors, lenders, insurers and other stakeholders. The Task Force on Climate-related Financial Disclosures (TCFD) provides voluntary, consistent climate-related financial risk disclosures for use by companies in information to investors, insurers and other stakeholders. While the recommendations of the TCFD primarily relate to listed entities and as we transit into a lower carbon economy, we are, as good business practice, looking to assess climate-related risks and opportunities for CNCo. We will address this in more detail in future reports as the Swire group comes to a consensus on the most applicable Representative Concentration Pathway (RCP) to use for our scenario planning.
Many banks that lend to shipping lines have announced that climate impact will be integrated into the criteria that determines how much they will lend to shipping companies and at what rate, an effort they say will substantially cut CO2 emissions in the industry. Responsible Finance Houses will be able to measure the carbon intensity of their shipping portfolios on an annual basis and assess their climate alignment relative to established decarbonisation trajectories. This should be a strong driver to prioritise climate change issues in the business' decision-making processes and help drive transitioning to the necessary technology for the design of ships, reduction of emissions and, crucially, radical decarbonisation that the industry requires.
The new lending framework, termed the "Poseidon Principles", will assess and disclose whether financial institutions' lending portfolios are in line with the IMO's climate goals adopted in 2018. The Poseidon Principles are the world's first global, sector-specific and self-governing climate alignment agreement among financial institutions which is very important in driving climate change action within the shipping industry.
CNCo takes multiple steps towards reducing our emissions from operations and our effort towards increasing fuel efficiency are a good testament to that. CNCo has a very young fleet of modern, fuel / carbon efficient "eco-designed" vessels which helps us to gain savings possible through Technical and Operational measures. We are also actively looking at the possibility of using biofuel and hydrogen as the alternative energy source. We are engaging with industry partners on advancing new alternatives to fossil fuels and Cold Ironing in ports. We are constantly evaluating various options that will help us to decarbonise our business.
We have set ourselves a more aggressive goal to reduce liner and bulk fleet EEOI which we measure and monitor and work with the two operating divisions and fleet management on strategies towards gradual annual reduction.
We have explored the option of using battery stored hydrogen to supplement Heavy Fuel Oil (HFO) for our coastal vessels in New Zealand (NZ). However, our study showed that lower energy density, significant storage requirement on-board vessels and insufficient hydrogen supply makes it not a viable solution at this time.
We also started to investigate using power from ashore, also known as Cold Ironing. This involves the provision of electrical power from the shore (especially in ports where the grid supply has a very low carbon footprint) to a vessel while it is docked, thereby allowing the vessel's auxiliary engines to be turned off and the burning of diesel fuel to cease. This is existing technology, used in ports globally, allowing reduction of GHG emissions by up to 98% under optimal energy circumstances.
While this sounds like a good opportunity to reduce emissions in ports, the drawbacks include high CAPEX and dependence on port infrastructure which is not widely available in the many ports CNCo calls at. We will continue exploring using Cold Ironing for our two cabotage ships in NZ.
Project Cerulean is an example of CNCo's investment in low carbon shipping solutions in the Pacific where commercial shipping is often not a viable solution for trade routes between smaller islands. They have very little connectivity and rely heavily on the import of goods. For more information on Project Cerulean please see "Our Communities" section of the report.
Joining the Getting to Zero Coalition is also a strong commitment towards being a part of the industry-wide effort towards radical decarbonisation. We will continue exploring various decarbonisation options and will report on our progress in future SD reports.