Out-Law Analysis 2 min. read
31 Oct 2022, 12:22 am
Climate change and net zero targets have created challenges for high carbon emitting industries such as international shipping. The Poseidon Principles were created to meet the need for a global framework for responsible shipping finance.
According to the International Energy Agency, in 2021, international shipping accounted for about 2% of global energy-related carbon dioxide (CO2) emissions. In 2021, emissions from the international shipping sector grew by 5%, rebounding from the sharp decline in 2020 as a result of the global pandemic.
While measures approved by the International Maritime Organisation (IMO) are likely to achieve a 15% emissions reduction by 2030, there is growing pressure for more ambitious climate commitments from the shipping sector. This pressure for more ambitious emission reduction targets on the shipping industry also affects related sectors, including shipping finance and the growing global offshore wind industry. The Poseidon Principles, published in 2019, were designed to fill this gap.
The Poseidon Principles are globally-applicable rules for assessing, disclosing and mitigating the climate change impacts of shipping finance. The principles were the world’s first sector-specific climate change agreement. The agreement has received widespread subscription, with signatories making up US$185 billion or 50% of the global ship financing portfolio.
There are four Poseidon Principles:
The Poseidon Principles are aligned with the IMO’s ambition to reduce emissions from international shipping by 50% by 2050. Signatories to the Poseidon Principles are attempting to build on this ambition by bringing the trajectory of shipping emissions in line with net zero by 2050.
Decarbonising the global shipping sector will directly impact offshore wind projects being proposed for Australian waters. Offshore wind, once constructed, is a low-emission source of energy producing six grams of carbon dioxide per kWh generated compared to gas and coal which produce about 412g/kWh and 1,011g/kWh on average.
However, the development of a robust offshore wind market in Australia from ‘scratch’ will require the procurement of multiple different types of marine vessels: most relevantly, wind turbine installation vessels for carrying out wind turbine installations in offshore wind farms such as jack-up barges and sheerleg cranes, cable laying vessels for cable installation between the wind mills as well as between the offshore wind farms and the shore, and service operation vessels, for performing regular inspections and maintenance of the offshore wind farm.
Such vessels will need to be procured or chartered in accordance with the Poseidon Principles, meaning that the developers of offshore wind projects will need to be mindful of the source and financing of their fleet of vessels.
Co-written by Patrick Hart of Pinsent Masons.