Integrating ESG aspects in the KSA & UAE Shipping Sectors
Transport & Insurance Focus
The shipping industry is a vital component of the global economy, transporting around 80% of world trade by volume and 70% by value.
Law Update: Issue 366 - Transport & Insurance Focus
Yasser MadkourPartner,Transport & Insurance
Giannis PetrasAssociate,Transport & Insurance
Fares AbdullahAssociate,Transport & Insurance
The shipping industry is a vital component of the global economy, transporting around 80% of world trade by volume and 70% by value. However, the industry also has a significant environmental impact, emitting large amounts of greenhouse gases and other pollutants that contribute to climate change, air quality degradation, and marine ecosystem disruption.
Oil spills, resulting from accidents, collisions, or illegal discharge, significantly harm marine ecosystems, human health, and coastal livelihoods. Similarly, vessel discharges, including bilge water, ballast water, sewage, and garbage, compromise water quality and marine life by introducing pollutants, pathogens, and invasive species.
The IMO has implemented several conventions, such as the International Convention for the Prevention of Pollution from Ships (MARPOL) and the International Convention for the Control and Management of Ships' Ballast Water and Sediments (BWM), to mitigate these impacts and regulate pollution from ships.
This discourse has gained increased relevance in oil-producing nations such as the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE), which, amidst global scrutiny over environmental responsibilities, are pioneering transformative initiatives within the shipping sector, as well will see below.
In the wake of increasing environmental concerns, the shipping industry faces growing pressure from regulators, customers, and stakeholders to reform its operational practices. To mitigate its ecological footprint, the industry is vigorously exploring and adopting innovative technologies.
a. Adoption of Alternative Fuels and Green TechnologyThe transition towards sustainability has seen the exploration of alternative fuels such as methanol, ammonia, hydrogen, and the incorporation of wind power and battery technologies. These pioneering approaches aim to drastically curtail emissions from shipping operations. Despite their promising potential, these initiatives encounter obstacles in production scalability, cost-effectiveness, compatibility with current infrastructure, and overarching safety concerns.
b. Green Shipping Routes, Operational Efficiencies and Capacity OptimizationComplementing this is the implementation of green shipping routes, designed to minimize environmental impact. A notable example is the Asia-Europe container route, responsible for a significant portion of shipping CO2 emissions. Further, the shipping industry is also improving the design and performance of vessels and operations to enhance the efficiency and reduce the emissions and the waste. Some of the improvements include digitization, onboard systems, hull and propeller optimization, speed reduction, and route planning. Another improvement is increasing the container capacity of vessels, which can reduce the number of trips and the fuel consumption per unit of cargo.
a. COP28: A Driver for Maritime SustainabilityAt COP28, hosted by the UAE, the shipping industry saw valuable initiatives being undertaken towards sustainability, underscoring the UAE's leadership in this domain. The event was a platform for launching the Green Shipping Challenge, which saw countries, ports, and companies making over 60 announcements aimed at decarbonizing shipping, from establishing green corridors to integrating zero-emission fuels.
Adding to the momentum of green shipping initiatives in the context of COP 28, global shipping leaders issued a joint declaration for ending fossil-fuel-only newbuilds, advocating for the IMO to foster the shift to green fuels. This move, backed by Maersk, CMA CGM, MSC, Hapag-Lloyd, and Wallenius Wilhelmsen, emphasized regulatory reforms to ensure the maritime industry's sustainable transition.
The aforementioned initiatives are just a few examples of the efforts made at COP28 to advance maritime sustainability.
b. ESG Initiatives in the UAE and KSA Shipping SectorsThe UAE and KSA have taken various steps to incorporate ESG aspects in their shipping sectors, with the aim of improving sustainability, innovation, and competitiveness.
The UAE has adopted a strategy to transition its maritime sector to hydrogen-derived energy, in line with the Global Ports Hydrogen Coalition and its net-zero carbon emissions target by 2050. Moreover, the UAE Ministry of Energy and Infrastructure (MOEI) and DNV, signed an MoU to establish the UAE Maritime Decarbonization Center in July 2023, which will monitor and reduce CO2 emissions from the maritime industry.
Additionally, DP World endorsed an MoU to create an international green shipping corridor connecting several ports in Asia and the Middle East with the west coast of Canada, including Prince Rupert, Vancouver, and Edmonton. The MoU involves multiple stakeholders, such as Transport Canada and A.P. Moller Maersk, amongst others.
In the context of Saudi Arabia, Saudi Arabia, alongside the United Kingdom, formalised an MoU during the Saudi Green Initiative forum, coinciding with COP 28. This MoU underscores a shared commitment to marine environmental preservation, spotlighting key areas such as enhancing marine biodiversity, mitigating pollution, and advancing the science surrounding climate change.
Further, Saudi Arabia successfully secured a position within the 40-member council of the International Maritime Organization for the 2024-2025 term, underscoring the Kingdom's presence in an organisation paramount to setting the international standards designed to ensure the safety of maritime transport, reduce pollution from ships, and preserve the marine environment.
With respect to environmentally friendly ship recycling, Wreckdock Maritime is planning on developing a modern ship recycling facility in Saudi Arabia, in alignment with international standards for environmentally responsible maritime decommissioning. Scheduled to begin operations in 2025, this facility will approximately accommodate the recycling of 48 to 52 end-of-life vessels per year, including oil tankers and cargo carriers. With an investment of $300 million, the project underscores a commitment to sustainable practices by incorporating advanced technologies for minimizing environmental impact.
The shipping industry is undergoing a significant transformation to address its environmental impact and align with the global sustainability agenda. The UAE and KSA are playing an important role in this process, by implementing and supporting various initiatives that aim to reduce emissions, enhance efficiency, and foster innovation in the maritime sector. These initiatives demonstrate the leadership and vision of the UAE and KSA in advancing maritime sustainability, as well as their collaboration and partnership with various stakeholders. The impact and effectiveness of these initiatives will be evaluated in the following months and years to come.
For further information,please contact Yasser Madkour, Giannis Petras, Omar N. Omar and Fares Abdullah.
Published in March 2024
