IMO 2020: The Big Shipping Shake-Up
Over 90% of all global trade takes place on our oceans.
Unfortunately, the network of 59,000 vessels powering international commerce runs on sulfur-laden bunker fuel, and resulting emissions are causing problems on dry land.
As today’s infographic by Breakwave Advisors demonstrates, new emissions regulations taking effect in 2020 will have a big impact on the world’s massive fleet of marine shipping vessels.
The Regulatory Impact
The International Maritime Organization (IMO) – the UN agency responsible for ensuring a clean, safe, and efficient global shipping industry – will be implementing new regulations that will have massive impact on maritime shipping.
The regulations, dubbed IMO 2020, will enforce a 0.5% sulfur emissions cap worldwide starting January 1, 2020 ─ a dramatic decrease from the current emissions cap of 3.5%.
Here are a few ways marine fuel will likely be affected by these regulations:
- High-sulfur fuel oil will drop in price as the demand drops dramatically after January 1, 2020
- Diesel, a low-sulfur fuel oil, will be in higher demand and should see a price increase
- Refiners should also expect higher profits as refining runs increase to satisfy the new regulations
The Economic Impact
IMO 2020 will be one of the most dramatic fuel regulation changes ever implemented, with a significant impact on the global economy.
New regulations are certain to influence freight rates ─ the fees charged for delivering cargo from place to place. These rates can fluctuate depending on:
- Time and distance between ports
- Weight and density of the cargo
- Freight classification
- Mode of transport
- Tariffs and taxes
- Fuel costs
Rising fuel costs means rising freight rates, with much of these costs being passed to consumers.
In a full compliance scenario, we estimate the total impact to consumer wallets in 2020 could be around US$240 billion.
─ Goldman Sachs
The Environmental Impact
Not surprisingly, the world’s 59,000 transport ships, oil tankers, and cargo ships have a consequential impact on the environment.
Bunker fuel accounts for 7% of transportation oil consumption (~3.5 million barrels/day). Burning this fuel generates about 90% of all sulfur oxide and dioxide (SOx and SO2) emissions globally. In fact, the world’s 15 largest ships produce more SOx and SO2 emissions than every car combined.
These sulfur emissions can cause several harmful side effects on land ─ acid rain, smog, crop failures, and many respiratory illnesses such as lung cancer and asthma.
Changing Currents in the Shipping Sector
As IMO 2020’s implementation date nears, shippers have a few courses of action to become compliant and manage costs.
1) Switch to low-sulfur fuel
Bunker fuel use in the shipping industry was 3.5 million barrels per day in 2018, representing roughly 5% of global fuel demand.
Annual bunker fuel costs are predicted to rise by US$60 billion in 2020, a nearly 25% increase from 2019. Price increases this significant will directly impact freight rates ─ with no guarantee that fuel will always be available.
2) Slower Travel, Less Capacity
The costs of refining low-sulfur fuel will increase fuel prices. To offset this, shippers often travel at slower speeds.
For example, large ships might burn 280-300 metric tons of high-sulfur fuel oil (HSFO) a day at high speeds, but only 80-90 metric tons a day at slower speeds. Slower travel may cut costs and help reduce emissions, but it also decreases the capacity these vessels can transport due to longer travel times, which shrinks overall profit margins.
3) Refueling Detours
Adequate fuel supply will be a primary concern for shippers once IMO 2020 takes effect. Fuel shortages would cause inefficiencies and increase freight rates even more, as ships would be forced to detour to refuel more often.
4) Installing Scrubbers
A loophole of IMO 2020 is that emissions are regulated, not the actual sulfur content of fuel itself.
Rather than burning more expensive fuel, many shippers may decide to “capture” sulfur before it enters the environment by using scrubbers, devices that transfer sulfur emissions from exhaust to a disposal unit and discharges the emissions.
With IMO 2020 looming, only 1% of the global shipping fleet has been retrofitted with scrubbers. Forecasts for scrubber installations by mid-2020 run close to 5% of the current ships on the water.
There are a few reasons for such low numbers of installations. First, scrubbers are still somewhat unproven in maritime applications, so shippers are taking a “wait and see” approach. As well, even if a ship does qualify for a retrofit, cost savings won’t take effect until several years after installation. On the plus side, ships with scrubbers installed will still be able to use the existing, widely-available supply of bunker fuel.
No matter which route shippers choose to take, the short-term impact is almost certainly going to mean higher freight rates for the marine shipping industry.
Vegetarianism: Tapping Into the Meatless Revolution
This graphic unearths the origins of the meatless revolution, while exploring how the $1.8 trillion meat market is responding to the threat of disruption.
Vegetarianism: Tapping into the Meatless Revolution
The way people choose and consume their food is changing, and it’s encouraging a sweeping shift from animal-based to plant-based food products.
Whether it’s from the perspective of environmental impact, cruelty to animals, or health benefits, meatless diets are quickly becoming a new normal for people around the world—but where did it all begin?
Today’s infographic unearths the origins of vegetarianism and explores how the industry erupted into a lucrative web of sub-categories that are whetting the appetite of investors the world over.
The Origins of the Meat-Free Diet
Taking a holistic view of vegetarianism, there are several different diets that people typically adhere to. A vegetarian for example, doesn’t eat meat but still consumes animal products such as dairy and eggs. On the other hand, a vegan eats a strictly plant-based diet.
With 70% of the global population now reducing their meat intake, veganism has become a lifestyle choice for many. By 2026, the global market is projected to be worth over $24 billion.
While this seems like a relatively new phenomenon, the meatless revolution has been quietly building for almost two centuries.
- 1847: The first vegetarian society is formed in England
- 1898: The world’s first vegetarian restaurant opens in Switzerland
- 1944: The term “vegan” is coined
- 1994: The first World Vegan Day is introduced
- 2014: Influential breakout documentary Cowspiracy is released
- 2017: 6% of the entire U.S. population claim to be vegan
- 2018: Roughly 8% of the global population claim to eat plant-based
- 2020: Acceptance of plant-based diets by both the medical community and general public is at an all-time high
Although vegetarian and vegan diets were once heavily stigmatized, global support is now growing.
Towards a Plant-Based Future
Today, people in dozens of countries are making big strides towards plant-based lifestyles.
China, for example, introduced guidelines to help its population of 1.3 billion people reduce their meat consumption by 50%. These ambitious goals will be driven by consumer’s growing understanding of the positive impacts of eating less meat, such as:
- Health benefits
According to the American Heart Association, reducing meat intake could reduce the risk of stroke, high blood pressure, type 2 diabetes, and even certain cancers.
- Environmental impact
Animal agriculture creates more greenhouse gases than the world’s entire transportation systems combined, but shifting to a plant-based diet could significantly reduce this problem.
- Animal welfare
Roughly two thirds of the 70 billion animals farmed annually are cramped in close quarters and given heavy medication. Plant-based diets eliminate animal suffering while lowering demand for other animal food products.
In fact, if more people commit to embracing a plant-based lifestyle, it could result in up to $31 trillion—or 13% of global GDP—in savings for the economy.
Big Players Fight For a Piece of the Pie
Given the newfound consumer demand for meat alternatives, it’s no surprise that global companies are clamouring to enter the market.
Many established food companies such as Nestlé and Danone are either advancing their own formula for plant-based proteins, or acquiring companies with existing experience.
Meanwhile, fast food chain McDonald’s features vegan products as permanent staple on their menu, and report an 80% uplift in customers buying these products in certain countries.
Big Meat Shifts Gears
As new players in the space attempt to cut into the $1.8 trillion global meat market, big meat companies are responding in kind.
Tycoons such as Tyson Foods and Cargill are placing bets on plant-based startups and filling shelves with their own plant-based products.
But while plant-based products created by traditional meat companies may appeal to less rigid flexitarians, vegans and vegetarians may not accept them so readily due to their strong ethics.
Food For Thought
Along with the uncertainty of how these products will be received, there are other challenges that the market must overcome in order to be considered truly accessible. For instance, plant-based alternatives boast higher price points than their predecessor’s products, which may deter consumers from entering en masse.
Regardless, it is clear that the shift to plant-based diets is a disruptive force that could change the food industry over the long term. Early movers are dangling a golden carrot in front of investors—but will they take a bite?
Visualizing the Human Impact on the Ocean Economy
The ocean economy is under threat. How are human activities impacting the sustainable use of our ocean assets, valued at over $24 trillion?
Visualizing the Human Impact on our Ocean Economy
When you think of economic output, it’s likely the ocean isn’t the first entity that comes to mind. But from facilitating international trade to regulating the climate, the “blue economy” contributes significant value in both tangible and intangible ways.
The sustainable use of the ocean and its resources for economic development and livelihoods have such far-reaching effects, that its protection is a significant goal of the United Nations, as well as for many other countries and organizations throughout the world.
However, these vital ocean assets are in danger of sinking quickly. Ahead of World Oceans Day on June 8, 2020, we look at the total value of assets that come from our ocean, and how various human activities are affecting these resources.
Global Ocean Asset Value
Economic value from all the oceans is measured both by their direct output, as well as any indirect impacts they produce.
According to the World Wildlife Fund, these combined assets are valued at over $24 trillion. Here’s how they break down:
- Direct Output: Marine fisheries, coral reefs, seagrass, and mangroves
Total value: $6.9T
Examples of direct output: Fishing, agriculture
- Trade and Transport: Shipping lanes
Total value: $5.2T
- Adjacent Assets: Productive coastline, carbon absorption
Total value: $7.8T, and $4.3T respectively
Examples of services enabled: Tourism, education/conservation (such as jobs created)
In fact, the annual gross marine product of the oceans is comparable to the Gross Domestic Product (GDP) of countries, coming in at $2.5 trillion per year—making it the world’s eighth largest economy in country terms.
Unfortunately, experts warn that various human activities are endangering these ocean assets and their reliant ecosystems.
The Cumulative Human Impact on Oceans
An 11-year long scientific study tracked the global effect of multiple human activities across diverse marine environments. The researchers identified four main categories of stressors between 2003-2013.
- Climate change: Sea surface temperature, ocean acidification, and sea level rise
- Ocean: Shipping
- Land-based: Nutrient pollution, organic chemical pollution, direct human pollution, light pollution
- Fishing: Commercial and artisanal fishing, including trawling methods
Across the board, climate stressors were the most dominant drivers of change in a majority of marine environments. Similarly, pollution levels have also increased for many ecosystems.
Plastic pollution is especially damaging, as it continues to grow at unprecedented rates, with a significant amount ending up in the oceans. The World Economic Forum estimates that by 2050, there could be more plastic in the ocean than fish by weight.
Among the various marine environments, coral reefs, seagrasses, and mangroves proved to be most at-risk, experiencing the fastest increase in cumulative human impact. However, these are also the same ecosystems that we rely on for their direct economic output.
Overall, climate-induced declines in ocean health could cost the global economy $428 billion annually by 2050.
The Ocean Economy is in Hot Water
It can be difficult to truly understand the scale at which we rely on the ocean for climate regulation. The ocean is a major “carbon sink”, absorbing nearly 30% of the carbon emitted by human activity. But acidity levels and rising sea surface temperatures are changing its chemistry, and reducing its ability to dissolve CO₂.
According to the UN, ocean acidification has grown by 26% since pre-industrial times. At our current rates, it could rise to 100-150% by the end of the century. Overfishing is another urgent threat that shows no signs of slowing down, with sustainable fish stocks declining from 90% to 66.9% in just over 40 years.
To try and counteract these issues, this year’s virtual World Oceans Day is focused on “Innovation for a Sustainable Oceans” to discuss various solutions, including how the private sector can work with communities to maintain the blue economy. In addition, there’s a petition in place to urge world leaders to help protect 30% of the natural world by 2030.
Will our human activities continue to stress the ocean economy, or will we be able to positively reverse these trends in the years to come?
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