Climate Regulations Are About to Disrupt Global Shipping HEAD TOPICS

Climate Regulations Are About to Disrupt Global Shipping

10/21/2022 7:00:00 PM

Policies and regulations to help mitigate climate change have a major impact on how supply chains are designed

Source

Harvard Business Review

Policies and regulations to help mitigate climate change have a major impact on how supply chains are designed Ships that transport goods across oceans are collectively a major generator of greenhouse gases. Rules from the International Maritime Organization and the European Union aimed at curbing these emission promise to make transoceanic and regional shipping more expensive and reduce service, which will have a significant impact on global supply chains. Managers should begin to prepare now for this new era. Options for Achieving a Better Grade2.and has ordered 12 16,000 TEU methanol-powered ships. It has also signed agreements with several companies to produce methanol from renewable energy. CMA CGM, the third-largest container line, has made a big bet on liquified natural gas (LNG) as an interim transition fuel and plans ultimately go to some form of hydrogen. It has already put 12 LNG-powered vessels into service and will have 44 operating by 2024. Mitsui OSK Lines plans to launch 90 LNG-powered ships by 2030, and Ocean Network Express (ONE) recently ordered 10 13,700 TEU ships that could run on either ammonia or methanol. All these companies will be looking to bio-based marine fuel oil as well. Read more:
Harvard Business Review » Lawyers rush to benefit from Arizona's new rules on law-firm ownership UK's interior minister resigns after breaching government rules Germany violates human rights due to racial profiling, European court rules Controversial 'Stop WOKE,' parental rights rules get go-ahead as Florida LGBTQ advocates object

Hacking - CNN

CNN News, delivered. Select from our newsletters below and enter your email to subscribe. Read more >> Tighter traceability regulations, a heightened focus on food safety & frequent supply chain disruptions are all industry challenges an ERP can conquer for your business. Discover more here: FoodSafety FoodAndBeverage 💯🚚🥫 Lawyers rush to benefit from Arizona's new rules on law-firm ownershipGold rush: Lawyers are flocking to Arizona to take advantage of new rules resulting in a flood of outside investments in law firms UK's interior minister resigns after breaching government rulesBritain's Suella Braverman resigns as interior minister, saying she has to go after she breached government rules by sending an official document from her personal email account Germany violates human rights due to racial profiling, European court rulesGermany violates European Convention on Human Rights by denying independent, effective investigation into racial profiling by police officers, Europe's top human rights court rules Controversial 'Stop WOKE,' parental rights rules get go-ahead as Florida LGBTQ advocates objectThe rule requires districts to notify parents about bathrooms or locker rooms “not separated by biological sex at birth.” The other rule approved penalizes teachers for some race-related subjects or instruction on sexual orientation or gender identity. U.S. consumer protection watchdog's funding unconstitutional, court rulesA federal appeals court ruled on Wednesday that the U.S. Consumer Financial Protection Bureau's funding apparatus is unconstitutional, faulting a system Democrats designed to insulate the agency from requiring congressional appropriations. Democrats trying to skirt the system….again. SenWarren ha ha. Sounds like fraud. Truth always comes out..Soon or later..KARMA Broadcast Gains Share, Streaming Rules Again in Platform Rankings'The Rings of Power' drives a big bump in viewing for Prime Video in September, and Pluto TV is the first FAST service to earn a spot in Nielsen's monthly snapshot. Make your business more resistant to global risks.a recent Stanford Law School study .Her departure comes days after Truss fired her Treasury chief, Kwasi Kwarteng, on Friday after the economic package the pair drew up spooked financial markets when it was announced on Sept.The court unanimously ruled that Biplab Basu and his daughter’s rights to non-discrimination were violated. The AER is used to grade the ship A, B, C, D, or E. Vessels that receive a grade of A, B, or C will be deemed compliant that year. have also taken steps to take advantage of the new rules. Vessels graded D have a three-year grace period during which the owner will have to somehow get back into compliance, and those graded E will have one year to do so. The second senior minister to leave the government in less than a week, Braverman's departure on Wednesday heaps yet more pressure on Truss as she fights to stay in power just over six weeks after she entered Downing Street. Importantly, the grading criteria will become tougher every year: The IMO is mandating a 2% annual improvement in AER from 2023 through 2030. The subsidiary lists 20 employees on LinkedIn, mostly focused on trademarks. Thus, a ship may start with a B grade in 2023, but if no changes are made after as few as six years, it could automatically become a D. The court reiterated that the internal police investigation cannot be considered effective, and states should ensure independent mechanisms to investigate complaints about racial profiling. If the owner cannot comply, the vessel will have to be removed from service and likely scrapped. However, this doesn't appear to have happened yet. Truss, who became prime minister on Sept. The impact on container shipping, the backbone of the global merchandise trade, will be substantial. A significant number of ships will not be compliant. His firm already has some clients involved in the biggest tangles of lawsuits currently out there: water contamination at Camp Lejeune, the bladder drug Elmiron, and paraquat, a herbicide. Most of these are older, smaller ships with less than 8,000 TEU capacity (TEU stands for 20-foot equivalent unit and is a standard container size), but the implications are serious. Hunt had backed Truss's rival for the leadership, Rishi Sunak. Options for Achieving a Better Grade Shipping companies have three options to improve a ship’s grade: Switch to fuels that generate less CO 2. German isn't doing much advertising yet. The fuel choice is challenging because not many fuels have the necessary energy density. Maersk, the second-largest container line by capacity, is focusing on biomethanol and has ordered 12 16,000 TEU methanol-powered ships.  Of 15 ABS applications approved this year, at least eight focus on finding and representing clients hurt by truck accidents, defective drugs, environmental disasters and other mass torts, according to state filings. It has also signed agreements with several companies to produce methanol from renewable energy. CMA CGM, the third-largest container line, has made a big bet on liquified natural gas (LNG) as an interim transition fuel and plans ultimately go to some form of hydrogen. Advertisers and litigation funders now own equity in law firms Other investors taking advantage of the new rules include executives who hail from legal financing companies like Counsel Financial, Stonehill Capital Management and Virage Capital Management, which typically lend money to plaintiffs' firms with cases in the works that could lead to big payouts. It has already put 12 LNG-powered vessels into service and will have 44 operating by 2024. Mitsui OSK Lines plans to launch 90 LNG-powered ships by 2030, and Ocean Network Express (ONE) recently ordered 10 13,700 TEU ships that could run on either ammonia or methanol.com. All these companies will be looking to bio-based marine fuel oil as well. For all these strategies, a key dependency is how fast suppliers can scale up production of the massive quantities of fuel that will be needed. Mike Morse, a Michigan injury lawyer, and Keith Givens, the managing partner of the firm that bears Johnnie Cochran's name, are Virage's business partners. Originally, it was thought that LNG would have a significant advantage over the near term because it is already available in many geographies, and it is easier to handle than methanol and ammonia. But the skyrocketing prices of LNG and questions about Russian supplies due to the Ukraine war could significantly alter that equation. All of them declined to be interviewed or didn't respond to interview requests. New LNG-powered ships will be comfortably below IMO targets for the first decade of their lifetime, but beyond that other measures will likely have to be taken such as blending with bio-based LNG or transitioning to some form of hydrogen fuel. Change how a ship is operated. It's good for lawyers, who can leave marketing and operations to their professional partners. This option is the least expensive way to keep many existing ships in compliance. Because the carbon-intensity measure is tied to how much weight is moved per unit of distance, larger vessels sailing long routes with fewer port calls will earn higher grades than smaller ships making lots of port calls. And it's good for funders, who as equity holders, can be hands-on managers, rather than just putting restrictions on how a firm can use money that it borrows. Newer and larger ships, even if not completely full, will score better than smaller ones. Ships can slow-steam to reduce fuel consumption and hence emissions, but this also reduces the annual cargo hauling capacity of what are expensive assets and crews. Pre-settlement funding, which is one of the riskier kinds of loan for plaintiffs' law firms, often has interest rates of 12 to 20 percent, Ziser said. Ship operators have been reducing speeds for the last decade, but the 2% annual improvement mandate means this technique will eventually reach its practical limits and older ships will have to be replaced sooner rather than later. Ports and trade lanes that cannot support high volumes may see less frequent service or the elimination of service altogether as it becomes progressively harder to serve them and remain compliant. Milan Markovic , a law professor at Texas A&M, said letting lawyers partner with investors could incentivize them to take on lower-quality cases. Make technical refinements. These include upgrading engines and emission controls. In the US, both sides pay their own legal fees, so it can be cheaper to settle a weak case than to fight it. It might include actions such as retrofitting the engine so that the ship can use alternative fuels, making changes to optimize the flow of water around the hull, or polishing or upgrading propellers. These changes will also be expensive."I'm not saying it's going to be disastrous; I'm just saying it's a very different model from what we have. Jeremy Nixon, the CEO of Ocean Network Express, a global container shipping company, that the global container shipping industry will have to invest $1.5 trillion over the next 20 to 30 years to meet IMO targets. Ziser said some of the new firms might not just need to look into buying legal malpractice insurance, but also at D&O insurance and errors-and-omissions coverage because they might face risks that traditional law firms don't. Even though the industry booked record profits last year, the investments it faces are enormous. The EU’s Emissions Trading Scheme Adding to costs, the European Union (EU) is planning to bring shipping into its Emissions Trading Scheme (ETS) in 2023. Some of the new shops might sit idle until there's regulatory clarity, he added. Shipping lines will have to purchase allowances for 50% of emissions for voyages connecting EU and non-EU ports. Maersk has already announced surcharges for its Asia to North Europe and North Europe to U."It's not gonna be a light switch.S. trade lanes, and others will have to follow. Credentialed non-lawyers can advise clients on niche areas like family law, in the same way a nurse practitioner can do some things a doctor can do, according to David Freeman Engstrom, a Stanford law professor. While a looming recession is already driving shipping costs lower, they will likely not return to their pre-pandemic levels over the longer term as the added costs ultimately have to be paid for. The ETS is central to the EU’s climate policy and covers 40% of emissions of firms in energy-intensive sectors. And they can cold-call businesses and pitch themselves. It seeks to reduce GHG emissions by 61% by 2030 compared to 2005 levels. The EU’s proposed Carbon Border Adjustment Mechanism (CBAM), slated to become fully operational in 2026, will put a tax on imported products in designated sectors where production-related emissions have not been taxed at the same level by the exporter’s country.  But allowing non-lawyer ownership was probably the most controversial change. This is designed to prevent the circumvention of the EU’s GHG-reduction efforts by imports from countries with less ambitious climate policies. It will also be a critical part of phasing out of free allowances for EU producers. While criminal defendants have a right to counsel, most people don't have lawyers in debt collection cases, child-custody disputes, evictions and other high-stakes legal proceedings, according to Engstrom. While imports into Europe of products covered by the CBAM will likely decrease, exports will be impacted as well. EU-made goods that use EU ETS products as inputs will become more expensive, whether they are imported or produced in Europe. But some lawyers say they haven't seen any evidence that the new rules are helping more people gain access to legal help. As other countries implement carbon pricing, they will need to set up similar mechanisms. The Implications for Companies For managers planning their supply chains, there are several important things to pay attention to: The cost of decarbonization in ocean shipping is going to change the calculus of where goods are sourced. He said people still don't seem to have processed the changes — doctors aren't asking for referral fees left and right, for example — but he's skeptical that they'll improve things. Although spot market rates have declined recently, it is probably unrealistic to think that costs will return to their pre-pandemic level. While carriers plan to add a substantial amount of new capacity in the next few years, it’s tricky to forecast shipping rates because the retirement of old capacity that will have trouble meeting IMO rules will likely balance out the additions."I haven't seen one iota of proof that any progress has been made. Much will depend on whether U.S. Subscribe to push notifications Listen to The Refresh, Insider's real-time news show Was this article valuable for you? Yes. import demand drops and carriers choose to idle ships. Other segments like bulk carriers and vessels for transporting motor vehicles may face significant challenges because there isn’t as strong an order book for new more efficient ships to replace older ones that will need to be taken out of service. High-volume trade lanes where container lines can deploy newer, larger, and more efficient assets will fare better, but all in all it may make less sense to produce many goods far away from where they are consumed even if the production costs are lower. Lower-volume trade lanes will likely see less-frequent and higher-cost services. This was foreshadowed during the height of the supply chain crisis in 2021, when Japan lost some direct eastbound services to North America as container lines tried to juggle capacity shortages and delays by dropping port calls from their schedule rotations. (It was a more efficient way to operate the vessels. ) The IMO rules will favor efficiency: larger ships, fewer port calls, and less-frequent service with maximum capacity utilization per ship. Companies that export to Europe or have European suppliers should plan for the higher costs that CBAM, ETS, and similar actions by other countries will produce. Managers should anticipate that other countries outside the EU will take similar actions. For example, U.S. managers should pay attention to Canada, which has set a large increase in carbon pricing for 2030. There may be pressure for similar border adjustment measures in heavy-GHG-emitting industries such as steel. Policies and regulations to help mitigate climate change promise to have a major impact on how supply chains are designed. Increased costs as well as the practicalities of shipping logistics are on a course for change. They will alter the way supply chains are designed and how shipping will work. Now is the time to start planning for this new era. Read more on .