Transition towards zero-emission IWT and how to make the business case

Addressing the issue of climate change is a political priority both nationally and internationally. The Paris Agreement, which aims to slow down the pace of climate change (with i.a. a maximum increase in the global average temperature to well below 2 °C above pre-industrial levels by 2100) by reducing CO2 emissions, is definitely one of its key components. In their Declaration signed in Mannheim on 17 October 2018, the transport ministers of the Member States of the Central Commission for the Navigation of the Rhine (CCNR - Germany, Belgium, France, Netherlands, Switzerland) also reasserted the objective of largely eliminating greenhouse gases and other pollutants by 2050. Therefore, a large study has been conducted by, amongst others, Panteia, on the funding/financing needs and the added value and possible structure of a new instrument.

The following key research questions were addressed in the study:

1. What are the possible triggers and financial drivers to enable a positive investment decision by shipowners to invest in technologies contributing to zero-emission performance?
2. What can we learn from other transport modes?
3. Which greening techniques fit into zero-emission development of IWT and what are the impacts?
4. What is the potential of pay-per-use and leasing schemes for the IWT market?
5. What is the potential of joint procurement?
6. What can be expected from national and European programmes and products providing funding and financing?
7. What is the potential for polluter pays schemes in IWT?
8. What are the requirements and boundaries considering level playing field and modal share?
1. What is the added value of a new European funding and financing scheme for IWT and how could this work?
10. What accompanying measures and follow-up steps are needed?

Panteia was responsible for the research question A on the possible triggers and financial drivers to enable a positive investment decision by shipowners to invest in technologies contributing to zero-emission performance. Research question A showed that the status quo as regards financing and funding in IWT is characterized by mortgage financing from commercial banks, which is the conventional form of financing in the IWT sector and by temporary grant schemes at European level or national/regional level.

The results from research question A also show that only a very limited part of the IWT sector can finance the electrification of a vessel by own means (own capital and/or bank financing). There is a lack of financial capacity and also the incentives (business case) are not available to make greening their powertrain an economical choice for the shipowner/operator. There is no return on investment at the current framework conditions, it only adds additional costs which are not paid for by the client (shippers/forwarders).

The assessment only concerns the electrification, i.e. making a vessel “electric ready” for future fuel cell and battery pack applications. It did not take into account the more expensive investments in the fuel cells and batteries itself. The latter may be provided by third parties to the IWT sector by means of pay-per-use schemes (see research question D). The electrification of a vessel was chosen just as an example to illustrate the difficult financial task an inland vessel owner would face. However, this difficulty will also apply to other technologies for the transition towards zero-emission, such as investing in a clean combustion engine in combination with using renewable fuels.

At this stage, the intermediate results for research questions A and D-H are available. The final overall study report is expected to become available by the summer 2021.

You can read the press release here and the report can you find here.