A TRILLION euros here, a few billion dollars there — stimulus packages are being puffed into the global economy daily by panicked governments struggling to patch up the burst whoopee cushion of central bankers’ shrinking forecasts.
The shipping industry should be watching carefully, and not just in terms of demand creation.
Success in such scenarios is of course a relative concept. By the Bundesbank’s own estimate issued on Friday, Germany’s economy will shrink 6% this year — only faring better than other big European countries thanks to Berlin’s €130bn ($165bn) stimulus package unveiled in recent days.
Germany’s typically robust approach comes after the European Commission touted its €750bn package and South Korea’s new government detailed a $110bn programme.
Such eye-watering figures are no doubt impressive, but the significance for shipping lies more in the common thread of the green requirements being written into these recovery plans.
Governments have long accepted that the next phase of industrial decarbonisation will require significant green supports, albeit without much urgency tied to that acceptance.
Coronavirus has tipped the balance by creating the need for governments to pump cash into the system now rather than later. Why inject a black stimulus now when a green stimulus would have been required five years down the line anyway, is the basic economic calculation at play here.
For shipping to move away from fossil fuels, hurdles need to be overcome.
Despite the much-vaunted zero carbon ambition being touted by a handful of eager industry leaders, the maritime decarbonisation project is still very much at the piloting phase where research and development is essential and expensive to the tune of billions of dollars.
That investment requires a business case with more detail than we have available right now.
The technical immaturity of solutions on offer do not lend themselves to private sector punts and even with land-side subsidies in play and the assumption of super-cheap electricity down the line to kick-start renewable fuel solutions, there’s no immediate guarantees that we will be looking at options that are cost competitive with the fossil fuel habit we are so desperately trying to kick.
Government green subsidies need to be teamed with policy to incentivise a switch, and while the prospect of carbon pricing will no doubt send shivers down the spines of shipping’s old guard this is the time to get behind the acceleration of the new green economy.
For shipping to move beyond the current tendency towards greenwashing and fake zeros, government subsidies, incentives and clarity regarding regulation are the base case for success and, ironically for those who rail against the unfairness of national supports, our best hope of a level playing field.
The industry needs more specific definition around green financing to support the investment cases and allow government backing with tangible metrics. Ambition without clarity is only fluff when it comes to decarbonisation, but that applies to government and industry equally.
Supporting economies in “building back better” and in decarbonising is a move to welcomed by shipping, but don’t mistake this for an easy hand out — it will require a long-term commitment to change across the industry and there are no quick and easy wins here.
