Where gunboats meet the stock market!

Every day humanity pumps 400,000 Hiroshima bombs equivalent to heat - to borrow from environmentalist Bill McKibben - into the planet. How much of it is generated on land and how much off of it is a moot point. As much as 90% ends up in the oceans.

“Excess heat added into our oceans in 2022 is 100 times the total world electricity generation in 2021”, according to Assaad Razzouk of Gurin Energy.

Our marine activities - including shipping - ensure we pollute the waters and keep harming rich biodiversity every which way. All this, however, comes back to us. And we insure such causes of damage. “Recent, rapid ocean warming ahead of El Nino alarms the scientists”, says the BBC. These record temperatures put Earth in ‘unchartered territory’. 

Shipping, like aviation, does not come under the purview of the Paris Agreement. The IMO is yet to demonstrate the rigour and vigour of disciplining shipping.

“It is alarming to witness the upcoming COP President, UAE, being one of the leading voices for lower ambition at the International Maritime Organization (IMO) meetings”, says Aoife O’Leary of Opportunity Green.

With cracks developing in the Net Zero Insurance Alliance (NZIA), the Poseidon Principles adopted by a small set of marine insurer ecosystems is like a band-aid for a terminal injury.

Even though insurers have resolved to move from IFRS 4 to 17, where is sustainability in the reporting standards? Despite taking over the International Sustainability Standards Board (ISSB), the IFRS foundation continues to drag its feet both on double materiality as well as the Science Based Targets initiative (SBTi). Given this backdrop, can insurers step aside from the business-as-usual mode in these exceptional times? Revisit what they have been doing all this while? Do what they haven’t done thus far?

Says James Corbett, professor of marine policy at the University of Delaware:

"Ship pollution affects the health of communities in coastal and inland regions around the world, yet pollution from ships remains one of the least regulated parts of our global transportation system."

It sounds serious, but how bad could it be? According to the Guardian, just one of the world's largest container ships can emit about as much pollution as 50 million cars. Further, the 15 largest ships in the world emit as much nitrogen oxide and sulphur oxide as the world's 760 million cars. This is the best-known harm shipping inflicts.

“Every day the clothes, tech and toys that fill the shelves in our shopping centres seem to arrive there by magic. In fact, about 9 out of 10 items are shipped halfway around the world on board some of the biggest and dirtiest machines on the planet. It has been estimated that just one of these container ships, the length of around six football pitches, can produce the same amount of pollution as 50 million cars. Most of the pollution occurs far out at sea. Out of the sight and minds of consumers. And out of the reach of any government."

Pollution 

"If shipping were a country, it would be the sixth largest CO2 emitter”, writes The Guardian. 

However, it is not just the greenhouse gases turning our seas feverish. Most ships burn bunker fuel - an environmental nightmare. It is heavy and toxic, does not evaporate, and emits more sulphur than other fuels. There is also sound pollution, oil spillage, and sewage. We now have what Anna Turns of BBC Future calls ‘’industrialised oceans’’.

“Marine mammals depend on their senses to communicate, navigate, feed, hear and detect danger. Besides impacting their senses, marine pollution can impair mammals' fertility and immune systems”, she says.

The rich marine life, both plants and animals capture carbon, regenerate and recharge the oceans. Vessel hits leading to injury and killing keystone species such as whales are commonplace. 

“Between 2017 and 2019, fishing vessels disabled their transponders for around 1.6 million hours each year. This represented roughly 6% of their global activity, not reflected in global tallies of what types of fish are being caught where. Enforcement of Automatic Identification System (AIS) laws is generally poor, and although these are getting better in some jurisdictions, the sanctions are not severe enough to act as deterrents. The insurance industry enables the practice of switching off AIS through weak due diligence practices. Insurers have a role to play in curbing such illegal behaviour, and it is not discretionary,” says Heather Welch.

Bottom trawling flourishes, despite being entirely incompatible with the objectives of Marine Protected Areas (MPAs).

Some emerging risks

“Existing bodies already responsible for regulating human activities like fisheries, shipping or deep-sea mining can, for now, continue to do so without having to follow the environmental impact standards laid out in the treaty. Given the declining health of the ocean and the persistent failure of current systems to tackle the issue, these exemptions represent a major loophole’,’ according to The Nature Conservancy.

“Will we create dual systems in one jurisdiction where there is one definition of marine protected areas within jurisdiction and another definition for beyond national jurisdiction? Will all countries legislate with rigour or will some see the opportunity for profit with weaker regulations?” Angelique Pouponneau has these concerns.

Will they play around with Flags of Convenience, yet again, thereby diluting any form of ownership? Insurers need to take a call as to which side of history they wish to be.

Distracted by OPEC and the decision to cut oil production, there has been little debate on the risks associated with the increasing number of the so-called "shadow fleet" transporting oil - and often Russian oil - around the world, apprehends Alessandro Blasi of the IEA. The point is not "only" about what insurance would pay in case of environmental disaster, but the fact that the risk is exponentially increasing as the shadow fleet tends to have a much higher share of old vessels, being also more than 25 years old.... believes Blassi.

Dr. Sylvia Earle terms it deep sea mining devastation!

“Independent science deems deep-sea mining unnecessary and risky. However, due to financial interests, there’s pressure to expedite the Mining Code, enabling large-scale mining. The UN International Seabed Authority (ISA) governs 50% of Earth’s surface in international waters and has already granted 31exploitaton licenses. If executed, this would be history’s largest mining operation, spanning over 1.5 million square km, more than twice France’s size”.

Would insurers wish to be a party to this calamity?

“We know that carbon dioxide and methane are only about 25% of climate change yet the world is fixated with net zero, which will be the death of us all. Even if we achieve net zero by the end of the decade, atmospheric carbon dioxide still passes 500 ppm and oceanic pH drops below pH7.95, and we lose marine life in the oceans, the Surface Microlayer (SML), and end up back with catastrophic climate change. Unless we stop marine pollution by 2030, this will happen with 100% certainty as reported by the IPCC. Ocean acidification is the Evil Twin of climate change, Evil because it will be far more serious, the process is half way through and in 20 years there will be no way to stop the process once we pass pH7.95,” a stark warning from Dr. Howard Dryden of Goes Foundation.

Taming the wild west

“The high seas are the modern world’s Wild West where outlaws engage in illegal activities like unauthorized fishing and human trafficking. Is it time to celebrate the recently concluded high seas treaty? The 30 x 30 campaign is an ambitious campaign to protect 30% of the global ocean by the year 2030 under fully and highly marine protected areas. This ‘agreement in principle’ provides the tools and a process to contribute to achieving this target. However, the devil is in the detail”.  

The agreement on ‘Marine Biodiversity of Areas Beyond National Jurisdiction’ (BBNJ) provides a legal framework for the conservation and sustainable use of the marine biological diversity of our ocean beyond national jurisdiction. How does the ISA impinge upon it? How do you ensure there is no dual legislation by countries who wish to get away via the flags of convenience route? Last but not least, how do you transition the net-zero route ideally ahead of time? 

If some of these signals are to be believed, there is room for hope. Fiona Harvey of the World Bank is among those urging levy to fund climate action in the developing world and encourage fleets to upgrade. Many questions are being asked. Should we aim for true zero or net zero, with the latter leaving wiggle room to use carbon offsets? Should we set interim emissions reduction targets? And if so, how do we put a carbon price on shipping emissions? asks Climatechangenews.com.

In the meantime, Maersk, the world’s second-largest shipping line, pledged to make its business carbon-neutral by 2040 instead of its previously stated goal of 2050, according to Nicolas Rivero of qz.com. The company also expanded its net-zero emissions pledge to include the emissions produced by its energy consumption and its supply chains. 

If the IMO walks the talk on decarbonisation and insurers price all the externalities, avoid the unmanageable, manage the unavoidable, penalise, thereby making repeat errant behaviour expensive, and facilitate proactive regulations, would we steer away from the cowboy territory? Far away from the neoliberal terrain where the gunboats meet the stock market? Surely they would have tried not to aid and abet damaging our oceans.