Green public procurement in shipping
Green procurement in transport means the inclusion of requirements relating to low- or zero-emission transport in public procurement processes. Following such an approach allows governments to support decarbonisation by using their purchasing power to choose assets, services and works that have a comparatively lower environmental impact. In the case of shipping, green public procurement of domestic shipping services (or works/assets) can have important spillover effects for international sea transport.
Green procurement in shipping may include:
- The purchase of energy-efficient vessels (construction and retrofits) for use at sea and on inland waterways. These may include public transport vessels such as ferries, research vessels, and patrol and surveillance boats.
- The procurement of services (public service obligations) or public works in which vessels are used – such as dredging activities, passenger and goods transport – by applying award criteria based on sustainability.
The main levers of green procurement are contract award criteria that consider lower environmental impacts to be of primary importance. For example, these criteria could require compliance with a specific environmental standard, such as the maximum amount of greenhouse gas that may be emitted.
Although almost all ITF and OECD countries have developed strategies or policies to support green public procurement, very few focus explicitly on the shipping sector. For example, the Netherlands has guidelines for green vessel procurement in place. In Norway, the rapid phase-in of ferries with electric propulsion systems has been driven by requirements included in public procurement processes. The Norwegian Regulation on Public Procurement states that environmental requirements and criteria may be applied in all steps of the procurement process – and that, where applied, they should be weighted to a minimum of 30%.
Green procurement contracts may further incentivise environmentally friendly practices by potentially (i) subtracting financial support for environmental upgrades from the bid price and (ii) requiring mandatory monitoring of, and reporting on, environmental performance related to specified emission limits.
The CO2impact of green procurement policies will depend on the scope and stringency of such policies, and on what alternative purchase decisions would have been made if such policies had not been in place. The success of green public procurement also depends on the presence of certain contract features (e.g. duration and flexibility), supporting policies and legislation, and sufficient charging or fuelling infrastructure. Direct impacts of green procurement policies are therefore difficult to assess.
The most recent public procurement procedure for the maritime connection between Stockholm and Gotland incorporated limits on greenhouse gas emissions. In combination with the 10-year duration of the contract, this encouraged Rederi Gotland AB, a Swedish passenger shipping company, to order LNG-powered vessels that may decrease CO2 emissions by around 20%.
Costs for green procurement programs depend on the scope and stringency of the policy, as well as on the cost differential between the ‘green’ purchase option and the purchase option that would have been chosen if a green procurement scheme had not been in place.
In cases where a green procurement program requires the purchase of low- or zero emission vessels, capital costs for such vessels can currently be expected to be significantly higher than for vessels running on heavy fuel oil. The amount of such additional capital costs depends on ship size and type.
However, while the use of modern electric or hybrid-electric ships means a larger up-front investment (i.e. more expensive technology), they come with lower operating costs due to reduced fuel costs, higher levels of automation and less maintenance. Siemens Denmark concludes that 7 out of 10 Danish ferry routes would become more profitable if electrified.
Low- or zero-emission ships and their operation become more cost-competitive where electricity tax exemptions exist (e.g. in Sweden) and a price is set on carbon. Electric ferries also require investments in onshore power supply (OPS), the current cost of which is USD 5-10 million per installation – mainly related to extending the grid into ports.Standardisation and harmonised guidelines can make the procurement process more resource-efficient for bidders. In addition, longer time windows for bidding and between contract award and start of operations can drive down costs for delivering new, non-standardised technological solutions and allow for more competition in the procurement process.
Decarbonisation of national shipping activities thanks to green procurement programs can generate spillover effects to fleets that operate internationally. It can also provide important opportunities for piloting and developing zero-emission technologies and their associated infrastructure. The co-benefits of electric ships include the reduction of air pollution, noise and vibration. Batteries that have reached their lifetime on vessels can be reused in onshore industries.
Green procurement may have additional environmental benefits besides reducing greenhouse gas emissions. Other award criteria can include requirements for sustainable wastewater management, non-toxicity of oils or greases used, antifouling, exclusion of certain hazardous substances, engines conforming with a higher emissions standard, onshore power connection, etc.
ITF (2021) Transport Climate Action Directory – Green public procurement in shipping
https://www.itf-oecd.org/policy/green-procurement-in-shipping
ITF (2018), Decarbonising Maritime Transport: Pathways to zero-carbon shipping by 2035, https://www.itf-oecd.org/sites/default/files/docs/decarbonising-maritime-transport-2035.pdf.
ITF (2018), Decarbonising Maritime Transport: The case of Sweden, https://www.itf-oecd.org/sites/default/files/docs/decarbonising-maritimetransport-sweden.pdf.
Bjerkan at al. (2019), Governance in Maritime Passenger Transport: Green Public Procurement of Ferry Services, https://www.mdpi.com/2032-6653/10/4/74/htm.
Lagouvardou, S., H.N. Psaraftis and T. Zis (2020), A Literature Survey on Market-Based Measures for the Decarbonization of Shipping, Department of Technology, Management, and Economics, Technical University of Denmark, https://doi.org/10.3390/su12103953.
Lloyd's Register & UMAS (2018), Zero-emission vessels 2030. How do we get there? https://www.lrs.or.jp/news/pdf/LR_Zero_Emission_Vessels_2030.pdf.
Rehmatulla, N. (2017), The relationship between EU’s public procurement policies and energy efficiency of ferries in the EU, https://www.sciencedirect.com/science/article/pii/S0308597X15003887.
Siemens Denmark (2016), Electrification of Denmark’s ferry fleet, https://assets.new.siemens.com/siemens/assets/api/uuid:01a7cbed-c7fc-4884-a591-bc5c5fed2f0e/study-electrification-e.pdf.
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