KCC eyes carbon pricing in charters within half year

Shipowner Klaveness Combination Carriers (KCC), transporter of oil and dry bulk commodities, is working on including a carbon pricing provision in its charter parties and is optimistic it can be achieved in the next six months.

The goal is to "get some kind of carbon pricing in the contract, meaning customers have to be willing to [raise] the freight rate if we achieve certain targets for reducing emissions, and at the same time we are willing to accept a lower freight rate if we don't achieve them," said Engebret Dahm, chief executive of KCC, during a Marine Money panel yesterday.

Such a clause would incentivize KCC to improve fuel efficiency in its current operations and at the same time help finance longer-term carbon-cutting investments in its fleet, something KCC believes it has to do, according to Dahm.

Short-term fuel efficiency measures include reducing hull resistance through repainting or installing propeller boss cap fins on the existing fleet, while longer-term measures may involve ordering alternative fuel ships and partnering with a supplier of such fuel.

KCC is in discussion with two customers and has received "good feedback that we can achieve a [carbon pricing] framework in a contract in the next half year and hopefully build on that," he said.

KCC leases its vessels out on contracts of affreightment (COAs), which Dahm believes positions the company well to take advantage of carbon pricing since such contracts keep the vessel's operational control with the shipowner.

"One advantage is we have COAs, not time charter, so we are masters of our own ship when it comes to all initiatives -- speed, efficiency, the whole menu. So it's a little easier than if you're on a time charter with an oil company," he said.

When a shipowner contracts one of its vessels out on time charter it relinquishes much of the operational control to the charterer.

KCC owns a fleet of 18 ships in the 72,000-82,500dwt range, most of which have the uncommon ability to alternate between transporting oil and dry bulk cargoes.

By Nicholas Watt