Policy Perspectives
Environmentalism Makes Good Business Sense for the Transportation Industry

May 1, 2006
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I will focus my comments today on an issue of great significance to our industry and the world. This issue is the environment, a subject that might have once been dismissed within shipping industry circles as commercially insignificant.

This year marks the 50th anniversary of containerization. During these last 50 years, the service scope of ocean carriers has been extended from a port-to-port service to a vast intermodal network and the emergence of end-to-end international logistics. Ocean transportation has made this possible with more than 75 percent of global trade carried over the seas.

It is accepted that ocean shipping is indispensable. But, we must now consider these tremendous benefits against the environmental cost to future generations.

For example, it is estimated that every year more than 2 million sea birds and 100,000 marine mammals die from waste materials discarded by humans. In view of this depletion of natural resources and exploitation of the environment, governments and protection groups have been calling the world's attention to these serious problems. They are also trying to stop the worsening situation through binding agreements and regulations.

We believe it is our responsibility to address these issues proactively, using the most advanced design and shipbuilding technology to protect the environment. Using new shipbuilding technology, we can design larger, more efficient vessels that incorporate important features for protecting the environment. We can do this today.

A new evolutional fuel tank arrangement, for example, incorporates a double-skinned hull minimizing the risk of oil pollution or fire as a result of grounding or collision.

Ship coatings can be damaging to the environment. Tin, for example, can seriously spoil the genetic makeup of marine creatures, cause mutation, and even bring disaster to the marine ecology system. For the preservation of marine ecology, we should switch to tin-free coating materials. With low-sulfur fuel and the latest fuel system, we can enormously reduce the emission of sulfur-containing exhaust. Larger bilge oil tanks enable the vessels to avoid any discharge when sailing in sensitive areas. This shipbuilding technology is available today.

To demonstrate our commitment to adopting these technologies for the environment, Evergreen Group has begun to take delivery of our new S-type containerships that we call “Greenships.” In December last year, we celebrated the maiden voyage of one of our S-type “Greenships”-the Hatsu Sigma-at the U.S. ports of Los Angeles and Tacoma. We will take delivery of four more Greenships this year with four more to follow, designed with many environmentally friendly features that go beyond current standards.

But as we have embarked on this mission, we are not blind to the cost.

The investment in new features costs an estimated US$5 million for each vessel, plus US$400,000 per year for maintenance. Based on an economic life of 20 years, each vessel is estimated to cost US$13 million additional. There are about 5,500 container vessels sailing the globe today. If we equip all these vessels with the same equipment, the cost will amount to more than U.S. $70 billion.

This is a huge cost for container carriers-an industry with low profit margins (a recent survey reveals an average profit ratio of around 10 percent for this “prosperous” year; typical average profit is more or less 5 percent).

People want to improve the environment. Even our customers now are beginning to make business decisions based partly on environmental policies.

But if we all believe it is important, we must all be willing to bear some cost.

The concept of “User Pays” is widespread in modern societies. In the aspect of environmental protection, we can extend this principle into a new concept of “Beneficiary Pays.” And who is the ultimate beneficiary of the global supply networks our companies have developed together? Ocean carrier? Terminal? Railroad? Trucker? Shipper? Consumer? All of us, of course.

We all realize the benefits of container shipping when we acquire goods at affordable prices-as our shared standard of living improves worldwide. It is now time that we come together-ocean carriers, ports, terminals, inland carriers and shippers-to develop new ways to protect the environment for future generations while we maintain the efficiency of our global network. And once we have developed this “new way,” we must educate. We must raise the awareness of the world's people to the importance of our industry and why investment is so critical-investment from everyone worldwide.
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