Marsoft, ClimeCo to market tech-based ocean carbon projects by year-end

Consultancy Marsoft is working with trader ClimeCo and shipowners to develop some of the world's first technology-based ocean carbon offset projects, with company executives aiming to start selling voluntary credits from them this year.

Via its GreenScreen program, Marsoft will quantify and certify the CO2 savings from vessel retrofits based on a Gold Standard methodology, and the carbon credits will be sold in collaboration with shipowners and ClimeCo in voluntary trade.

"These credits will form a relatively unique category in the voluntary market, and we are looking forward to selling the first GreenScreen program carbon credits later this year," ClimeCo's senior vice-president of environmental commodities Dan Linsky recently told S&P Global Commodity Insights.

Gold Standard, one of the world's largest carbon registries, has approved the decarbonization effects from energy-saving ship retrofits -- which can reduce consumption of fossil-based marine fuels -- since last decade.

But so far only one project has been admitted under Gold Standard's Voluntary Emission Reductions program, generating 171,049 mt/CO2e of carbon credits via advanced hull coatings since August 2013, according to the nonprofit's data.

To promote this type of carbon offset project, Marsoft president Arlie Sterling said his company and ClimeCo would be willing to offer "a firm floor price... well above commonly quoted carbon credit indexes" for credits originated in 2023 and 2024 to shipowners who enroll their vessels to GreenScreen this year. Serling declined to comment further on the pricing level.

There are few non-nature-based carbon offsets created in the ocean for comparison. S&P Global's Platts Blue Carbon Carbex index was assessed at $26.48/mtCO2e May 22, but the assessment focuses on credits from preservation projects related to costal and marine ecosystems that act as carbon sinks.

The Platts CAC index, which takes into account nature- or technology-based emissions avoidance projects, generally onshore, was assessed at $3.25/mtCO2e for current year on May 22.

Methodology change

Previously, few shipowners were willing to develop carbon offset projects based on retrofits as the earlier Gold Standard methodology required them to track emissions for years to calculate decarbonization effects before credits were issued, according to Marsoft.

To reduce the payback period, Marsoft said it had worked with the Massachusetts Institute of Technology to revise the methodology in coordination with FremCo, the consultancy involved in earlier methodology development.

The revised methodology allows shipowners to estimate fuel consumption savings by using regression models based on ship hydrodynamics, which would be "less time-consuming and equally accurate," according to Gold Standard.

While shipowners needed to provide fuel consumption data via noon reports for years, they now can use model-based performance values verified against sea trial and speed trial measurements, eliminating the needs of frequent reporting, Marsoft said.

Investment returns

Shipping firms working with Marsoft to develop carbon offset projects include Ridgebury, a US-based maritime investor, and Greenheart, a subsidiary of London-based Hayfin Capital Management, according to company announcements earlier this year.

Their interest has come despite the general weakness of voluntary carbon market in 2023, partly due to controversies around the integrity of nature-based solutions projects. The Platts CEC index, which evaluates carbon credits eligible for the Carbon Offsetting and Reduction Scheme for International Aviation scheme, was assessed at $0.75/mtCO2e May 22 – the lowest since the assessment began in January 2021.

Nikos Benetis, technical director and ESG lead of Greenheart, said any retrofit investment decision of the company would not be simply based on the current VCM pricing.

"We're going to be honest... this is not what's driving us. What's driving us is improving the performance of our ships," Benetis told S&P Global.

Major retrofits can be costly. Consultancy Ricardo estimated air lubrication -- pumping of compressed air into a recess in the bottom of the ship's hull - could cost $3.38 million per ship for a 7% reduction in emissions and fuel consumption, and that wind powered Flettner rotors could cost $3 million per ship for a cut of up to 30%.

Greenheart is working with tech firm Njord to evaluate retrofit options for four of its nine ships that could reduce emissions between 7% and 16%, and some projects could be carried out during their next dry-dock periods in 2024-25, according to Benetis.

Benetis said the company would take into account savings in fuel costs, with the Bunkerworld Marine Fuel 0.5%S Index above $550/mt since September 2021. While selling voluntary credits can generate some income, Greenheart also takes into account the compliance costs for the EU's Emissions Trading System, which will cover shipping from 2024, Benetis suggested.

The nearest-December contract for EU emission allowances was at Eur87.76/mtCO2e ($94.89/mtCO2e) May 22, according to Platts assessments.

"I have to look at the economics, and I have to look at the feasibility," Benetis said.