The introduction of the island exception can endanger both the Åland shipping company operations and the future competitiveness of the entire Finnish maritime cluster.
The history books tell an interesting story about Gustaf Adolf Mauritz Erikson (1872 – 1947), a ship owner from Åland Archipelargo. When the world’s sea transport started using steamships in the 1920s and 1930s, Erikson continued operating with sailing ships until the Second World War. At the end of the sailing ship era, he had the largest sailing fleet in the world, i.e. almost 50 ships transporting wheat from Australia to Europe, for example. Erikson’s strategy was successful. Used sailing ships were cheaply available between the world wars. According to the story, part of the profitability was based on the fact that in England sea cadets had to complete training on sailing ships and Erikson hired men for a fee. However, after the Second World War, the era of sailing ships was over and Erikson’s son, who continued as the manager of the shipping company, abandoned sailing ships.
The story of Erikson comes to mind now, when the EU Fuel Maritime shipping emission trading regulations are under discussion. Shipping is facing enormous changes in this and the following decades. The goal is to achieve carbon-neutral shipping by 2050. This changes shipbuilding, the fuels used and the way ships operate.
Emission trading increases shipping companies’ costs and at the same time directs the development of ships to more energy-efficient solutions and to the development and introduction of new fossil-free fuels. However, Finland has the opportunity to introduce the so-called a temporary island exception, with which the emissions trading would not apply to passenger ships traveling between the mainland Finland and Åland until 2030.
For decades, the traffic between Åland and mainland Finland has been one of the world’s most advanced passenger-car ferry services. Viking Grace was the world’s first passenger car ferry using LNG – later the same ship experimented with wind rotors as part of its energy production. This year, we have been able to read about the option offered to customers to pay extra for emission-free fuel and ideas where the ships of the future will be completely emission-free.
The island exception, which may be introduced now, will reduce the need for shipping companies to invest in fossil-free shipping.
This means lower costs in the short term. At the same time, the island exception can be seen as a trap for companies and the entire industry. There is a high probability that the ships being built now will still be in traffic in 2050. The possible island exception puts shipping companies in an unequal position with each other. A large number of shipping companies are starting or have already started their transition towards carbon-neutral sea transport. Instead, shipping companies operating under the island exception would be able to postpone the changes for another six years. What consequences would the island exemption have for Åland’s shipping companies besides lower costs?
1. Competence in low-emission shipping grows in competing shipping companies participating in emissions trading. The island exception makes it possible for shipping companies operating between Åland and mainland Finland to fall behind in the know-how of green sea transport.
2. Ship investments made in this decade by shipping companies that participate in the emissions trade will be competitive even after 2030.
3. Environmentally conscious customers use vessels that are as emission-free as possible, and thus switch to using a competing shipping company or route.
4. And the most important: investors hardly take the risk that the shipping company will no longer be competitive after 2030. This can affect the company’s stock market value already years before the exception is removed.
The most important task of the company’s management is to choose a strategy. The island exception is naturally attractive when you look at the company’s operations in the short term. In the longer term, it may lead to the entire Åland passenger car ferry traffic lagging behind the development. And at the same time, it can make the Åland shipping company cluster an attractive target for corporate takeovers.
From a broader perspective, it should be remembered how significant know-how cluster in shipyard and marine technology is in Finland. What if a large part of Finnish shipping companies now choose a path where they no longer build the world’s most advanced ships – will the technological know-how of the maritime industry remain in Finland?
Would Gustav Erikson have implemented his sailing ship strategy if he had known it would only be valid for six years, or would he have prepared his company for the future?
The article was previously published in Finnish in the online magazine for maritime professionals Navigator Magazine on August 4th, 2023.
Tales of Talsinki 