How to effectively meet customer concerns about greenhouse gas

CLIMATE CONCEPT FOUNDATION
How to effectively meet customer
concerns about greenhouse gas emissions
A new challenge for the cruising industry
By Christopher Brandt, Climate Concept Foundation
‘
Presently, most
people are unaware
about the ecologic
impacts a cruising
holiday has with
regard to climate
change
’
CRUISING ENJOYS A GREAT attractiveness with
consumers. Especially, the European markets
experienced a year on year increase of passenger
numbers for many years. And growth perspectives are
still very favourable in spite of the still challenging
macroeconomic conditions. A CEO of a leading
German cruising company said in an interview that he
hopes for 2 million cruise passengers a year by 2020.
Since 2011, German company Hapag-Lloyd offers
carbon neutralisation to passengers on a voluntary
basis. If the passenger agrees, a donation is made to a
partner organisation which uses the funds raised for
initiating environmental projects aimed at reducing
greenhouse gas emissions. Emission reductions
funded by the consumer correspond to the per capita
emissions attributable to him for participating in the
cruise1.
Why cruise companies should offer
carbon neutralisation to passengers
Environmental consciousness amongst consumers is
rising just like the fascination for cruising holidays is.
Environmentalism is no longer the hobbyhorse of a
few anti-establishment fanatics on the edge of society,
but has reached its very centre. At least a moderate
degree of concernedness about environmental issues
is a common trait of most citizens in industrialised
countries. Presently, most people are unaware about
the ecologic impacts a cruising holiday has with regard
to climate change. The intuitive expectation is that a
cruise ship does not emit so much, because it is not
fast and does not fly through the air. Everyone knows
that flying is bad for the environment. But cruising?
This is, however, already changing.
It is no longer unusual that on-board staff is
confronted with questions on environmental
performances of their ship. In addition, environmental
NGOs have begun highlighting ecologic implications
of cruising aiming to further raise consumer
awareness. Every now and then, there is a press article
about the environmental consequences of cruising or
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shipping in general with regard to air pollution and
climate impact.
While there is a lot the industry can do – and already
has done – to reduce its ecological footprint, available
measures to reduce carbon dioxide emissions are
facing technical constraints. Once options such as
hull streamlining optimisation, propeller design and
potential to reduce on-board electricity consumption
have been exploited, additional efficiency gains are
often hard to implement. Although carbon savings
entail fuel savings, not every available measure is
theoretically economically viable. In any case, even a
very fuel efficient ship still is a significant source of
carbon dioxide emissions.
Hapag-Lloyd’s move therefore can be regarded
as a pre-emptive measure to address potential
passengers concerns about that part of carbon dioxide
emissions that are unavoidable.Thereby, Hapag-Lloyd
cannot only demonstrate that they take their
passengers’ concerns seriously, but also provide new
content for marketing and public relations activities.
Also, they may succeed in appealing to consumers
who so far had not seriously considered cruising as a
holiday option due to environmental concerns.
How the industry should handle a
reputational risk
Admittedly, greenhouse gas emissions from ship s are
only of minor significance compared to global
emissions, even more so when solely looking at the
cruising industry. However, cruising is serving
consumer – rather than business to business – markets
and thus especially dependent on what people think
about it. Not only the passengers’ opinion is of
importance, but also the viewpoint taken by
neighbours, friends and family. If cruising ever became
something regarded as socially not quite acceptable,
sales figures would suffer.
There is quite some probability that environmental
campaigning and press coverage may turn the tide
against the industry, unless it makes use of all options
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CLIMATE CONCEPT FOUNDATION
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How does carbon dioxide
neutralization work?
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to alleviate its environmental footprint in a credible
way. Unavoidable carbon dioxide emissions, of course,
remain problematic due to the unavailability of an all
encompassing technical solution.
Our team at the Climate Concept Foundation (CCF)
is convinced that actively involving the consumer is
the most promising solution. By offering a credible
solution for neutralising the unavoidable carbon
dioxide emissions attributable to a specific consumer,
a cruise company can pass on the “emotional
responsibility” to its passengers. We believe that this is
where it belongs.
Thus enabled, the consumer can make a conscious
choice how to deal with this issue. Taking part in the
neutralisation scheme remains completely voluntary.
The passenger shall be informed appropriately
without being pushed. Also, the communication must
be solution-focused and not putting too much
emphasis on the problem as such.
How carbon dioxide neutralisation
works
The consumer is informed that a donation could be
made to CCF into an account held in trust by the
cruising company. This suggested amount is
calculated so that it is sufficient for financing CCF’s
climate change mitigation activities in congruence
with the emissions attributable to the consumer.
A donation made into this account is subsequently
forwarded to CCF. We use it for financing emission
reduction activities. Whilst adhering to maximum
ecological standards (in fact matching or even
exceeding the criteria established for the United
Nations’ Clean Development Mechanism), we put an
emphasis on initiating climate change mitigation in
countries, for which the currently existing incentive
systems are unavailable. Our projects offer valid,
additional and permanent emission reductions
independently audited by UN-accredited institutions.
Project types are of a large variety: we work in
promoting the proliferation of renewable energies,
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providing alternatives to forest degradation caused by
local firewood consumption and support the use of
state of the art greenhouse gas abatement
technologies in countries where these technologies
are not yet being used.
Donating passengers can rely on CCF’s
trustworthiness as we are state controlled. Being a
registered charitable organisation, our funds must be
used for furthering the organisation’s statutory goals.
Due to our charitable status, we can issue donation
receipts to our donating passengers which allow
deducting the donation made from taxes.
The donation level we look at
Carbon neutrality is amazingly cheap. Let us look at an
example: Emissions of 1200 gCO2 / pkm (i.e. per
passenger and kilometre) are quite usual for average
cruise liners. Assuming a cruise covering a distance of
1,400 km2, this entails more than one and a half tons
of carbon dioxide emissions that can be attributed to
each passenger on the ship.This already includes a 5%
safety margin for factors such as adverse weather
conditions that cause higher fuel consumption.
In reference to current carbon prices3, the
aforementioned cruise could be set carbon neutral for
as little as € 18.36. At the same time, carbon neutrality
should not cost more than about €604 for the
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CLIMATE CONCEPT FOUNDATION
foreseeable future due to a natural price ceiling
putting a lid on perceivable price developments.
If a passenger donated €28.22 to CCF5 for carbon
neutralisation, we could finance emission reduction
measures ensuring full coverage of all emissions
associated with the cruising experience.
Consumers enabled to address the climate impact
of their holiday of choice have an additional argument
for themselves (but also in discussion with people
potentially capable of influencing their decisions) why
cruising is a type of leisure activity that is perfectly
compatible with being an environmentally
responsible person.This, in turn, will reinforce the long
term attractiveness of cruising and ensure a sustained
continued growth of the industry.
Cruising companies can demonstrate their
commitment to fully addressing the environmental
challenges associated with their business.
If you would like to learn more about CCF’s
cooperation offer, please contact the author mailing
to [email protected].
Why all this make sense from a
cruising company’s perspective
Firstly, there is a business case. Consumers are
becoming more and more aware about environmental
issues.
An example for this is a consumer segment
identified by marketers in the mid-2000s, the LOHAS.
This acronym stands for “Lifestyle of Health and
Sustainability”. It represents a consumer segment of
above average income and education which is most
strongly represented in the 40 to 60 years age group.
These consumers would like to enjoy themselves, but
at the same time are environmentally concerned
about the ecologic impact their consumption choices
may entail.
Effectively marketing cruises as the preferred
holiday option to consumers that are increasingly
environmentally aware will pose a challenge to the
industry. Cruising companies that have credible and
reliable answers to consumer concerns will have an
advantage.
While a fuel efficient fleet and/or the introduction
of technical measures to improve efficiency certainly
are an important part of the equation, consumers will
also be worrying about emissions that cannot be
avoided by presently available technology. If taking
part in a cruise means comparatively serious harm to
the environment, such consumers may prefer other
ways of spending their holidays.
Secondly, CCF’s cruise industry partners also benefit
from offering carbon neutrality to their consumers
from a public relations perspective. Making carbon
neutralisation available to consumers creates an
38 ❘ GreenPort WINTER 2011
opportunity to further improve the company’s public
perception by various stakeholders.
Carbon neutralisation offered by the
CCF is organised in two ways:
Firstly, we initiate environmental projects in
developing countries that are providing permanent
and additional emission reductions equal to the
emissions the consumer seeks to neutralise. Our
projects fulfil (or even exceed) United Nations
standards for international climate change mitigation
projects6 and are independently evaluated by testing
institutions officially accredited by the responsible
United Nations bodies. Whilst preserving a high
degree of environmental integrity, we do not lose sight
of cost efficiency. This is reflected in our project
portfolio.
Secondly, we acquire carbon certificates suitable for
compliance in mandatory emission trading regimes.
This approach is chosen in order to meet fluctuations
in consumer demand for carbon neutralisation. By
acquiring a carbon certificate, we make it unavailable
for “justifying” a ton of carbon dioxide emissions (or the
equivalent of other greenhouse gasses in case these
are also covered by the system in question) and
thereby reduce the overall emissions taking place
within the emissions trading regime.
The environmental benefit delivered by the CCF is
credible and valid. Consumers will value being offered
the choice to neutralise their emissions. And cruising
industry partners will benefit from their consumers’
approval and address the reputational risks associated
with greenhouse gases in the light of climate change
in a meaningful way.
For further information, please contact the author
at the Climate Concept Foundation under brandt@
climate-concept-foundation.org.
1
Cruise Industry News, Hapag-Lloyd Cruises: A Trailblazer in the
Offset of CO2 Emissions, 21st September 2010, see
http://www.cruiseindustrynews.com/cruise-news/4500-92110hapag-lloyd-cruises-a-trailblazer-in-the-offset-of-co2-emissions.html
2Assumptions derived from study for the EU Commission DG
Environment "Technical support for European action to reducing
GHG emissions" (CE Delft, December 2009), section 13.3 (p. 302)
3ICE EUA (Dec 11) on 17th October 2011 (carbon certificate price is
used as a reference only). Factual abate-ment costs depend on project
type implemented.
4At this price level, carbon capture and storage (CCS) becomes
economically viable. This technology is capable of withholding
significant amounts of carbon emissions from the atmosphere.
Although its introduction still faces technical and political barriers,
this approach is very likely to be applied large scale, should carbon
prices exceed 35 € for any sustained period of time.
5The carbon neutralisation offered by CCF is priced at 16 € / tCO2e to
allow a broader selection of project types and thus manage technical
and / or regulatory risks.
6i.e. Clean Development Mechanism (CDM) projects established in
accordance with Art. 12 of the Kyoto Protocol to the United Nations’
Framework Convention on Climate Change (UNFCCC)
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