CASE STUDY: How to reduce carbon footprint in sea freight

The carbon footprint of sea freight is huge. Studies suggest that the industry accounts for about 2% of global energy-related CO2 emissions, which have grown over the past decade. It is no wonder then that how to reduce the carbon footprint of sea freight is often at the centre of the debate on sustainability. 

The ways sea freight is trying to reduce its CO₂e emissions 

Efforts are underway to reduce sea freight emissions. There have been multiple regulatory implementations over the years, from the Energy Efficiency Existing Ship Index (EESI) to the European Union Emissions Trading System (EU ETS). Plus, there are the industry targets: the International Maritime Organisation’s greenhouse gas (GHG) strategy includes reducing carbon emissions by 20-30% by 2030, as part of net zero goals. 

Most of these efforts target vessels. This makes sense when ships produce most of the emissions, an issue initiatives such as alternative fuels, new builds, retrofitting and slow steaming all try to address. 

The challenge is that none of these efforts will deliver an immediate response. Alternative fuels require infrastructure changes, new builds take time to join fleets, retrofitting requires vessels coming out of rotation and slow steaming can only deliver so much. None of them is a silver bullet that will dramatically reduce sea freight’s carbon footprint alone. 

The industry understands this, which is why most operators will pursue these strategies in different ways. 

However, targeting vessels is not the only way to reduce carbon emissions. The sector can, and should, be looking at all aspects of its operations. Including how it uses paper.

The carbon footprint of sea freight paper documents

Among that documentation is the Bill of Lading (BL). Sea freight might be going through digital transformation, but certain tasks, including BLs, are still very much paper-based. The Digital Container Shipping Association estimated that just 1.2% of the 45 million B/Ls issued in 2021 were electronic. The direct cost of that is around $6.5 billion, just for transferring physical paper across the world. 

But what about the carbon cost? 

Let’s think about everything that goes into producing a BL:

1. Production

2. Distribution

3. Utilisation

4. End-of-life

Each of these steps produces emissions, and that’s as true for an electronic BL (eBL) as it is for a paper one. But what has a larger carbon footprint?

We recently conducted a study into this question. Based on a paper weight of 80 g/m2 in an A4 format, we calculated that the total emission for the production of a paper BL was 24.09g of carbon dioxide equivalent (CO₂e). That might not seem a huge amount, but this is before we’ve considered transportation (often via air, so that the right parties have the relevant documentation before cargo arrives), preparation, and eventual disposal. Full details can be found in the paper, but in summary, we calculated that a paper BL’s CO₂e was 975.54g. 

For comparison, a single-use 500-millilitre plastic bottle has a total footprint of 82.8 CO2e. Considering that single-use plastics are held up as a major sustainability issue, the fact that a single BL produces more than ten times the CO₂e suggests that there could be scope to reduce sea freight’s emissions by looking at whether BLs need to be paper. 

But what are the alternatives? 

The carbon footprint of electronic bill of lading

It won’t come as any surprise to read that CargoX thinks that eBLs are a viable alternative. We were founded to develop a more efficient, secure, and immutable way of creating and sharing BLs. Using digital technologies like blockchain, eBLs are faster to produce and share, easier to distribute to multiple parties simultaneously, and provide a secure record of the cargo and all involved. Its digital nature makes it easier to track and can reduce administrative burdens by reducing manual handling and integrating innovations such as smart contracts.

But do all these potential benefits include being more sustainable? 

It’s easy to think that something electronic will have a smaller carbon footprint than something that’s had to be physically manufactured and transported around the world. Yet that overlooks different technologies’ energy consumption. 

Take, for example, the Bitcoin network – it has a carbon footprint of between 350kg and 400kg CO2e per transaction. Elsewhere, if the world’s data centres were a country, they would be the 11th largest electricity consumer globally, ahead of Saudi Arabia and only just behind France.

So, technology comes with a carbon emissions cost, and eBLs are no different. They’re built on blockchain which, as the technology that enables cryptocurrency, is often perceived as having a significant carbon footprint. 

But as with anything related to emissions, the truth is not as straightforward as that. eBLs are built on one of two blockchain technologies: public Layer 2 Ethereum blockchain using Proof of Stake (PoS) and private blockchain based on Bitcoin using Proof of Work (PoW). 

Private blockchain vs public blockchain 

What is the difference between the two blockchains?

We use the public Layer 2 Ethereum blockchain, which offers:

• Improved scalability and reduced transaction costs 

• Significantly lower energy consumption due to the PoS consensus mechanism

• Public verifiability and transparency of transactions

• Interoperability with the wider Ethereum ecosystem

Private blockchains using Bitcoin's PoW consensus mechanism provide:

• High security through the energy-intensive mining process 

• Full control over the network for the operating entity or consortium 

• Potential for customisation to meet specific industry needs 

• Limited public verifiability, as the network is not openly accessible 

Our study evaluated eBLs using both types of blockchain. The public Layer 2 Ethereum blockchain generated 35.17g CO₂e, less than 4% of a paper BL. The Bitcoin eBL, however, produced emissions ranging from 10.05kg to 50.05kg CO₂e – a huge increase on both paper and public Layer 2 Ethereum. 

One of the key drivers of CO₂e, particularly with paper and Bitcoin, was the transfer of documentation. In this table, we can see the emissions per transfer of each type of BL:

*Disclaimer: These figures represent estimates based on limited available sources. While they provide a general understanding of the scale, more precise data may exist.

Note: BTC public chain is not used for document transfer, but the information is included as an estimate and for illustration purposes.

**For column B (CO₂e per transfer) the available data was averaged, and available information ranges were as follows:
ETH public chain: 100-200 g
BTC private chain: 10-20kg
BTC public chain: 350-400 kg

The carbon emissions opportunities in digital transition 

The data shows that switching from paper BL to eBL can drive significant environmental benefits. However, it also demonstrates that the choice of underlying technology can have a major impact. 

It is unlikely that anyone will switch from paper to eBL just because of the opportunity to reduce their carbon emissions. The potential advantages in efficiency, security, and interoperability are likely to be critical business drivers, but the sustainability opportunities cannot be overlooked. However, there will be trade-offs: a company that wishes to use a private blockchain-based eBL will sacrifice any carbon emissions reductions in exchange for slight increases in security and control. They could also be turning their back on greater levels of scalability; public Layer 2 Ethereum blockchain solutions integrate more effectively with the wider blockchain ecosystem and do not struggle with the same restrictions as private blockchains as their networks grow. 

The public Layer 2 Ethereum solution provides a balance of energy efficiency, scalability, and transparency. The findings from our study suggest that the adoption of PoS-based eBL systems could drive not just better data-sharing processes, but sustainability benefits as well. Ultimately, becoming another strategy to help reduce sea freight’s carbon emissions. 

eBLs: A greener future for shipping

Reducing carbon emissions in sea freight is a major challenge. It is only right that much of the attention should be on coming up with the most energy-efficient vessels with the lowest carbon footprints.

Yet shipping is more than simply ships. It is a complex network of carriers, shippers, cargo owners, technology vendors, agencies, customs departments, forwarders, and more. Paper documentation continues to play a major role in helping the industry work. That brings with it, as well as administrative burdens, a significant carbon footprint of its own. 

Simply going digital won’t automatically bring with it sustainability benefits; just as any new system needs to be properly specified and deployed to unlock its value, so choosing the most carbon-efficient eBL is about balancing the overall business needs with the pros and cons of the underlying technology. 

One thing is for sure, however; the sea freight sector can reduce carbon emissions by transitioning to the right eBL.