“We need to make it commercially viable for businesses to decarbonise. It all leads back to the money.”

Author: Kathryn Torney

Time to read: 4 minute

Posted on: 15 April, 2024

In the first of our On Board With interview series, Kathryn Torney speaks to leading shipping and asset finance lawyer Harry Theochari about decarbonisation, the importance of the UK’s shipbuilding industry and the challenge of securing funding for new technologies.

Harry Theochari describes himself as a simple ship finance lawyer but that doesn’t do justice to the extensive experience and knowledge which led to him being named by Lloyd’s List as the most influential shipping lawyer in the world.

He started working in asset finance in 1984 and then – he says, due to his Greek heritage and ability to speak Greek – he started to get involved in shipping finance and ended up doing that for most of his career.

Harry joined the global law firm Norton Rose Fulbright in 1985 and retired as a Partner in December 2020. He’s now Senior Consultant to the firm, chair of Maritime London and the Belfast Maritime Consortium, advises governments, and sits on the Shipping Council of the United Kingdom. In 2022, he was awarded an OBE for his services to the maritime industry.

This is a man who knows a lot about ships and money.

A lot of people don’t realise that this is a hugely pivotal time for the shipping and maritime industries, he said.

"We face possibly the two greatest generational challenges and perhaps two of the greatest challenges the industry has ever faced. These are decarbonisation and what I describe as disruptive technologies – things like artificial intelligence, blockchain, cyber issues, autonomous shipping. They are really going to challenge us. It is similar to the time we went from sail to steam and then from steam to diesel."

Harry says that the need to decarbonise is not just a problem for the industry.

"It’s a problem for humanity and failure isn’t an option. The big problem we face is that there simply isn’t enough money to get us over the line.

"The shipping industry has traditionally relied on banks and financial institutions for funding, but their lending has reduced considerably.

"We thought private equity would come in, but they never really came into the market in any meaningful way.

"Investing in new technology isn’t going to be simple because the banks and the usual financial institutions that we’ve relied on for so long simply aren’t there for the huge sums that will be required to decarbonise our industry by 2050. We are talking of sums in the region of US$1.4 trillion to US$1.9 trillion and perhaps more. This means that industry will have to look to governments. Governments are going to have to step up as they’re the only people with deep enough pockets to cover what is needed on a global basis.

"The amounts of money provided by the UK government are very welcome, but they are much smaller than the billions available for ports and infrastructure in America. We need to continue to fund research, to drive innovation and growth of new businesses so they can get to a meaningful size and start contributing back to the UK economy."

Harry acknowledges that it can be very difficult for startups to find financial support when their technologies are untried and untested.

"What is really heartening is that Artemis Technologies and the Belfast Maritime Consortium were able to secure government funding and they are now paying back all that trust and goodwill and it’s reflecting well on those who supported Artemis Technologies at the beginning. That’s the kind of relationship that I’m trying to build in other areas."

He praised the Shipbuilding Credit Guarantee Scheme (SCGS) launched in July 2023 which will help ship owners access finance to buy UK-built ships with the government acting as a guarantor for their lenders. The Government will guarantee a percentage of the loans used to purchase, refit, retrofit or repair vessels, sharing the risk with lenders to encourage offers of finance to vessel owners and operators. Harry would like the scheme to be improved though, with a higher percentage of the loans guaranteed and the provision of refund guarantees. He said:

"This government talks a lot about levelling up and I totally support this. The sad thing is that most of the really impoverished places on the British Isles are around the coast. It’s the ports and coastal cities that are really down in the dumps. What better way to level up than to create some shipbuilding activity and the supply chains to supply those shipbuilders. I think there’s tremendous potential there."

Shipbuilding is already vitally important to the UK. It supports 42,600 jobs nationwide and adds £2.4 billion to the economy every single year. Ninety-five percent of UK trade is moved by sea. Harry stressed:

"We are an island nation. We need ships to trade.

"Something like 24% of all our energy supplies come in on a ship through a port, about 48% of everything that we eat comes in on a ship through a port. So, if the industry fell apart, we would have reduced power supply and half the population might go hungry, we’d all have to eat a lot less. It’s that fundamentally important but nobody seems to want to focus on it for some reason.

"We’re never going to compete with the Japanese or Koreans or the Chinese in building big ships. We just don’t have the infrastructure anymore. They can do it more cheaply and they’re really good at building ships. But Artemis Technologies and the Belfast Maritime Consortium are giving us a real opportunity to show the global maritime business that we here in the UK can build the best cutting edge zero carbon emission vessels. Once we show we can do that, we can hopefully expand into other areas.

"I hope that others will learn from the Artemis Technologies experience. And I hope that the Artemis Technologies team can go out and spread the word, like apostles for the British maritime industry. The Belfast Maritime Consortium ferry project can act as a catalyst for regenerating cutting edge shipbuilding in the UK."

The UK Government’s Clean Maritime Plan wants zero emission shipping to be commonplace globally by 2050. How realistic is this ambition? Harry said:

"I think we’re talking about a human endeavour here and we don’t want to fail. But I am becoming ever more concerned that, in order to protect certain world economies and industries, people are going to start rowing back from that ambition. We saw that with electric vehicles. The government was going to phase out the production of all new carbon emitting cars by 2030. They’ve pushed it to 2035.

"I’ve got children and I hope I’ll have grandchildren one day and I’d love them to live in a much cleaner and healthier world. So, I’ll do everything that I possibly can to drive this change. But we really need to make sure that governments act. The only way to make governments act is through people forcing them to act so we need to keep making lots of noise. We need the public to understand how fundamentally important it is that we don’t just forget about this. We can’t just assume it will all go away; that someone else will sort it out. It’s incumbent on all of us to make sure that we reduce our carbon footprint.

"We need to make it commercially viable for businesses to decarbonise and the only way we can do that, in my opinion, is with government support. It all leads back to the money."

Harry said that the UK could be building all the vessels needed to support all the wind farms in the UK territorial waters.

"The UK is one of the world leaders in offshore wind. This is a real opportunity to have British built ships giving employment to British workers in British coastal regions, creating wealth, creating supply chains for the whole shipyard and creating infrastructure to service a United Kingdom asset.

"Why doesn’t the government say if you want to work in the in the seas around the UK, you’ve got to buy British? There’s nothing wrong with that. Many European nations do exactly that. I suppose the United Kingdom wants to be seen to be a global free trading power and that’s great – but there comes a point where if you don’t look after your own, you might lose them."

He described the maritime industry as "a bit of a lone wolf industry" and highlighted the importance of partnerships.

"I think more partnerships will develop for the cutting edge, new type of vessels being developed because of the amount of money and the different types of expertise needed. You simply can’t do it by yourself. First mover advantage is fundamental and if you’re looking for government money, you’ve really got to put a partnership together.

"I keep going back to the money because that’s what drives everything.

"Government is going to be fundamental to decarbonising the industry as regulations are going to have to be imposed to actually force people to decarbonise. The International Maritime Organization needs to impose rules and regulations on the shipping industry that are workable and viable, that allow the industry to continue to grow and flourish, but force companies to do what is the right thing.

"The EU is putting together an emissions trading scheme where you’ll have to pay for the emissions exceeding those that you are allowed. That will create another fund which will enable more investments, more technological development, more advancements. That’s the righteous circle, as I call it, that we need to try and develop."

What are his hopes for the future of the maritime industry?

"I’d love to see a fully decarbonised industry, hopefully before 2050. That would be wonderful. I’d like to see a lot more cooperation. Regulation will need to be developed in conjunction with the ship owning community. There’s no point stymieing the industry or holding the industry back or making it unprofitable because then there’s no incentive for anyone to build new and better ships or to develop new technology.

"The industry has got to keep providing the world with everything that it needs but, at the same time, allowing those that take the risks, that put the money in, to make money so that they have every incentive to continue to improve and develop and become better.

"I take great pleasure from the fact the real beneficiary from the success of the Belfast Maritime Consortium will be Northern Ireland. It is ultimately the people of Northern Ireland that will benefit through the wealth and extra employment that will be created. That’s what industry should be doing; benefiting the nation and local communities."