Klaveness Combination Carriers signs the first maritime agreement linking freight earnings to reduce carbon emissions

KCC Chartering AS, a subsidiary of Klaveness Combination Carriers ASA and South32 Marketing Pte Ltd, a subsidiary of globally diversified mining and metals company South32, have agreed to incorporate a carbon pricing mechanism in their existing Contract of Affreightment (COA).

The parties agreed on a sustainability framework to minimise carbon dioxide emissions from KCC's fleet, including the fleet used to export South32's caustic soda to Australia, under the six-year COA announced in January 2022.

In accordance with this framework, KCCC and South32 created a mechanism in 2022 that links freight payments made under the COA to the carbon dioxide emissions of KCCC's boats compared to a predetermined baseline. According to the agreed-upon system, which will be put into effect in 2023, KCCC will earn more freight if actual carbon dioxide emissions are lower than the baseline and less freight if performance falls short of the baseline.

However, the additional freight paid by South32 under this arrangement will be used to fund improvements to KCCC's fleet's energy efficiency.

Engebret Dahm, the Chief Executive Officer of KCC, said: "KCC Chief Executive Officer Engebret Dahm said: "The shipping industry needs a price on carbon emissions to incentivize efficiency improvements, cut waste, and start the transition to new fuels. In the absence of adequate regulations, we are grateful for the support and partnership with front-runners South32 in developing and introducing the first carbon pricing mechanism in the dry bulk and tanker industries."

Holly Buschman, the Vice President of Sustainability Strategy and Community at South32, said: "We are pleased to reach this new industry-first agreement with Klaveness Combination Carriers ASA. At South32, we produce critical commodities for a low-carbon future."

"We recognise that we have a critical role in contributing to the decarbonisation of the value chain in partnership with our customers and suppliers. This agreement with Klaveness Combination Carriers ASA is an important step towards our goal of net zero Scope 3 greenhouse gas emissions by 2050."