“Sustainability issues in maritime transport and main challenges of the shipping

industry”

Viktoriia Koilo [Link]

AUTHORS
[Link]

Viktoriia Koilo (2019). Sustainability issues in maritime transport and main

ARTICLE INFO challenges of the shipping industry. Environmental Economics, 10(1), 48-65.
doi:10.21511/ee.10(1).2019.04

DOI [Link]

RELEASED ON Tuesday, 03 September 2019

RECEIVED ON Wednesday, 07 August 2019

ACCEPTED ON Tuesday, 27 August 2019

LICENSE This work is licensed under a Creative Commons Attribution 4.0 International
License

JOURNAL "Environmental Economics"

ISSN PRINT 1998-6041

ISSN ONLINE 1998-605X

PUBLISHER LLC “Consulting Publishing Company “Business Perspectives”

FOUNDER LLC “Consulting Publishing Company “Business Perspectives”

NUMBER OF REFERENCES NUMBER OF FIGURES NUMBER OF TABLES

37 9 3

© The author(s) 2019. This publication is an open access article.

[Link]
Environmental Economics, Volume 10, Issue 1, 2019

Viktoriia Koilo (Norway)

Sustainability Issues
BUSINESS PERSPECTIVES
in Maritime Transport
and Main Challenges
of the Shipping Industry
Abstract
LLC “СPС “Business Perspectives”
Hryhorii Skovoroda lane, 10, Considering the rapid development of oceanic logistics, the maritime traffic is one of
Sumy, 40022, Ukraine the worst offenders for air and water pollution. This paper primarily aims to explore
the key concepts and terms applied to denote the sustainability issues in maritime
[Link] transport and main challenges for the shipping industry. The present study investigates
the existing sustainability frameworks on the relationship between sustainability and
maritime industry. Also the author proposes to use modelling approaches to measure
the relationship between oil prices, exchange rate, services export and ocean transport
value added. The empirical findings indicate that growth rate of the crude oil prices
has negative impact on ocean transport value added growth, and it can be traced that
the oil industry has a strong influence on value creation in maritime clusters and their
competitiveness, especially on the shipping sector. The analysis also sheds light on the
impacts of relationship between environmental pollution and maritime cluster activity
(through the validation of the EKC hypothesis in Norway). The current paper reveals
Received on: 7th of August, 2019 that there is an inverted U-shaped relationship between economic growth and CO2
Accepted on: 27th of August, 2019 emissions. The empirical evidences show that the links between CO2 emissions and
ocean transport value added are more significant than with energy consumption in-
dicator. It can be assumed that, due to the energy efficiency policy and technological
leadership in the shipping industry, the environmental impact of energy use (renew-
able energy) has improved.

© Viktoriia Koilo, 2019 Keywords greenhouse gas (GHG), green shipping, sustainable
development goals (SDGs), zero-emission zones

Viktoriia Koilo, Ph.D., Associate

JEL Classification O44, Q01, Q53, Q56
Professor, Hauge School of
Management, NLA University
College, Norway.
INTRODUCTION
The maritime cluster in Norway has an advanced position in the oce-
anic world, moreover, it is the second largest export industry after the
oil industry in the country. There is no other such developed and com-
plete maritime cluster as the Norwegian. Here the industry employs
almost 100,000 women and men and generates the value of almost 15
billion euros per year.

In a global context, the Norwegian model is completely unique, in

the way that competitors, customers and suppliers work closely, and
thereby constantly creates the basis for new technologies and pow-
erful innovations. Today, the maritime cluster is probably the most
knowledge-intensive and innovative sector of the country, and broad-
This is an Open Access article,
ly speaking it accounts for about ten percent of the total value created
distributed under the terms of the in the Norwegian economy.
Creative Commons Attribution 4.0
International license, which permits
unrestricted re-use, distribution, Nevertheless, in recent years Norwegian shipping industry has faced
and reproduction in any medium,
provided the original work is properly some increasingly growing problems. There three main branches of
cited. the Norwegian maritime sector:

48 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

1) petroleum industry (oil companies, businesses supplying goods to customers, and services for the
upstream oil and gas industry);

2) maritime industry (shipyards, shipbuilding, businesses supplying equipment, and maritime design
and service providers);

3) seafood industry (fishing, aquaculture and subsequent processing sector).

Tight linkages and close industrial relations have provoked the following situation: a sharp drop in oil
prices from 2014 to 2016 led to a decline in the oil industry, and as a result led to a decline in investment
in the production of marine equipment and shipbuilding.

Moreover, over the past 30 years, there has been paid great attention to the impact of the maritime indus-
try on environmental degradation, which has attracted significant attention both from the scholarly world
and international organizations. Norway’s active participation in the implementation of the principles of
sustainable development creates the conditions for preventing future crises. For example, in 2016 there was
developed a strategy called “Maritime Opportunities – Blue Growth and for Green Future”. The main aim
is to boost the competitiveness of Norwegian companies within this sustainability directions plan.

Despite efforts to reduce the negative impact of maritime industry, degradation of the oceanic environ-
ment continues to grow. In order to determine the most feasible solution, this simultaneously requires
the mobilization of academic communities, the industry, business communities and the financial sector,
as well as the support of governmental initiatives.

Therefore, this study focuses on sustainability issues within maritime transport as a main challenges of
the shipping industry.

The present study is structured as follows: a literature review on the relationship between sustainability
and maritime industry is presented in section 1. Section 2 investigates the main challenges of the mari-
time industry in Norway. Section 3 explains data and methodology, proposes modelling approaches to
measure the relationship between oil prices, exchange rate, services export and ocean transport value
added, and explains the link between environmental pollution and maritime cluster activity. The results
of the proposed models are provided in section 4. Section 5 gives an extended discussion of findings.
Finally, this study ends with conclusions and future research directions in final section.

4. LITERATURE REVIEW Generally speaking, air pollution challenges related

to maritime emissions have been discussed as on the
The link between sustainability and maritime eco- global (Jalkanen et al., 2012), as on local levels (Zis et
nomic growth, and related challenges has been wide- al., 2014).
ly discussed in the literature.
In the existing literature, Cheng et al. (2013) con-
For instance, sustainability issues in the maritime sider the sustainability changes in terms of ports,
industry have become an important component of supply chain and shipping. Maragkogianni and
maritime logistics and supply chain management. Papaefthimiou (2015) argue that the port activity
should get a special attention, as the technical use
In their study Lee et al. (2019) state that among three in harbor logistics services includes huge amounts
pillars of the sustainability, the social element is get- of emissions into the air. According to the existing
ting to be the main point of policy focus, since all study of Lee et al. (2019), the cruise sector is more
ports areas have been influenced by ships’ emissions, to blame for the atmosphere pollution rather than
which cause lung cancer and heart-related illnesses. cargo shipping: all major harbor cities, which are

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Environmental Economics, Volume 10, Issue 1, 2019

characterized by rapid growth of cruise industry emissions and identification of substandard, highly
(e.g., Singapore, Shanghai, etc.), have highly polluted polluting ships”.
air. Li et al. (2018) state that the congested container
transport network can have a negative influence on Another illustration of the present issue is shown in
ports, environment and people in those areas. a study of Urban et al. (2018). They argue about the
importance of the innovations in shipping of two
In this regard, the Nature and Biodiversity main shipping nations, such as Greece and Norway.
Conservation Union (NABU) calculated the amount According to their study, the source of all positive
of emissions into the atmosphere caused by the and negative changes should be considered on differ-
cruise industry in main ports of Germany. The ent levels such as macro level (international), mezzo
conclusion derived from this study as follows: “fuel level (national), and micro level (firms).
oil can contain 3,500 times more sulphur than die-
sel that is used by road vehicles” (Fung et al., 2014). Despite that in a literature review the issue of sus-
Findings from Nicolae et al. (2014) also contributed tainability and maritime economic growth is widely
to this line of research – for assessing of the impact discussed, there are limited studies on the use of var-
on environment in port administration politics, they ious concepts and models to measure the relation-
proposed to consider a computing algorithm on the ship between environmental pollution and maritime
basis of some ships’ parameters: tonnage, propelling cluster activity.
systems, engine type, etc.

Li et al. (2018) point out that air pollution in the mar- 1. TREND ANALYSIS
itime cluster is a result of fossil fuel combustion by
ships and oil-consuming equipment as well. On the
OF THE NORWEGIAN
other hand, there is also the second (indirect) source MARITIME INDUSTRY
of CO2 and other GHG emissions as many different
types of equipment use electricity converted from Norway is one of nations which has a complete mar-
coal as power. itime cluster, and in time of shipbuilding slump in
the European area, the cluster is still going strong.
There is a bulk of literature on the investigation of The maritime sector is deeply connected with lots
measures needed to reduce emissions from all types of substantial related industries, which are also pre-
of vessels. These incorporate greening of ports (Li et sented in Norway, e.g., the offshore industry, and
al., 2018), zero carbon shipping (Urban et al., 2018), fishing and aquaculture. It should be noted that
utilization of alternative maritime fuel, such as LNG Norway holds several well-known global maritime
(Wu et al., 2018), setting standards and laws of green knowledge hubs: Møre has been a pioneer in marine
shipping (Shi et al., 2017), and penalties for non-com- research and innovation (The Norwegian Shipping
pliance in the shipping sector (Lähteenmäki-Uutela Industry, 2019), also, the biggest well-known banks
et al., 2019). and ship insurance companies are placed in Norway.

Hence, the maritime industry, including ports, ship- In 2018 the Norwegian fleet was ranked as number
ping and logistics, is faced with different types of five in the list of world ship owning nations. Japan,
regulations and rules to protect environment and re- Greece and China are the three largest nations by
duce the impact of GHG emissions (Shin et al., 2018). far and the USA is on fourth place.
Moreover, researchers all over the world started their
mutual collaboration to give effective recommenda- If to separate the cargo carrying element, the
tions on setting standards and laws of green shipping Norwegian fleet value has strengthened with 21
(Shi et al., 2017). Also, it has been taken into consid- percent from 2017 to 2018. Forecasts moreover es-
eration that measures, which should be implement- timate further growth. This demonstrates that the
ed to reduce emissions of all ships, firstly should be situation in these segments is not at all bad.
located in the port areas. Nicolae et al. (2017) argue
that “naval/port authorities should promote admin- It is worth mentioning that the Norwegian mar-
istrative measures to facilitate monitoring of ship itime fleet has different classifications: a) cargo

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 Environmental Economics, Volume 10, Issue 1, 2019

ships (or freighter ships) and non-cargo ships; 3) the maritime offshore vessels. Members of
b) merchant vessels or trading vessels (that trans- NSA control 593 vessels and 55 mobile off-
port cargo or carries passengers for hire), pleasure shore units (drilling rigs, etc.).
craft ships (used for personal recreation) and na-
Table 1. Norwegian-controlled foreign-going
val ships; c) ships flying under the Norwegian flag fleet composition as of January 1, 2019, by
(can be registered in the Norwegian Ordinary Ship number of ships
Register (NOR) or in the Norwegian International
Ship Register (NIS)) and Norwegian-controlled Source: Norwegian Shipowners’ Association (2019).

ships sailing under a foreign flag. Foreign Total number

Category NOR NIS
flags of ships
Also, the Norwegian fleet can be divided into three Offshore service 159 190 244 593
main categories (Table 1): Other dry cargo
9 131 411 551
vessels
1) the deep sea fleet (car carriers, tankers, dry Chemical tankers 1 109 129 239
bulk, LNG, chemical, container and gen-
Gas tankers 0 49 64 113
eral cargo ships, etc.). There are more than
Bulk carriers 0 67 40 107
600 ships under the control by Norwegian
Shipowners’ Association (NSA); Other oil tankers 0 43 35 78
Shuttle/storage
2 10 57 69
2) the short sea segments. It plays a key role in tankers

transportation of all types of freight and pas- Passenger vessels/

6 8 10 24
ferries
sengers along the coast of the country and
from European ports. There are approximate- Combined carriers 0 5 8 13
ly 130 short sea ships under the control by Total 177 612 998 1,787
members of NSA;
Source: Compiled by author.

Møre og Romsdal
Design, construction and
operations of offshore vessels
Trøndelag
Maritime R&D
Bergen
Deepsea shipping
Oslo
Maritime services: financial,
legal and technological

The Stavanger area

Haugaland/Sunnhordland The Oslofjord area
The Bergen area Electronics and subsea
All maritime activities in equipment
exploration, development,
operation and distribution
of oil and gas
Southern Norway
Oil drilling equipment

Figure 1. Geographical distribution of the most important maritime regions in Norway

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Environmental Economics, Volume 10, Issue 1, 2019

In general, the maritime cluster in Norway can be The decline in the shipping sector had a strong ef-
divided into eight regions (Norwegian Shipowners’ fect on the dynamics within the cluster. Its share
Association, 2018): of the total value added shrank by ten percent in
2017 compared to previous year. However, ship-
4) the Oslofjord area; ping is still the largest segment in the cluster
5) Southern Norway; (Norsk Industri/Menon, 2018).
6) the Stavanger area – Rogaland south of
Boknafjord; Meanwhile, the role of other segments is becom-
7) Haugaland/Sunnhordland; ing significantly important for the cluster. In 2017
8) the Bergen area; two segments have experienced growth – equip-
9) Møre og Romsdal; ment producers and services (the value added of
10) Trøndelag; equipment producers increased by 18 percent and
11) Northern Norway. services by 4 percent).

Møre og Romsdal remains the most important ar- Nevertheless, the ratio of export in sea and coast-
ea in Norway for shipbuilding activities (Figure 1). al water transport services to total export in ser-
Nevertheless, in recent years, the demand for new vices have increased during the period (Figure 3).
vessels has declined and the market is still charac- Moreover, in 2018 it reached the point of 41 per-
terized by oversupply. cent, that proves the statement about the impor-
tance of the shipping sector in Norway.
From June to December 2014, the price of crude oil
fell from over USD 110 to USD 50 per barrel, which For the cluster combined, the oil and gas market
sent shock-waves through the Norwegian economy constitutes 35 percent of the aggregated market.
(Figure 2). Due to its strong dependency on the oil For the shipping companies, the proportion is
and gas industry, the Blue Maritime cluster at Møre still high, 81 percent (Figure 4), but for the yards,
og Romsdal (Ålesund region) was severely hit by a equipment manufacturers, design companies and
following downturn in activity. The value added has other services the proportion is 30 percent or low-
declined since the peak in 2014 and continued along er (Norsk Industri/Menon, 2018).
the same downward-pointing trajectory in 2017
(Norsk Industri/Menon, 2018). Yacht and cruise industry remains the second larg-
est market element. Fishery and aquaculture are
In the shipping industry valued added continued significantly important for the maritime cluster as
to fall in 2017. The rest of the cluster (yards, equip- well, at the same time, the growth is still smaller
ment and services) managed to stay stable or even than for the passenger segment (Norsk Industri/
increase their value added. Menon, 2018).
Source: The World Bank (2019), SSB (2019).
0,60
0,40
0,20
0,00
1989

2006

2018
1980
1981
1982
1983
1984
1985
1986
1987
1988

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

-0,20
-0,40
-0,60
-0,80

Service exports Crude oil price Official exchange rate Ocean transport value added

Figure 2. Development in crude oil prices, services export, official exchange rate NOK to USD and
ocean transport value added in Norway during the period 1980–2018

52 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

Source: The World Bank (2019), SSB (2019).

300,000 40.88 42.00

250,000 37.82 40.00
200,000 36.55 38.00
150,000 34.20 36.00
100,000 34.00
50,000 32.00
0 30.00
2015 2016 2017 2018
Export in sea and coastal water transport service, NOK million
Export in service all types, NOK million
Ratio of sea and coastal transport service to export in service all types, %

Figure 3. The dynamics of export in sea and coastal water transport services and share
of it in total export in services in Norway, 2015–2018

Source: Norsk Industri/Menon (2018).

100%

80%

60%
27 81
40%
18
14
20%

0%
Design and services Equipment Yards Shipping

Offshore oil/gas Offshore wind Fishery Aquaculture

Ferries Cruise/yachting Cargo shipping Other markets

Figure 4. The cluster’s turnover broken down on the four segments and split by markets

To conclude, this study will contribute to the exist- shipping sector, this study employs annual time
ing literature in two ways. Firstly, this paper will series from 1980 to 2018. The data are collected
examine the impact of oil prices, exchange rates, from the World Bank database (The World Bank,
and service exports on ocean transport value add- 2019) and Statistics Norway (SSB, 2019).
ed. Secondly, the study will check the hypothesis
about the existence of EKC in Norway. In this study, the author uses non-linear regres-
sion to estimate relationships between variables.
The general model is presented as the following:
2. MATERIALS
AND METHODS = β0 +
log VA _ ocean _ transport
In order to determine the links between oil prices, + β1 log Oil _ price + β 2 log Exch _ rate + (1)
exchange rates, service exports and ocean trans- + β3 log Exp _ service + ε t ,
port value added, as a measure of activity in the

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Environmental Economics, Volume 10, Issue 1, 2019

where log VA _ ocean _ transport is the loga- α + β1 log GDPt +

log CO 2t =
rithm of the growth rate of ocean transport value (3)
added, log Oil _ price is the logarithm of the
β 2 log 2 GDPt + β3 log Energyt + ε t ,
growth rate of crude oil prices, log Exch _ rate is
the logarithm of the growth rate of official exchange where log CO 2t is the logarithm of CO 2
rate of NOK against USD, log Exp _ service is emissions, log VA _ ocean _ transportt and
the logarithm of the growth rate of service exports, log 2 VA _ ocean _ transportt are the loga-
β 0 is a constant or intercept, β1,n is the slope for rithms of ocean transport value added and its
n-independent variables, ε is the residual vector, square, log Energyt – is the logarithm of energy
t is a year. consumption.

Also, this study adopts and autoregressive distribut- According to the EKC hypothesis, it is assumed
ed lag (ARDL) to estimate the long-run relationships that with an increase in income (GDP) per cap-
between the indicators. If the value of the depend- ita (in our case, ocean transport value added)
ent variable changes due to a small interval time after to a certain level, the volume of pollution per
changing the values of x factors, then the independ- capita first increases and then decreases (Xu et
ent variables must be presented with the correspond- al., 2018). If β1 > 0 and β 2 < 0, the EKC hy-
ing lag ( t − m ) in the regression equation: pothesis is valid, thus, there is U-shaped rela-
tionship between CO2 and dependent variable
(Koilo, 2019). The inflection point can be meas-
= β0 +
log VA _ ocean _ transport
ured as − β1 2 β 2 .
+ β1 log VA _ ocean _ transportt − m +
+ β 2 log Oil _ pricet − m + (2) It should be noted that the validation of the
econometric model is an important and nec-
+ β3 log Exch _ ratet − m + essary task. To assess adequacy of the present-
+ β 4 log Exp _ servicet − m + ε t . ed models in the study, the author used several
methods, among them: the Durbin-Watson test
Economic growth in the maritime sector has a pre- (used to verify the existence of the autocorrela-
dictive ability for carbon emission, as the amount tion of the residuals in the model (Hisamatsu
of fossil fuels spent increases along with activity. & Maekawa, 1994)); the Dickey-Fuller test (ap-
Thus, investigation of the relationship between plied to test some series for stationarity (EViews,
environmental degradation, economic growth in 2019)) and the Hanna-Quinn criterion (a meas-
maritime industry and energy use in Norway is ure of model suitability and used in the time se-
an important task. ries analysis to determine the appropriate order
of a model (Salie et al., 2012)). Also in this re-
In order to test the relationships between air pol- search author used the Hodrick-Prescott filter
lution from the international marine bunkers’ fuel as a time series smoothing method in order to
combustion, economic growth in shipping indus- highlight the long-term trends in a time series
try and energy consumption the paper use annual (Kurt, 2006).
data, covering the years from 1978 to 2015.

The investigation is based on the World Bank 3. RESULTS

database (The World Bank, 2019), International
Energy Agency (IEA, 2018), and Statistical Review 3.1. Exploring the link between oil
of World Energy (BP Statistical Review of World prices, exchange rates, service
Energy, 2018).
exports and ocean transport
Also, it was decided to explore the relationship value added
between CO2 emissions and the explanatory
variables using a log-linear quadratic regression This section shows the estimation results of the
equation: model. The initial regression analysis and the

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 Environmental Economics, Volume 10, Issue 1, 2019

0.60
0.40
0.20
0.00
1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018
–0.20
–0.40
–0.60
–0.80
Crude oil price Trend component Cycle component

Figure 5. Deviation from trend of the oil price component

validation of the estimates show that the results that the obtained results are reliable – F-criteria is
of the model are not adequate and some varia- 0.00, this value is less than 0.05.
bles has no significant effect on resulted indi-
cator. Thus, one uses a Hodrick Prescott-filter In order to investigate the adequacy and reliability
to find short-term deviations from long-term of the obtained data, and to test for the presence
equilibriums in data serials. The original results of serial correlation of residuals, the paper use
showed that there is a significant deviation from Durbin-Watson (DW) statistics.
trend of oil prices, hence, in this particular case
The Durbin-Watson test reports a test statistic, with
there is a need to separate the cycle component a value from 0 to 4. In this model, DWfact = 2.38,
from trend (Figure 5). which is more than 2, hence, its needed to run
the test for negative autocorrelation at signifi-
Therefore, further investigation is required to cance 0.05. The test statistics (4-DWfact) is com-
determine the link between oil prices, exchange pared to lower and upper critical values (DW1
rates, exports and ocean transport value added and DW2). In this case, DW1 = 1.12, DW2 = 1.45,
on the basis of obtained results from the tests. (4-DWfact) = 1.62, which is more than DW2, thus,
the hypothesis about the absence of auto-correla-
Table 2 depicts the regression analysis of the rela- tion is accepted.
tionship of the estimated indicators.
Next step – the author verified the stationarity of
Table 2. Regression results
this time series using expanded Dickey-Fuller test
Source: Author’s calculations. (Figure 6).
Variable Coefficient t-ratio Std. err.
Dependent variable –0.05** –1.70 0.03 Since the p-value for VA _ ocean _ transport
log(Oil_price) –0.26 –0.74 0.35 time series is small (–6.47) with a significance lev-
log(Exch_rate) 1.46* 4.18 0.35 el of 0.01, 0.05 and 0.1, this series can be consid-
log(Exp_service) 1.57* 4.49 0.35 ered stationary (the hypothesis of the presence of
R-squared 0.63
a unit root is rejected).
ESS 0.51
RSS 0.75 Thus, according to the abovementioned results,
F-statistic 7.92 the regression equation can be presented as the
F-criteria 0.00 following:
Note: * 1% significance level; ** 10% significance level. VA _ ocean _ transport = −0.05 −
Based on the adjusted R value, one can conclude
2
−0.26Oil _ price + 1.46 Exch _ rate + (4)
that the model can explain 63% of the variation +1.57 Exp _ service.
in ocean transport value added. It was concluded

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Environmental Economics, Volume 10, Issue 1, 2019

Null Hypothesis: OCEAN_TRANSPOR_VALUE_ADDED has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, maxlag=9)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -6.473807 0.0000

Test critical values: 1% level -3.615588
5% level -2.941145
10% level -2.609066

*MacKinnon (1996) one-sided p-values.

Figure 6. The results of the check on the stationary time series in the EViews program

Empirical findings indicate that service export Since mid-2014, the Norwegian krone exchange
growth rate has the largest positive effect on rate against US dollars has sharply increased. As a
ocean transport value added growth. This means result, companies with revenue in US dollars and
that a one percent increase in export growth rate most expenses in Norwegian kroner had a posi-
contributes to increase of value added by 1.57 tive impact on their competitive situation (GCE
percent. This relationship was significant at one Blue Maritime, 2018). Hence, the obtained results
percent level of significance. A similar situation of the regression model proves the existence of
is observed with growth rates of official exchange strong relationship between this macroeconomic
rates and ocean transport value added. The ob- variables.
tained results show that one percent increase in
exchange rate contributes to increase of value However, the regression analysis of the model de-
added by 1.46 percent. picts another tendency for the relationship with
crude oil prices: a one percent increase of this
Figure 7 presents the evelopment in official ex- indicator decreases ocean transport value add-
change rate with USD relative to NOK and ocean ed level by 0.26 percent. These analyses prove the
transport value added during the fourty-year pe- statement that oil industry has a strong impact
riod (1979–2018). on value creation in the maritime cluster and its

40000.00 10.00
35000.00 9.00
8.00
30000.00
7.00
NOK per USD

25000.00 6.00
NOK million

20000.00 5.00
15000.00 4.00
3.00
10000.00
2.00
5000.00 1.00
0.00 0.00
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017

Value added at basic prices (ocean transport, NOK million) Official exchange rate (NOK per USD)

Figure 7. Development in official exchange rate with USD relative to NOK and ocean transport value
added during the period 1979–2018

56 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

40000.00 120.00
35000.00
100.00
30000.00

USD/bbl
80.00
nok milllion

25000.00
20000.00 60.00
15000.00
40.00
10000.00
20.00
5000.00
0.00 0.00
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Value added at basic prices (ocean transport, NOK million) Crude oil, Brent (USD/bbl)

Figure 8. Development in crude oil prices and ocean transport

value added during the period 1979–2018

competitiveness, especially on the shipping sector testing to estimate the long run relationships be-
(Figure 8). tween the indicators (Figure 9).

The next step of the analysis is based on the above- Here the multiple R (R2) is 0.79, hence the model
mentioned multiple regression model. The study can explain 79% of the variation in ocean trans-
adopts an autoregressive distributed lag (ARDL) port value added. It can be concluded that the ob-
Dependent Variable: OCEAN_TRANSPOR_VALUE_ADDED
Method: ARDL
Date: 07/22/19 Time: 10:33
Sample (adjusted): 1984 2018
Included observations: 35 after adjustments
Maximum dependent lags: 2 (Automatic selection)
Model selection method: Hannan-Quinn criterion (HQ)
Dynamic regressors (4 lags, automatic): CRUDE_OIL_PRICE
OFFICIAL_EXCHANGE_RATE SERVICE_EXPORTS
Fixed regressors: C
Number of models evalulated: 250
Selected Model: ARDL(1, 4, 0, 3)

Variable Coefficient Std. Error t-Statistic Prob.*

OCEAN_TRANSPOR_VALUE_ADDED(-1) 0.050703 0.136756 0.370754 0.7142

CRUDE_OIL_PRICE -0.183589 0.092498 -1.984799 0.0592
CRUDE_OIL_PRICE(-1) 0.285275 0.094605 3.015437 0.0062
CRUDE_OIL_PRICE(-2) -0.323977 0.100501 -3.223609 0.0038
CRUDE_OIL_PRICE(-3) -0.229633 0.102822 -2.233314 0.0355
CRUDE_OIL_PRICE(-4) -0.125665 0.090341 -1.390999 0.1775
OFFICIAL_EXCHANGE_RATE 1.172366 0.330243 3.550008 0.0017
SERVICE_EXPORTS 1.671536 0.392332 4.260512 0.0003
SERVICE_EXPORTS(-1) -0.299217 0.295413 -1.012875 0.3217
SERVICE_EXPORTS(-2) -0.121194 0.270611 -0.447854 0.6584
SERVICE_EXPORTS(-3) 1.262916 0.285612 4.421790 0.0002
C -0.084957 0.032747 -2.594395 0.0162

R-squared 0.789435 Mean dependent var 0.035312

Adjusted R-squared 0.688731 S.D. dependent var 0.187096
S.E. of regression 0.104384 Akaike info criterion -1.415625
Sum squared resid 0.250607 Schwarz criterion -0.882363
Log likelihood 36.77345 Hannan-Quinn criter. -1.231543
F-statistic 7.839106 Durbin-Watson stat 2.277264
Prob(F-statistic) 0.000018

*Note: p-values and any subsequent tests do not account for model selection.

Figure 9. Autoregressive distributed lag (ARDL) testing results in the EViews program

[Link] 57
Environmental Economics, Volume 10, Issue 1, 2019

Hannan-Quinn Criteria (top 20 models)

-1.10

-1.12

-1.14

-1.16

-1.18

-1.20

-1.22

-1.24

A R D L(2, 3, 0, 4)

A R D L(1, 4, 1, 4)

A R D L(1, 4, 3, 3)

A R D L(1, 2, 0, 3)

A R D L(1, 3, 2, 3)

A R D L(2, 4, 1, 3)

A R D L(2, 4, 2, 3)

A R D L(2, 4, 1, 4)
A R D L(1, 4, 0, 3)

A R D L(1, 3, 0, 3)

A R D L(2, 3, 0, 3)

A R D L( 2, 4, 0, 3)

A R D L(1, 4, 0, 4)

A R D L( 1, 4, 1, 3)

A R D L(1, 4, 2, 3)

A R D L(2, 4, 0, 4)

A R D L(1, 3, 0, 4)

A R D L(1, 3, 1, 3)

A R D L(1, 4, 2, 4)

A R D L(2, 3, 1, 3)

Figure 10. Selection of the optimal model ARDL according to Hanna-Quinn criterion

tained results are reliable since the F-value is close value added in the current period is the result
to 0.00, this value is less than 0.05. Moreover, the of the growth of the same criterion in the pre-
F-statistic is 7.84, and it exceeds the value of the vious year, hence an increase of this indicator
F-criteria, this makes possible to argue about the by one percent will lead to the growth of it by
adequacy of the obtained values of the model. 0.05 percent in the current period. An increase
of one percent of oil prices with a lag in four
Also, in this model automatic selection (the years leads to a decrease in ocean transport val-
Hanna-Quinn criterion) was used with a max- ue added in the current period by 0.13 percent.
imum of 4 lags of both the dependent varia- Additionally, one finds an impact of exports on
ble and the repressors. Out of the 250 models services: an increase of this indicator with a lag
evaluated, the procedure has selected an ARDL of three periods is accompanied with a fall of
(1,4,0,3) model – a one period lag of the depend- ocean transport value added in the current pe-
ent variable log (VA _ ocean _ transport ) , riod by in 1.26%.
4 lags of log ( Oil _ price ) , and 3 lags of
log ( Exp _ service ) . To view the relative superiority of the selected
model against alternatives, there also can be
Thus, the obtained ARDL equation can be present- used a criteria graph to view the Hanna-Quinn
ed as the following: criterion of the top twenty models (Figure 10).
VA _ ocean _ transport =
−0.08 +
To sum up, the empirical results show that offi-
+0.05VA _ ocean _ transportt −1 − cial exchange rate of the NOK to the USD and
(5)
−0.13Oil _ pricet − 4 + service exports growth rates have positive ef-
fects on ocean transport value added growth,
+1.17 Exch _ ratet − 1.26 Exp _ servicet −3 . when there is another tendency for the rela-
tionship with crude oil prices, i.e. negative cor-
The analysis of the coefficients of ARDL model relation with economic growth in the shipping
shows: the growth rate of the ocean transport industry.

58 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

3.2. Regression results Figure 12 shows a summary of CO2 emissions by

on relationships between carbon transportation subsectors in Norway. It proves
that road transport emitted 76 percent of total
emissions from international emissions in 2015, while water transport – just
marine bunkers and ocean four percent. Nevertheless, the maritime industry
transport value added in Norway seeks to further improve fuel efficiency and its car-
bon footprints.
Globally, all transport in the world consumes 20-
25% of all fossil fuel burned per year, the share It should be noted that the modern maritime trans-
of aviation in this consumption is 13%, and mo- port industry has the opportunity to reduce the
tor transport is 80%. Since 1990, the emissions consumption of resources. To this end, the IMO
of freight transport have increased significant- has developed Ship Energy Efficiency Management
ly, while the total amount of harmful emissions Plan and Energy Efficiency Design Index (EEDI).
into the atmosphere has decreased by 28 percent According to these recommendations, shipowners
(International Energy Agency, 2019). and maritime transport organizations should focus
on a number of key points, namely: efficient fuel
According to Figure 11, the transport sector in consumption, design of propulsion system, mainte-
Norway is the most vulnerable and emits 39 per- nance and operation of machinery and equipment,
cent of total CO2 emissions. The highest level is ob- management of the ship and fleet, optimization
served in Sweden (53%), while in the Netherlands of cargo operations, energy saving and personnel
it’s only 19%. training (World Shipping Council, 2019).

Despite the fact that shipping is the most envi- To this end, the study suggests that energy use
ronmentally friendly way of transporting goods and economic growth in maritime clusters could
in the world, moreover, more efficient than road be important sources of variation in CO2. Recent
or air transport, the World Shipping Council actions of world organizations towards sustaina-
(WSC) and its members are committed in im- ble development might improve efficiency across
proving fuel efficiency and reducing CO2 emis- the fleet. Hence, the relationship between environ-
sions across the fleet. mental degradation (CO2 emissions from marine

Source: International Energy Agency (2018).

100%
90%
80% 25,8
70% 38,9 19,3
53,1 36,0
30,3
60%
50%
40%
30%
20% 39,9 40,2
33,0 31,5
10% 16,7
5,6
0%
Norway Sweden Denmark Finland Netherlands United Kingdom

Electricity and heat production Other energy Manuf. industries Transport Other sectors
industry own use and construction

Figure 11. Share of carbon dioxide emissions

from fuel combustion by sectors in 2015

[Link] 59
Environmental Economics, Volume 10, Issue 1, 2019

Source: International Energy Agency (2018).

12.0 100,0
90,0
10.0 80,0
76.1
8.0 70,0
60,0
6.0 50,0 million tons of CO2
40,0
4.0 %
30,0
10.4
2.0 9.3 20,0
4.2 10,0
- -
Maritime Air Road Other

Figure 12. Distribution of CO2 emissions

from the transportation sector in Norway in 2015, by subsector

bunkers), ocean transport value added, and ener-

CO 2 = −15.14 + 6.86VA _ ocean _ transport −
gy use should be investigated. For this reason, the
paper checks the EKC hypothesis: can it be argued −0.83VA _ ocean _ transport 2 + 1.30 Energy.
that Norway has already reached a certain level of
economic growth and maturity in the shipping in- This implies that for each unit increase in ocean
dustry, which allows to improve the environmen- transport value added, CO2 emission increase with
tal situation and levels of CO2 emissions? 6.86 percent at the departure and this rate is decreas-
ing, when inflection point is reached, and for each
The regression results are given in Table 3. percentage increase in energy consumption, level of
environmental pollution increases with 1.30 units,
The determination of validity of the regression respectively.
estimates, based on the significance of R2 and the
F-statistic show that results of the model are ade- According to the regression results, the coefficient of
quate and reliable. the logarithm of value added is positive (6.86) and
its squared value is negative (−0.83). Hence, there is
Table 3. Regression results
an inverted U-shaped relationship between econom-
Source: Author’s calculations.
ic growth and CO2 emissions, and, in this case, the
Variable Coefficient t-ratio Std. err. environmental Kuznets curve hypothesis can be
Dependent variable –15.14** –1.99 7.61 accepted.
log(VAot) 6.86* 2.37 2.90
Hence, the turning point is 4.12, that is 14.266 mil-
log(VAot)2 –0.83* –2.36 0.35 lion. NOK of ocean transport value added. It was
log(Energy) 1.30 1.27 1.03 suggested that after the inflection point was reached
R-squared 0.47
in 1990, CO2 emissions have a tendency to decline.
Thus, these evidences prove the EKC hypothesis in
ESS 1.56
Norway.
RSS 5.65

F-statistic 3 Hence, the empirical evidences show that the links

between CO2 emissions and ocean transport value
Prob(F-statistic) 0.04
added are stronger, rather with energy consumption.
Note: * 5% significance level; ** 10% significance level. It can be assumed, due to the energy efficiency policy
and technological leadership in the shipping indus-
Thus, according to the abovementioned results, the try, that the environmental impact of energy use (re-
regression equation can be presented as follows: newable energy) has improved.

60 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

Source: Authors’ calculations.

3,5

2,5
CO2, million tonnes

1,5

0,5

0
0 5000 10000 15000 20000 25000 30000 35000
VAot, NOK million

Figure 13. EKC for CO2 emissions from international marine

bunkers and ocean transport value added in Norway

4. DISCUSSION 2019). The International Council on Clean

Transportation reports that total fuel consump-
The development of the Norwegian maritime tion by the global shipping fleet has increased
cluster is deeply connected with the productivi- on 7 million tons (+2.4 percent) during the last
ty of the oil and the fishing industry. Nowadays three years (ICCT, 2017).
shipping companies are faced with the main
challenges of the century: on the one hand, how In the previous section the paper explored the
to mitigate the oil price crises and to shift the link between energy use and CO2 emissions.
activities to alternative industries, on the other One can argue that the increasing level of fu-
hand, to get towards the major goal – the west el consumption can lead to deterioration of the
Norwegian fjords should become zero-emission natural resources and environment. In fact,
zone by 2026 (SAFETY4SEA, 2018). ships emitted 932 million tons of CO2 in 2015.
Container ships together with bulk carriers,
Although maritime clusters nowadays are not and oil tankers accounted for 55 percent of CO2
going through the best times, the industry still emissions 2013–2015 (ICCT, 2017).
shows strong resilience in sustaining their com-
petitive position in the world. This is the result Meanwhile, Norway supported the IMO agree-
of active investment in new technologies and ment, adopted in April 2018, on a comprehensive
good export potential all around the world. strategy for the total elimination of CO2 emis-
sions in the shipping industry. This includes
In order to stay in the forefront of the maritime goals to decrease the level of carbon dioxide
industry, Norway should keep its position in tech- emissions at least by 40% by 2030 and 70% by
nological leadership and continue the capacity for 2050. In fact, nowadays more electricity is be-
reinventing themselves. Also its important to pro- ing used in marine industry in Norway, both in
vide this optimization both in environmental and combination with other fuels (hybrid ships) and
economic terms in line with sustainability goals. alone (Ministry of Petroleum and Energy, 2019).

Nevertheless, Norway still uses large amounts of It should be noted, among seventeen sustainable
fossil fuels (Ministry of Petroleum and Energy, development goals, there are six main of them,

[Link] 61
Environmental Economics, Volume 10, Issue 1, 2019

Source: Compiled by author based on SAFETY4SEA (2018).

SDGs
related to the maritime
industry

Figure 14. Sustainable development goals related to the maritime industry

which are deeply connected with the shipping To sum up, all segments in maritime clusters
industry (Figure 14). are deeply connected with tne technologies use
and innovations in a fundamental way. An im-
As mentioned before, new technologies use can exac- portant question is whether the maritime in-
erbate problems for the planet and, at the same time, dustry has the right competence, capacity and
contribute toward the UN’s SDGs. In general, the willingness to continue to exploit these meg-
digital revolution, integration and automation pro- atrends to reduce costs, increase market shares
vide transparency and increase the accountability of and gain competitiveness (GCE Blue Maritime,
the shipping industry (SAFETY4SEA, 2018). 2018).

CONCLUSION AND FUTURE STUDIES

In this paper, existing sustainability frameworks on the relationship between environmental sustaina-
bility and the maritime industry were reviewed and discussed.

It was derived that the Norwegian maritime cluster is the second largest export industry of the country
after the oil and gas industry. Nevertheless, in the recent five years, Norwegian shipping industry has
been faced with decline in investments in the production of marine equipment and shipbuilding caused
by a significant decrease in oil prices from 2014 to 2016. Meanwhile, Norway was always in the top of per-
formers in striving to reach the United Nations SDGs, including the transition from oil and gas dependen-
cy to low carbon. Hence, two main issues arise: how to keep the competitive position as the forerunner for
sustainable maritime technology, particular in terms of green shipping and driving for a greener future,
on the one hand, and remain attractive industry for long term investments in times of recession of the oil
prices, on the other hand?

This research proposes modelling approaches to measure the relationship between oil prices, exchange
rates, service exports and ocean transports value added, and to explain the link between environmental
pollution and maritime cluster activity.

Empirical findings indicate that the growth rate of service exports has the biggest positive effect on

62 [Link]
 Environmental Economics, Volume 10, Issue 1, 2019

ocean transport value added growth. This means that a one percent increase in export growth rate leads
to increase of value added by 1.57%. A similar situation is observed with the growth rate of exchange
rates and ocean transport value added. The estimated results show that a one percent increase in ex-
change rate leads to increase of value added by 1.46 percent. At the same time, the regression analysis of
the model depicts another tendency for the relationship with crude oil prices: a one percent increase of
this indicator decreases ocean transport value added level by 0.26 percent. Hence, it can be traced that
the oil industry has a strong impact on value creation in the maritime cluster and its competitiveness,
especially on the shipping sector

The paper also uses an autoregressive distributed lag (ARDL) to estimate the long run relationships be-
tween the indicators. The analysis shows: the growth rate of ocean transport value added in the current
period is the result of the growth of the same criterion in the previous year, hence an increase of this
indicator by one percent last year will lead to the growth of it by 0.05 percent in the current period. An
increase of one percent of oil prices with a lag of four years leads to a decrease in ocean transport value
added in the current period by 0.13 percent. In addition, there is an impact of exports of services: an
increase of this indicator with a lag of three periods is accompanied with fall of ocean transport value
added in the current period by in 1.26%.

The regression results of the estimation the links between the carbon emissions from international ma-
rine bunkers and ocean transport value added confirm the validity of the EKC hypothesis in Norway
at a turning point 4.12 and it was reached in 1990. Furthermore, it was revealed that after the inflection
point, which appears at 14.266 million. NOK, CO2 emissions per unit have a tendency to decline with
the increasing levels of ocean transport value added.

Global competition is furious and growing in oceanic industries. Therefore, Norwegian maritime com-
panies are dependent on constantly developing products and production methods. The development of
maritime clusters in Norway is based on knowledge and technologies. It is strong in innovative research,
which helps to build bridges with other leading sectors of the Norwegian economy by using environ-
mentally friendly and energy efficient maritime transport.

Some research limitations still exist in the current paper. For example, author investigated the impact of
ocean transport value added on CO2 emissions, but the study doesn’t reflect the influence in the other
direction: how air-pollution exposures the economic growth in the maritime industry. The shipping in-
dustry has to face the challenge of meeting strict rules, and the industry should be in line with climate
regulations. Therefore, future research can perform surveys and use causality analysis to determine
this relationship. Another limitation, due to the lack of indicators and reliable data of port performance,
imply that the current study does not consider sustainability framework for individual ports, which
would be recommended to apply and make comparisons of the effectiveness of port logistics companies.
Hence, it would be meaningful to trace the sustainability performance of ports. However, these limita-
tions of the present study give a new perspective and avenue for future research.

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