Climate Change and Energy Management-Shih Wei Navigation Co., Ltd.

Climate Change and Energy Management

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Climate Change and Energy Management

Climate Governance

The issues of climate change have continued internationally for years. In 2022, Taiwan officially announced Taiwan’s Pathway to Net Zero Emissions in 2050. To respond to the government policy and effectively mitigate the impact of climate change, Shih Wei Navigation has set GHG emission targets based on the international maritime climate change strategies initiated by IMO and incorporated the SDGs into its operating activities. It is expected to set up an exclusively (or concurrently) dedicated unit or working group in 2023 to further promote relevant management approaches and measures, such as GHG reduction, energy management targets and so on. The schedules for the GHG inventory and verification of the parent company have been submitted to the board of directors in 2022 for the management and control on a quarterly basis, and the climate risk issues are also reported to the board of directors after the publication of the Sustainable Report for the board to implement its supervisory responsibilities.

Unit: tonCO₂

Year	2018	2025	2030	2050
Description	Base year of carbon emissions	The year to achieve the short-term goal	The year to achieve the medium-term goal	The year to achieve the long-term goal
Target value	Annual total carbon emissions of 509,725 tonCO₂	Annual reduction of 23% of the total carbon emission	Annual reduction of 40% of the total carbon emission	Annual reduction of 70% of the total carbon emission

Climate Risk Management

Marine Transportation is facing the impending EU’s Carbon Border Adjustment Mechanism (CBAM) and IMO’s carbon reduction strategies, having significant impact on corporate operations. To understand the potential risks of climate change for Shih Wei Navigation and to respond to the international trend of Task Force on Climate-Related Financial Disclosures (TCFD), we referred to the TCFD recommendations published by Financial Stability Board (FSB) to make analysis of risks and opportunities in accordance with the disclosure frameworks around four thematic areas of Governance, Strategy, Risk Management, and Metrics and Targets, and relevant countermeasures are discussed and developed.

Climate Risk and Opportunities & Responses

Climate Risk and Opportunities	Countermeasures
Physical The exacerbation of extreme climate change intensifies the impact of weather and ocean phenomena on Earth	Frequent storms and typhoons may lead to extra fuel costs or affect the routes of the ships. In the future, we will continue the improvement of our risk management strategies to lower the risks and implement drills for special situations for the sea crews We introduce the FleetDSS (Decision Support System) system, and through the real-time ship position monitoring, combined with the weather forecasts and navigation suggestions, the data of the vessel’s performance of each voyage is monitored and gathered for result analysis that can be used as reference basis for future responses.
Transition Policy and regulations Replace and update existing ship equipment	Short-term: The annual GHG inventory is conducted, and the carbon reduction targets are set. Regular review of the target achievement status is made based on which the rolling adjustment of the carbon reduction actions is made to cope with the impact brought by the carbon tax, carbon fee, or carbon trading in the future. A third-party certification body is commissioned to conduct the verification of the Energy Efficiency Existing Ship Index (EEXI) of the vessels in accordance with the IMO regulations, and the corresponding methods (e.g. energy-saving equipment) based on the conditions of the vessels are selected to meet the requirements. The energy saving and carbon reducing measures are adopted to meet the requirements in SEEMP Part III. Medium-term: Seek and evaluate different carbon reduction projects and increase energy-saving and carbon-reducing devices, such as installing the Propeller Boss Cap Fins (PBCF) to reduce fuel consumption. It is planned to introduce the PBCF into the entire fleet to improve the CII rating Sell old vessels and those whose market shrank to build a new fleet of young, eco-friendly, and fuel-efficient vessels Long-term: Look for economical green alternative energy.
Opportunity In the rapidly changing customer trends, more ships using green and low-carbon technology and renewable energy will be used.	The regulations will strictly limit the carbon emissions of ships, which will lead to changes in customer behavior. The low-carbon fleet will be advantageous to market competition. In the future, we will make use of more green and low-carbon technologies and renewable energy to gradually form a low-carbon fleet. Shih Wei Navigation will strive to ensure its environmental performance to become the most preferable bulk shipping company.

Climate Risk and Opportunities

Countermeasures

Physical

The exacerbation of extreme climate change intensifies the impact of weather and ocean phenomena on Earth

Frequent storms and typhoons may lead to extra fuel costs or affect the routes of the ships.

In the future, we will continue the improvement of our risk management strategies to lower the risks and implement drills for special situations for the sea crews
We introduce the FleetDSS (Decision Support System) system, and through the real-time ship position monitoring, combined with the weather forecasts and navigation suggestions, the data of the vessel’s performance of each voyage is monitored and gathered for result analysis that can be used as reference basis for future responses.

Transition

Policy and regulations
Replace and update existing ship equipment

Short-term:

The annual GHG inventory is conducted, and the carbon reduction targets are set. Regular review of the target achievement status is made based on which the rolling adjustment of the carbon reduction actions is made to cope with the impact brought by the carbon tax, carbon fee, or carbon trading in the future.
A third-party certification body is commissioned to conduct the verification of the Energy Efficiency Existing Ship Index (EEXI) of the vessels in accordance with the IMO regulations, and the corresponding methods (e.g. energy-saving equipment) based on the conditions of the vessels are selected to meet the requirements.
The energy saving and carbon reducing measures are adopted to meet the requirements in SEEMP Part III.

Medium-term:

Seek and evaluate different carbon reduction projects and increase energy-saving and carbon-reducing devices, such as installing the Propeller Boss Cap Fins (PBCF) to reduce fuel consumption. It is planned to introduce the PBCF into the entire fleet to improve the CII rating
Sell old vessels and those whose market shrank to build a new fleet of young, eco-friendly, and fuel-efficient vessels

Long-term:
Look for economical green alternative energy.

Opportunity

In the rapidly changing customer trends, more ships using green and low-carbon technology and renewable energy will be used.

The regulations will strictly limit the carbon emissions of ships, which will lead to changes in customer behavior. The low-carbon fleet will be advantageous to market competition. In the future, we will make use of more green and low-carbon technologies and renewable energy to gradually form a low-carbon fleet. Shih Wei Navigation will strive to ensure its environmental performance to become the most preferable bulk shipping company.

Impact of Climate Change on Operations

About 27% of the GHG emissions of global transportation come from marine transportation. Ships emit approximately 1 billion metric tons of carbon dioxide every year, accounting for nearly 3% of global GHG emissions. If no active actions are taken, in addition to the negative impact on the environment, we may also be forced to face the situations in which the investors, customers and other stakeholders will gradually increase their demands for low-carbon ships and the government may impose stricter laws and regulations so that the ships may be required to slow down or be levied carbon taxes or carbon fees. Proactive countermeasures have to be proposed to avoid negative impact on corporate profitability. Looking at this from another perspective, new market opportunities can be created by ensuring the advantages of environmental performance. Shih Wei Navigation will strive to work on its environmental performance so as to become the most preferable bulk shipping company with sustainability development.

Energy Management

Shih Wei Navigation has set the Energy Management Policy in accordance with IMO Resolution MEPC.213(63), regulating the establishment of the Ship Energy Efficiency Management Plan (SEEMP) to reduce the fuel consumption and the GHG (such as carbon dioxide) emitted by ship operations. To achieve the energy conservation goals, the Company has set up an energy management policy for the energy consumption management, aiming at avoiding unnecessary consumption, improving cost-effectiveness and working conditions, and reducing the amount of pollution, particularly the CO₂ and SO_x emitted by the engines.

Shih Wei Navigation’s fleet is strictly compliant with international environmental conventions and regional environmental regulations, and takes operational management measures and carbon reduction strategies to reduce energy consumption of the vessels. The fleet of Shih Wei Navigation provides high quality and safe shipping service under the premise of taking environmental protection, energy conservation and carbon reduction into account for the purpose of maintaining the marine ecology and contributing to the environmental protection for the earth. The power consumption of the Head Office is reduced through green purchase. By purchasing energy saving products, the electricity consumption is reduced. Due to the difference in business types, energy use is divided into that in the fleet and that in the Head Office.

The Fleet: The main type of energy is fuel used in ship engines, generators, and auxiliary equipment, etc.
Head Office: Purchased electricity

The Fleet

Head Office

Item	2020	2021	2022
Diesel (metric tons)	13,453	8,736	9,019
Heavy oil (metric tons)	130,060	116,837	111,071
Total (metric tons)	143,513	125,573	120,090
Diesel (GJ)	549,914.840	357,099.237	368,667.356
Heavy oil (GJ)	5,557,491.472	4,992,469.869	4,746,087.462
Total (GJ)	6,107,406.312	5,349,569.106	5,114,754.818
Ton-nautical Mile	571,429,580,468	508,515,951,237	395,132,066,870
Energy intensity (GJ/ ton-nautical mile)	0.0000106879	0.0000105200	0.0000129444

Item	2020	2021	2022
Purchased electricity (kWh)	183,225	179,085	185,372
Total (GJ)	659.610	644.706	667.339
Number of employees (people)	68	69	74
Energy intensity (GJ/number of employees)	9.700	9.344	9.018

Note:

1 Gcal = 4.185 GJ
The calorific values refer to the Taiwan Energy Statistics Year Book published by the Bureau of Energy, MOEA, which are 8,400 Kcal/L for Diesel and 9,600 Kcal/L for Heavy Fuel Oil
The fleet's energy data is derived from the ClassNK verification letter - IMO - Ship Fuel Oil Consumption Reporting
For detailed explanation, please refer to the company’s Sustainability Report

GHG Management

To make effective control and management of GHG, Shih Wei Navigation cooperates with the government in the promotion of GHG inventory and verification information disclosure to make stepwise establishment of the capabilities of carbon inventory and management. Currently, we have conducted autonomous inventory of the GHG emissions of the Headquarters (parent company) and the fleet (subsidiaries) between 2019-2022. The ISO 14064-1:2018 organization level GHG Inventory Standard is planned to be officially adopted in 2023. The goal is to obtain external verification for the parent company in 2024 and for the ship operating subsidiaries in 2025. The schedules for the GHG inventory and verification of the parent company have been submitted to the board of directors in 2022 for the management and control on a quarterly basis so as to fulfill the supervisory responsibilities.

The boundary of the Company’s GHG management scope is set by the operational control, which is divided into the Head Office and the fleet. Scope 1 emissions are from the fuel used for fleet operation and Scope 2 emissions are from the purchased electricity of the Head Office. The inventory of Scope 3 emissions has not been carried out. Currently, the autonomous inventory of Scope 1 and Scope 2 emissions have been completed.

To make effective management of the GHG and energy of the fleet, we have imported the StormGeo s-Insight system to every vessel for the reporting of relevant data daily. Through the data platform, the latest status can be grasped to ensure the ships’ compliance with EU-MRV, IMO DCS, EEXI, CII, and other regulatory requirements.

Unit: tonCO₂

Item	2020	2021	2022
Scope 1(The fleet)	448,336.000	392,521.801	374,790.008
Scope 2(Head Office)	96.008	90.975	93.670
Total emissions	448,432.008	392,612.776	374,883.678
Ton-nautical Mile	571,429,580,468	508,515,951,237	395,132,066,870
GHG emission intensity (Metric tons (t) CO₂ / Ton-nautical Mile)	0.000000785	0.000000771	0.000000948

Note:

The GWP Value from the Fifth Assessment Reports (AR5) by IPCC in 2013 was applied
Scope 2 emissions from the headquarters office are calculated by summing up the electricity usage data listed on the monthly electricity bills. For externally purchased electricity by the headquarters office, the emissions are calculated based on the carbon emission coefficients for electricity published by the Bureau of Energy, MOEA, for each respective year. Scope 1 emissions from the fleet are calculated based on the data from ClassNK fuel oil consumption certification. According to the fourth IMO GHG Study, the emission factors for Diesel/Gas Oil and Heavy Fuel Oil are 3.206 and 3.114, respectively.
GHG emission intensity should be calculated in tonCO₂/ton-nautical mile to show the relationship between the cargo load and the carbon emissions more accurately. If calculated in tonCO₂/nautical mile, only the total voyage distance is considered, which may not be enough to present carbon emission intensity. Due to the re-statement, only the unit of tonCO₂/ton-nautical mile would be used from 2021.
Ton-nautical Mile／Ton-mile is calculated by multiplying the weight of the cargo in tons by the distance traveled by the vessel in nautical miles.
The 2019-2022 data coverage rates all reached 100%. There is no relevant data for the passenger ship since there was no actual operation.
For detailed explanation, please refer to the company’s Sustainability Report.

GHG Reduction Actions

The Fleet

Sell old vessels and those whose market shrank to build a new fleet of young, eco-friendly, and fuel-efficient vessels
Fuel switching: Use low sulfur fuel oil to reduce the emissions of sulfur oxides (SO_x)
The Company’s new vessels built after 2015 adopt the electronically controlled engines (B&W ME-B), which have the same cylinder diameter of 500mm as the traditional engines (B&W MC-C) used in shipbuilding in 2011. When the two types of engines are compared, the electronically controlled engines have the advantages of more precise electronic control of fuel injection, more fuel-saving effect, high reliability, and reduced frequency of maintenance. Therefore, new vessels built after 2015 adopt the ME-B type engines to meet the environmental requirements and achieve the highest economic benefit
Compliance with EEXI and CII regulations:

Energy conservation requirements are given in terms of ship design efficiency on the premise of accomplishing a certain amount of transportation task while making the most efficient use of fuel. Ships not meeting the emission standards or causing pollution will be restricted or have to make adjustment or improvement. After the calculation by the third-party certification agency, ClassNK Consulting Service Co., Ltd. (NKCS), some vessels of the fleet have to be equipped with Engine Power Limitation (EPL) to reduce the GHG emissions to meet the requirements of EEXI
Every year, the vessels will undergo the CII verification and rating. If the rating is not good, corrective action plans will be established and included in the Ship Energy Efficiency Management Plan (SEEMP)

The Propeller Boss Cap Fins (PBCF) are installed in the vessels to reduce fuel consumption. It is planned to install the PBCF in the vessels of the entire fleet to improve the CII rating

Head Office

All the fluorescent lamps in the office have been replaced with lamps with energy-saving labels issued by the government
Emphasize the importance of work efficiency among employees and reduce the time for them to linger in the office to reduce energy consumption
The server virtualization was introduced in 2021 to achieve environmental protection, energy conservation, and reduction of maintenance costs by reducing the number of physical servers
Traditional laser and inkjet printers have been phased out and replaced by printers with Continuous Ink Supply System (CISS), saving as much as 95% of electricity compared with printers of the same level, putting an end to the harm of toners to human health. Currently, a total of 6 units are in use
In 2022, three photocopiers were replaced, and the new model rented is with the energy-saving label approved by the Bureau of Energy, MOEA, that can improve efficiency while at the same time reduce energy consumption
In 2022, the renewal project of the chillers of air-conditioning units was implemented to improve energy efficiency and achieve the benefits of energy conservation

Air Pollutant Management

The management and control of the nitrogen oxide (NO_x) and sulfur oxide (SO_x) emissions of Shih Wei Navigation’s fleet is implemented in the stages of ship building, equipment replacement, and voyage process to ensure complete implementation and control so as to reduce the emissions of air pollutants.

To work in line with the IMO 2020 Global Sulfur Cap regulation, the fleet has completely changed to use low-sulfur fuel oil (0.5%), and when entering the so-called Emission Control Areas, the ships use low-sulfur fuel with 0.1% maximum sulfur content, and only distillate fuels (e.g. MGO or MDO) with 0.1% sulfur content limit are allowed when ships are within 24 nautical miles of the California coastline. To comply with the requirements of the regulations on nitrogen emissions from marine engines, we have actively adjusted the marine engines to meet the Tier I or Tier II nitrogen emission restrictions. Moreover, to be compliant with the requirement of MARPOL Annex VI, after an inventory of the Company’s fleet, all young ships use eco-friendly refrigerants (R404A). For old ships, the refrigerant (R22 refrigerant) in the vessel flake ice machines and ship air-conditioners has been completed eliminated and changed to eco-friendly refrigerants (R-407), aiming at joint maintenance of the environment. In 2022, Shih Wei Navigation did not emit any ozone-depleting substances (ODS) during ship operation.

Statistics of air pollutant emissions from ships of Shih Wei Navigation in the past two years

Unit: Metric ton(s)

Category	2021	2022
NO_x	8,895.998	8,446.166
SO_x	171.571	170.137
PM₁₀	453.677	430.238
PM_2.5	417.383	395.819

The management and control of the nitrogen oxide (NOx) and sulfur oxide (SOx) emissions of Shih Wei Navigation’s fleet is implemented in the stages of ship building, equipment replacement, and voyage process to ensure complete implementation and control so as to reduce the emissions of air pollutants.

Climate Change and Energy Management