Carnival Corporation: A Company in “Conflict” while Cruising the C’s of Climate Change
The cruise line industry is at a unique crossroads with regard to climate change as it serves as both a major source of the environmental harm that has exacerbated the global warming phenomenon and a beneficiary of some of the effects of the rise in global temperatures. The subject of this discussion, Carnival Corporation p.l.c., is the largest cruise company in the world comprised of 10 cruise line brands with a combined fleet of over 100 ships (representing ~50% of the total worldwide cruise market).
Cruise Ships: The Environmentally Unfriendly Way to Travel
The large scale climate changes we have seen over the course of the last century is primarily due to the build-up of greenhouse gases in the atmosphere accumulated from the continual combustion of fossil fuels. This has resulted in a commiserate increase in CO2 levels translating to a correlated increase in temperature, a rise in sea levels and an increase in extreme weather events.
Oil is currently the dominant fuel source for all transportation methods and this dependence on fossil fuels make the transportation sector a major contributor to the aforementioned environmental issue. In particular, international sea vessels such as cruise ships typically use a form of heavy fuel oil which produces a greater amount of CO2 emission per ton of oil. In the last decade, Carnival published an annual environmental report detailing the level of CO2 emissions across its fleet. In the 2008 report, Carnival stated that its ships, on average, release approximately ~712 kg of CO2 per voyage. Per passenger the amount of CO2 emitted is about 401g or more than three times the amount of a passenger on a standard Boeing 747 jet.
The “Silver (Cruise) Lining”
Major entities within this industry, including Carnival, seem to be aware of this issue and appear interested in at least reducing the carbon footprint of its vessels. In 2014, Carnival achieved a goal of reducing the intensity of its carbon footprint by ~20%. Over this same time frame, they announced that the next generation of ships built by Carnival will be powered by Liquefied Natural Gas, recognized as one of the cleanest burning fossil fuels. Furthermore, the company has made a $400M investment in exhaust gas cleaning systems that reduce the amount of sulfur compounds and particulate matter generated by the ships’ engine exhaust. Finally, Carnival made a commitment to increase the number of ships in its fleet with cold ironing capabilities, allowing ships to connect to a port’s electrical grid as a power source, rather than relying on the ship’s engine, and further reducing the ship’s air emissions. As a result of these efforts, Carnival was identified as a leader in sustainability efforts and awarded a position on both the FTSE 350 and the S&P 500 CDLI, becoming the only company to have representation in both funds.
One Foot on the Brakes, One Foot on the Gas Pedal
According to Carnival, “change in mean temperatures could open up new routes and ports” for its ships, while “change in precipitation [might] make some ports more attractive.”
Ironically, climate change has caused more destinations to be accessible to tourists. As mentioned in the quote, Carnival may see substantial benefits from global warming as ports in the Northern hemisphere become more accessible and desirable for travel year-round. While the motivations behind these journeys may vary, the total effect is an increase in interest and cruise lines continue to be one of the fastest growing segments of tourism in the US. Even virtually untouched landscapes (e.g. northern parts of Alaska and the Arctic) have recently become accessible due to the melting of sea ice surrounding land masses.
Can Carnival Truly Be a Part of the Solution?
These benefits call into question whether Carnival is sufficiently motivated to fully contribute to climate change prevention. While many of Carnival’s new ships will include the technology outlined earlier in this post, the vast majority will continue to contribute only marginally lower levels of pollution than they did before.
Environmentally-sound practices are also not strictly enforced by law. While Carnival has received fines for its carbon emissions in the past, most ships are permitted to dump treated sewage from their ships anywhere. Though treated sewage is better for the environment than the raw version, traditional sanitation methods are not efficient enough to meet current EPA standards and have a negative cumulative effect in oceans waters, particularly with regard to reef ecosystems. Individual cruise lines have been taking measures to become eco-friendlier but it is essential for regulations and requirements to be placed at an international level. Cruise lines must have similar standards for carbon emissions and sewage treatment as countries to make a significant dent on their contributions to this issue.
Very insightful and well researched article! I agree with your points that the Cruise Industry is a very unsustainable way of traveling. They have taken some steps in the right direction, but it seems more like a half-heartedly approach, to say that they are being sustainable (or trying at least). With the high margins they are making, they should be investing much more into sustainability.
You have mentioned that they now have access to many more ports due to global warming. What shocks me even more is that they are also exploiting the ports they are currently going to, like Venice. The cruise line industry is exacerbating the climate change in Venice, by flooding the city with more and more tourists (they increased the number of tourists by 400% between 2008 and 2013 (https://www.wmf.org/project/venice)). Thereby ruining the canals and increasing pollution even further. It seems that they only try to maximize their short to medium term profits.
Great article! Like Miltok I agree that cruises seem to be an unsustainable way to travel, particularly when compared to the impact of airplane travel. However, it may be notable that cruise travel accounts not only for a passenger’s transportation from one location to another, but also their lodging. A stay at a hotel would increase that traveler’s carbon footprint as hotels utilize large amounts of energy and water. It may be difficult to compare the two – especially in terms of impact on any given local environment.
Carnival’s perspective on climate change is very interesting. From a brand equity point of view, Carnival seems to be aware that it must make an effort to be environmentally friendly. It is hard to believe that their motivation is skewed by the fact that climate change may open up new ports. It may be the case that Carnival is trying to see (or communicate to investors) the opportunity in what is otherwise negative news for their company. While they may benefit from more accessible and desirable ports, they surely are hurt by the fact that rising temperatures are accompanied by increased incidence and severity of storms. Additionally, there is a significant risk that climate change will result in increased damage to coastal land due to rising sea levels and storm surges. See “Risky Business: The Economic Risks of Climate Change in the U.S.” Cruise companies like Carnival rely on healthy and vibrant coastal destinations to attract customers and drive revenues. Overall, it would be short-sighted for Carnival to not wholeheartedly pursue solutions to climate change threats.
Addendum to the above article:
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Sources
(1)Carnival Corporation & plc Website, “Corportate Information”, http://phx.corporate-ir.net/phoenix.zhtml?c=200767&p=irol-prlanding. Accessed November 2016.
(2)Oliver J.A. Howitt, Vincent G.N. Revol, Inga J. Smith, Craig J. Rodger, Carbon emissions from international cruise ship passengers’ travel to and from New Zealand, Energy Policy, Volume 38, Issue 5, May 2010, Pages 2552-2560, ISSN 0301-4215, http://dx.doi.org/10.1016/j.enpol.2009.12.050.
(http://www.sciencedirect.com/science/article/pii/S0301421510000066). Accessed November 2016.
(3)Carnival Corporation & plc, “CDP Recognizes Carnival Corporation for Climate Change Transparency”, PRNewswire, 2015. http://www.prnewswire.com/news-releases/cdp-recognizes-carnival-corporation-for-climate-change-transparency-300178819.html. Accessed November 2016.
(4) Dowling, R.K. (2006) Cruise Ship Tourism. CABI Publishing, Oxford, UK.
(5)Dennis, Brady and Chris Mooney, “A luxury cruise ship sets sail for the Arctic, thanks to climate change” , Washington Post, 2016. https://www.washingtonpost.com/news/energy-environment/wp/2016/08/16/a-luxury-cruise-ship-sets-sail-for-the-arctic-thanks-to-climate-change/. Accessed November 2016.
(6) O’Connor, Mary Catherine, “Cruise Ship Industry’s Environmental Record: Not Triumphant”, Outside Magazine, 2013. https://www.outsideonline.com/1915601/cruise-ship-industrys-environmental-record-not-triumphant. Accessed November 2016.
(7)Becken, Susanne and John Hay (2007). Tourism and Climate Change: Risks and Opportunities, Clivedon. Channel View.
I really liked the article. You mentioned that some individual cruise lines became eco-friendlier. This is the trend in many industries, because awareness about climate change, its causes and problems have risen recently, making customers more conscious about the environmental issues. If climate change increases opportunities for cruise line industry, as you mentioned in the article, this will increase competition as well, which will in turn increase the pressure on the cruise line industry to become more environmentally friendly, because customers are becoming more environmentally conscious. I agree that stricter regulations and enforcements are necessary elements to fight against climate change and pollution, but increasing global awareness about the climate change is very important as well, because customers will eventually drive how the cruise line businesses operate in future.
An interesting analysis that could add some additional perspective would be to compare the carbon footprint of a traveller on the same route but using air travel. I remember back when I was working in consulting, this article in the New York Times circulated widely about how air travel was one of the biggest contributors to a person’s carbon footprint: http://www.nytimes.com/2013/01/27/sunday-review/the-biggest-carbon-sin-air-travel.html. Anchoring people’s frame of reference to something more tangible could help in contextualizing just how big of a contribution the cruise industry is making to the climate change problem.