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| II. Financial investment for climate changes |
| The company has made a lot of cost investment in the following aspects due to the global environment problems caused by the climate changes. |
The first is that climate changes impact the rules of typhoons including happening time, moving track and intensity of typhoon, which has great effects on COSCO's ships sailing around the sea areas in the world. In order to resist the possible damages caused by typhoons, |
| COSCO invests more human power and money in establishing organizations, shore-based shifts, commanding and coordination. Typhoons also lead to the increase of the sailing time and the miles as well as the delay of the schedules. See the below table for details: |
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The second is the prevention measures taken by port countries and seacoast countries to fight against the climate changes, e.g. the "Green Ship Flag" advocated by California of US. COSCO actively responds and initiatively participates into such moves, requiring ships reducing the speed in advance before sailing into or departing from the ports. COSCO's ships sail into and depart from ports at a speed lower than 12 sea middles per hour and use the light oil-based fuels with less content of sulfur instead of heavy oil in a bid to alleviate air pollution. Because the price of the light oil is 1.8 times of the heavy oil, COSCO needs more money to buy light oil-based fuels for ships.
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The third is the shortage of resources and energy caused by the climate changes. In order to jointly alleviate the environment pressure worldwide, COSCO invests human power and money to reinforce the researches on the technologies of saving fuels and seawater desalination as well as the improvement of related equipment and facilities. In order to increase the burning efficiency of the fuels and reduce the emissions, COSCO buys the fuel additives, which adds additional expenses.
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Finally, in order to effectively face the negative effects of the climate changes on COSCO in all aspects, COSCO sets up the management systems for operation quality, environment and occupational health and safety. COSCO also establishes the safe environment web and the occupational health and safety web as well as effective training mechanisms for knowledge propagation and operation skills, in a move to improve the environment awareness and the management ability of employees. While overcoming the negative effects of the climate changes, COSCO's additional cost rises. |
| ● Increased management cost and equipment expenses due to the implementation of the new rules of the Antifouling Convention |
The Appendix VI in the International Antifouling Convention MARPOL73/78 took effective on May 19, 2005 and the amendments of the Appendix VI of MARPOL Convention and the NOx Technical Code became effective on Nov. 22, 2006. According to these rules, ships entering into the controlled areas are compulsorily required to use the fuels with the sulfur content of 1.5%m/m. COSCO's ships will call at the bunkering ports to fill enough low-sulfur fuel oil before entering such water area in a bid to conform to the requirement, which greatly adds the operation cost with additional USD50 needed per ton of fuel oil. In 2006, about 20 ships entered this area with each ship filling 500 tons of oil on average, adding additional cost by approximate RMB3.75 million.
In addition, Brazil implements the unilateral ballast water administration rules. COSCO increased investment by nearly RMB700,000 expenses and a lot of human power in order to meet the requirements of the country. |
| ● Investment in reforming oil-saving technologies |
| A lot of expenses are needed to improve the oil-saving technologies such as oil syringe, grilling machine, fuel oil heater, sailing optimization control and anti-drag technology of ships. For instance, in terms of the oil-saving technology reform, COSCO Bulk Carrier invests about RMB1.5 million in 5 vessels using homogeneous fuel oil technology and RMB3.8 million in 3 vessels using electronic cylinder oil syringe. |
| ● Investment in purification processing |
| The company's investment is increasing year by year in order to meet the requirements for environment and discharge purification, e.g. the investment in oil-water separator, dejection tank, domestic sewage, waste oil processing and industrial sewage processing equipment has been increased significantly. In 2006, COSCO invested in RMB11.98 million in purification processing, up by 9.7% compared with the same period last year, while RMB8.55 million investment used to meet the emission standard of air pollutants in ship-building zones and communities. |
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