Green concession agreements

Making port management ‘green’

Environmental concerns about port activity are mounting. The process of making port management ‘green’ affects port authorities around the world in terms of safeguarding their ‘license to operate’ and increasing their economic and environmental competitiveness. In Europe, the growing green reflex is mirrored in the many green initiatives of individual ports and the coordinated actions of the wider port community, as exemplified by the Ecoports foundation (embedded in the European Sea Ports Organisation – ESPO) and the annual GreenPort conferences.

One of the most interesting fields of action for landlord
port authorities relates to the inclusion of green factors when awarding terminals to private terminal operators. Land for port development is scarce, making terminal concessions to private stevedoring companies a prime task of landlord port authorities.  Key issues in the process include the allocation of mechanisms used for granting seaport concessions, the determination of the concession term and concessions fees, and the inclusion of special clauses in the concession contract aimed at assuring that the terminal operator will act in the interest of the port authority and the wider community (cf. throughput guarantees). A well-designed concession policy allows port authorities to retain some control on the organization and structure of the supply side of the port market, while optimizing the use of scarce resources such as land.
 

Phases in the terminal awarding process

A typical terminal awarding procedure consists of three phases, as depicted in Figure 1 (see also: [1] and [2]).

In the pre-bidding phase, the port authority makes the necessary preparations for the awarding, taking into account prevailing regulatory conditions. This includes decisions on the rules of the game, such as criteria related to the qualification and selection of candidates, and the desirable concession duration. In the awarding phase, candidates are screened, bids are evaluated and the most appropriate candidate is selected. In the post-bidding phase, a legally binding concession agreement is signed with the selected candidate and the company’s performance is monitored during the contract term. If necessary, correcting measures are taken and disputes are settled.

Making terminal awarding procedures ‘green’ requires initiatives in each of the three phases of the process. Remarkably, a recent survey performed by ITMMA and ESPO, which included 43 recent terminal awarding cases across Europe, showed that environmental issues today do not play an important role in terminal awarding processes across European ports.
 

Green actions in the three phases

When deciding what site to award, port authorities could more explicitly look at the environmental quality of the port site. Brownfields might be more expensive to redevelop, but often lead to a higher spatial quality and regeneration of older port sites.
Port authorities could also include more stringent construction guidelines for port infrastructure and superstructure. Such measures could include the use of a minimum percentage of green energy or the installation of coldironing facilities.

In the awarding phase, port authorities often include a qualification stage in which the number of candidates is narrowed down. Candidates are qualified based on minimum requirements related to their financial strength and relevant experience in operating facilities for similar cargo in the same or other ports.

Environmental performance can constitute a new additional element in this qualification phase. By doing so, possible candidates are not only rewarded for their market scale and financial potential, but also for having taken initiatives previously to develop
a green policy at other terminals in their portfolio. In about 70 percent of today’s European terminal projects, candidates have to present studies of environmental and territorial impact, covering aspects such as the impact of the terminal operations on the environment and the alternatives to eliminate, reduce or mitigate certain effects. While this proves that port authorities are very much interested in the environmental strategy of candidates, it remains remarkable that environmental criteria are rarely included in the final selection round. There is scope here to more explicitly integrate environmental performance into the selection process, next to more traditional criteria such as throughput expectations, financial performance, the price bid and socio-economic impacts in terms of value-added, created and employment effects.

Port authorities should also consider the inclusion of green elements in the post-bidding phase. Environmental clauses appear in 85 percent of all recent terminal contracts. In most cases, however, the clauses simply stipulate that the terminal operator will have to comply with local, national and supranational environmental legislation. In about 30 percent of these cases, the environmental clauses refer to the compulsory use of some sort of environmental management reporting system, while stipulations on emission levels are included in 18 percent of the contracts. About 9 percent of the contracts refer to specific technical equipment being used to limit emissions. About one fourth of all contracts combine several of the above environmental clauses. Occasionally, ports include clauses on existing or future contamination of the terminal site.

Dr. Theo Notteboom, President of ITMMA, University of Antwerp, Antwerp, Belgium
Edition: Edition 47

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