Good morning, everyone, welcome to this presentation of KCC's updated environmental strategy for 2023 to 2050. As normal, you are able to write in your questions in the webcast solution, which we will take after the presentation. The starting point for our environmental strategy is our combination carriers, that due to their efficiency, already today are 30%-40% lower carbon footprint than the competing standard vessels. The uniqueness of the ships, being able to transport both tanker and dry bulk cargos and are made for very efficient cleaning and switching between the dry and wet cargos, enable them to utilize inefficiencies in shipping today. We employ the ships in trades where the standard dry bulk and product tankers are sailing long distances without any cargo on board.
By combining the cargo of the standard dry bulk and the product tanker vessels with minimum time empty, so-called ballast in between, we are transporting far more cargos than the standard ships and hence can split the fuel emission and reduce the fuel consumption per ton transported and hence the emission per ton transported over more cargos, reducing this by 30%-40%. Looking at the actual performance in 2022, we were 25% lower in terms of carbon intensity compared to the theoretical benchmark calculation of the standard vessels doing the same transportation work as our ships in our trades.
If we exclude the 17 percentage points of our capacity, which in 2022 were not in combination trade, and also the least efficient combi trades, focusing then on the trades into South America and Australia, we were 32% below the benchmark. I have to say that this calculation probably underestimates the real value contribution in terms of emission of our business. We safely can say what we deliver are between 30% and 40% lower carbon intensity compared to standard vessels in our main trades. We delivered our first environmental strategy in early 2020 after working hard through 2019. And I have to say it's been a lot of learnings, and we are probably at the time too optimistic.
We didn't have all our emission data ready, and also the world has changed quite differently from what we thought. The big learning point is that everything takes longer time than expected. Take looking, for instance, at energy efficiency measures, the big initiatives that we are doing from starting identifying it to implementing it on our ships, it's between one and a half to two years. Also, since we presented this strategy in early 2020, we have had COVID, which impacted efficiency through deviations for crew changes, more port congestion, and even the Ukraine situation has impacted trade flows, reducing efficiency. Another learning point is that there are no easy fixes. We had thought that the carbon offsets, which are very cost-efficient ways to reduce net emissions, which could be a good tool.
What we have learned is that carbon offsets is not a credible solution for shipping. With its low cost, which is not representative for the high cost of reducing emissions in the hard-to-abate industry like shipping. We also thought that it would be easier to get access to biofuels in ports around the world, and also that the pricing could quickly or at least reasonably fast reduce. We're seeing that to up to now, it's been mainly available in Rotterdam, in one single port in the world, and secondly, the pricing has been more than double. The third learning point is that when it comes to future non, low emission, zero emission fuel and technologies, there are more uncertainties than we thought.
We are seeing that for instance, with ammonia, the class rules for ammonia will not be ready before in 2027, 2028. The development on the regulation side internationally with IMO has been a big disappointment. They are slow-moving, and it seems that it will be quite a bit of time before we see any effective regulations in shipping that will impact the actual performance of ship owners. If you look on our total learning points, we are behind our targets for the carbon intensity improvements for the first years up to 2022. We are pleased that we have succeeded to de-deliver on the targeted emission carbon emission reductions.
We have based on our view on carbon offsets and also the longer time to get the biofuels as a important part of our operations, that the carbon neutrality target for 2030 is not realistic. We have to be honest on that. We also see that the fuel transition take longer time. Still looking on the journey we have started, and it's just in the beginning of this journey, from the presentation of our policy and strategy in 2020. Up to today, we have learned a lot and are very pleased that we have advanced on a number of fronts, including rolling out energy and voyage efficiency initiatives that and results you will see even more the coming years.
The main focus for the next four years is on efficiency improvements, which will make preparations for future fuels. The last part of this decade, we target to start the fuel transition and also to get new vessels delivered that are more efficient. Looking on the first four-year period, our strategy is, as mentioned, to scrutinize any possible efficiency reduction improvement potential throughout our business. Based on the identified and committed initiatives to date, we believe we can reduce our carbon intensity by 30% compared to our actual 2018 performance, which is 21 percentage points compared to what we already have achieved in 2022. There are three levers in this strategy. Firstly, it's to improve further the trading efficiency of our business.
Here you see the picture of our trade into South America, where we bring in clean petroleum products from Middle East, India into Argentina and Brazil and load grains and sugar more or less in the same port on the way back. A super efficient trade. We can improve that trade and other trade going forward. We will work hard to improve the voyage efficiency, the execution of the voyage itself, and we'll invest in energy efficiency measures to improve the efficiency of the vessels itself. Starting up with the trading efficiency, there are many ways to improve trading efficiency. One is to utilize the full carrying capacity of our vessels
We see especially in tanker space that there are fixed lot sizes decided by traders and suppliers, meaning that we can't utilize the ships with a full intake. We believe that there are potential to improve that. There's still potential to minimize ballast by increasing the shell capacity into combination trade and to optimize the mix of inbound and outbound cargos. We believe by better cooperation with customers and better scheduling, we can reduce waiting time, we can improve the port turnaround time, and we can avoid the high-speed voyages. The cooperation with customers are key and it is partly, as mentioned, to improve the performance on a day-to-day basis. Secondly is to bring money on the table that can create the right incentives for us as a shipowner to improve further.
One is to bring in the cost of carbon into daily chartering decisions. Secondly is to get funds to try out and use the biofuels and new type of fuels in the future. Secondly is to get part funding for energy efficiency measures that are difficult to fund based on a purely profitability point of view. Very pleased to tell you that we have after a 12 months trial, implemented what we call a carbon emission factor mechanism into our contract with the Australian miner and aluminum company South32 with effect from 1st of January 2023. In this mechanism, our earnings under the contract will be dependent on KCC's emission performance relative to baseline. If we perform below the baseline, that means have a better performance, we will get higher freight.
If we underperform the baseline, we'll get lower freight. This will drive efficiency in our business. Secondly, for all the other trades, we are implementing internal trading routes to improve the discipline of our chartering decisions, putting in a shadow carbon pricing, and even putting in a type of speed limits where we are planning based on lower speeds. We are working hard to get customers when we fix ships on time charter to reduce speeds, and we are working hard with customers to reduce the high-speed voyages. Looking on the effects of our shadow carbon pricing, normally it's a win-win model in our business. The higher efficiency results in higher earnings.
In situations we have had over the recent months with a booming tanker market and a poor dry bulk market, it has been on a purely profitability point of view, been from time to time, more optimal to do ballast rather than take the dry return cargo back again. Here you see the example from our trade from South America up to U.S. Gulf, where we take clean petroleum products southbound in the blue line and take dry bulk cargos up again. The alternative is to ballast. The difference is close to 40 days ballast and close to 1,000 ton CO2 per cargo.
With our shadow carbon pricing mechanism, we add a carbon price equal to the EU's emission allowance pricing, which you know is around $100 per ton, implying a carbon cost in our internal calculations of $100,000 per day. This will in super booming tanker market and poor dry market may be not enough to make the decisions to take the dry cargo northbound, but in many other situations, it will be the decisive factors to make sure that we maintain the highest possible trading efficiency. We believe there's a lot of potential to improve further the voyage efficiency, how the voyage execution is made. Digitalization of our fleet is a key initiative that we believe will drive voyage efficiency. What digitalization will give us real-time data, which from the critical performance of the vessels.
That will make it possible for us to make early corrective actions to improve efficiency. Secondly, digitalization can make automation on board the ships possible. Our crew get more and more new tasks to improve focus on operational efficiency using new type of equipment. By giving them better tools to take away tasks in order to prioritize other tasks is key to get performance up. Thirdly, we use artificial intelligence. We leave the potential to use historical data, vessel-specific data, to improve performance going forward. It will be increasingly complex for our crew to follow up our ships. Hence, we are investing in more crew training and also better shore follow-up of our ships and better cooperation to improve performance. In totality, these two initiatives will for certain improve performance.
Another important element is how we are improving the energy efficiency of our ships. We have to date implemented a number of low-hanging fruits across our fleet, everything from silicone antifouling, Mewis Duct, cleaning drones, and so on. The major installations, the timing of installation is set to docking, regular docking dates. The first big initiatives we have is the Silverstream lubrication system combined with a shaft generator will be implemented on two ships this year. will be during normal dry dock. Another nine ships are planned for this system in case it will be successful, which we expect it to be. The next step is to install wind-assisted propulsion tools. We target that we'll make our first decision and investment this year.
As a company, we are early movers in this field. We work with our suppliers to improve and to test out new solutions. We tell our customers, "Come to us. Our ships will be your floating laboratories. If it works, we'll run it out of our fleet." Good things about the energy efficiency initiatives is they are both sustainable and profitable. To date, in 2021 and 2022, we have invested close to $4 million in energy efficiency measures. You will see that the amounts used will increase substantially over the next years. 2023, we expect between $10 million and $12 million will be used on energy efficiency measures.
When we calculate the effect of these energy efficiency measures, we believe realistically that it will, the value of the lower fuel consumed is between five and a half and six and a half million dollars. I have to say, it's fairly complicated to make these calculations. There's so many things impacting the performance of a ship. I think we can safely say that what we have done to date, there is at least around one year payback time of what we have invested. Looking at the latter part of this decade, we target to deliver further improvements in carbon intensity, another 15 percentage points compared to the first period.
Making that the total improvements compared to 2018 ends up at 45% improvement in carbon intensity, which is substantial. The firstly is the fleet renew with getting in more efficient ships, combined with continued energy efficiency investments and improvements shall give results. Backed by customers and new regulations, we target to start using biofuels and zero-emission fuels in our daily operation. The new builds will be an important part of this strategy. We target to replace minimum three of our oil carriers that are being phased out of our business in 2026-2027 with new builds. On the new builds, we put in everything we have learned on our existing ships when it comes to energy efficiency.
The target is that these new ships should be 35% lower carbon footprint than the old ships that we phase out. As a minimum, these new builds will be prepared for later conversion to burning zero-emission fuels. We'll make considerable investments to make it easier, both time and cost effective to make these conversions at a later stage. We will work hard together with customers and seeking also public support to introduce the first zero-emission vessel in service within 2030. When it comes to the tough part is to start using biofuels and zero-emission fuels. We will already over the next years, up to 2026, work to test out biofuels and keep contact with suppliers to prepare ourself to be ready to use biofuels in a daily operation.
With EU's new regulations, so-called FuelEU Maritime 6% of fuel for shipments into Europe and out of Europe and internal Europe need to be blended with low carbon fuels in 2030. We assume that we will have 15% biofuel in our fuel mix in 2030. We target that minimum 50% of the fuel used for the one, or hopefully more, zero-emission vessels we target to have in service will be with zero-emission fuels. We have to be honest that there are large uncertainties when it comes to the fuel transition.
As mentioned, there are large uncertainties both with the future choice of low and zero-emission fuels, the availability of such fuels, the pricing of such fuels, and also technical solutions and regulatory framework. The ammonia is of course, which has been we, amongst others, have believe was the most promising fuels. As mentioned, class rules will only be available in 2027 and 2028. The engine manufacturers have delayed the commercial introduction of these engines. They're not probably ready before in 2027 and so on, just showing how demanding it is for a company like ours that are made to deliver returns to our shareholders to make these decisions.
There are new development when it comes to methanol as fuel, where the big container liners are implementing and contracting ships that can burn methanol as fuel. We know for certain that the availability of green methanol will not be there until well into the 2030s for someone that are not willing to invest in fuel production capacities and to commit to, let's say, a 10-year offtake agreement. In order to succeed with our targets, we need regulatory and customer support. We cannot advance the fuel transition on its own. We will work hard to achieve this.
In lack of the support, we have made a sensitivity shown in the graph, showing that what we can succeed on our own without the fuel transition is limited to the energy efficiency improvements and improvements that we will get through delivery of new builds. Shipping has an environmental challenge more than carbon emission. We have, as part of our strategy, a number of initiatives to improve further the environmental footprint of our business. The recycling of ships will be done in a responsible manner, in full compliance with the Hong Kong Convention and the guidelines of the Norwegian Shipowners' Association. Secondly, we will work hard to reduce waste. We have at least two initiatives that I would mention.
We are working in a work group in our industry to establish recycling facilities for worn ropes, and we target 100% of the worn out ropes we use can be recycled. We are targeted 100% of the fuel sludge we the ships produce will be delivered to shore for environmental recycling. Thirdly, we are working with customers that on every shipment in port, we should use our SCR system that reduce NOx emission by 80%.
NOx is a harmful local emission, which we can today do more than we do, because today the SCR system installed on modern ships like our CLEANBUs, the only place in the world you need to use them is in the U.S. and in Europe, and the rest of the world, there are no mandatory use. We will work with our customers to ensure that we use it in every port on every voyage. We are, we are very pleased to see that we have in KCC and in Klaveness overall succeeded to establish a company culture, a common understanding of the importance of delivering on the decarbonization. It's for the common good, but it's also matching our strategy of our company, strengthening the competitive advantage of our business. The headline of KCC's strategy is cost-effective decarbonization.
This strategy impacts more or less everything we do in every department, in every part of our business. We have talked about the vessel energy efficiency, making the vessel more efficient, the voyage execution and operations, the chartering, making the good scheduling, the right combinations from dry and wet cargos, the way we work with our customers to establish sustainability-linked contracts and this carbon emission factor mechanism, the way we finance our ships, which more or less all will be based on sustainability-linked financing with respect to banks within this year, and the way we report where we talk to be a leading company within reporting in emission performance. We can promise you only two things. One is that we work very hard to deliver on our emission reduction targets.
Secondly, it's going to be a very exciting and probably journey with probably a lot of surprises. We'll do what we can to optimize that. Stay tuned for this journey. To learn more about our strategy, we are releasing today one podcast. We have got Christine Korme from Director Communication for Norwegian Shipowners' Association to moderate that podcast, focusing on energy efficiency improvements. The second podcast moderated by Craig Eason, the director of Fathom World, which will focus on the transition to low and zero emission fuels. Please join that to learn more. That is the end of the presentation, and we are ready to take questions.
Yes, Engebret, we do have one question asking: How will the inclusion of shipping in the EU ETS impact KCC?
It will definitely be an advantage for us because it means that when we have shipments out of Europe, especially, the standard ships that have previous ballast coming into Europe will have to pay much higher carbon or have to buy more emission allowances than what we need to have. It gives us a very clear competitive advantage. Of course, that is something that will be for everyone that is focusing on being more efficient. You get the competitive advantage, and with a world with hopefully more regulations like in EU, with some sort of common price, it will give, it will create value for our company.
Yep. That's the only question. Thank you very much.
Thank you all for joining. Please let us know if you have further questions. You can always contact us in KCC. Thank you.