Carnival to Invest $400M to Cut Pollution - Analyst Blog

When it comes to environmental sustainability, very few industries face more elementary challenges than cruise ships. To conform to the environmental regulatory standards, Carnival Corporation CCL announced its plans to invest $400 million to reduce pollution generated by its ships by more than 70%.

This announcement follows Carnival's announcement in April regarding its targeted 20.0% reduction in greenhouse gas emissions from shipboard operations by 2015. The company has already reduced gas emissions by 19.0%.

The current expansion will cover 70 ships out of its current fleet of 101 within the next three years. The improvements will be carried out in 22 Carnival Cruise Lines ships, 9 Holland America Line ships, 7 Princess Cruises ships, 3 Cunard vessels and dozens of others in European cruise lines on AIDA Cruises and Costa Cruises.

The cruiser company's decision comes after the International Maritime Organization IMO recently capped sulfur within Emission Control Areas (ECAs) at 1.0%, which is expected to drop to 0.1% in 2015. Further, the IMO's global sulfur limit for seas, other than specifically designated ECAs, is currently 3.5%, and is expected to drop to 0.5% by 2020.

Owing to April announcement, the Miami-based cruise operator announced its plans to install scrubbers on 32 ships, to meet pollution restrictions by the Environmental Protection Agency and the IMO in September last year. Carnival installed a special exhaust gas cleaning technology — ECO Exhaust Gas Cleaning (ECO-EGC) — proven to eliminate key pollutants from exhaust gases of a ship at sea, during maneuvering as well as at the port.

Carnival's pollution-reduction system combines technologies that have been successfully used in onshore applications like power plants, factories and vehicles to remove high-sulfur content from exhaust fumes. Carnival will use a two-sided system – one to reduce particulates from the ship's engine emissions, and another to use seawater to purify sulfur compounds from the exhaust gases.

Therefore, Carnival's advanced ECO-EGC systems conform to both North American and global IMO standards. Apart from this, it will help the cruiser company to lessen the swelling fuel costs. Additionally, as a result of the September announcement, Carnival Cruise Lines will be able to return its ships to the registered ports in Baltimore and Norfolk in 2015.

For all the seemingly inherent wastefulness of the cruise industry and activists accusing these companies of taking environmental regulations lightly, Carnival — one of the worlds's leading cruise operators — seems to have taken a step in the right direction. With intense effort to lower wastage, cut fuel consumption and generally reduce their impact on the earth, Carnival is striving to enhance sustainability and improve its environmental friendliness.

Carnival, currently, carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Royal Caribbean Cruises Ltd. RCL, Regal Entertainment Group RGC and Speedway Motorsports Inc. TRK. All these stocks carry a Zacks Rank #2 (Buy).