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Microsoft heads up $34M investment in software platform to cut cargo ship emissions

New York–based startup Nautilus Labs uses AI to boost efficiency and pare fuel use on giant ships.
By Maria Gallucci

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A very large cargo ship sails at sea with a plume of white smoke rising from it
(Christian Charisius/Picture Alliance via Getty Images)

Microsoft is leading a $34 million investment in Nautilus Labs, a startup that uses data analytics to help giant ocean-crossing cargo ships reduce their fuel consumption and chart more efficient voyages.

The investment, announced on Wednesday, reflects a rising interest among logistics companies in deploying digital platforms to optimize their journeys on both land and sea. Ships and trucks move trillions of dollars’ worth of goods around the world every year, supplying the materials, machines and household products that keep the global economy humming. Most vessels and many vehicles still burn fossil fuels along the way.

Maritime firms in particular are turning to smart-planning tools as they navigate several headwinds, including stricter environmental standards, the worsening impacts of climate change, supply chain snags and — most recently — skyrocketing fuel prices and trade disruptions resulting from Russia’s attack on Ukraine.

Nautilus Labs, which is based in New York City, is among a handful of companies working to modernize the largely low-tech industry in an increasingly tumultuous time.

The startup combines data from satellites and onboard sensors with machine-learning tools to help ship operators devise shorter routes, set fuel-efficient speeds, avoid unfavorable wind conditions, and time arrivals so that ships don’t wind up idling in congested ports. All of those steps can reduce the use of dirty marine fuels and lower greenhouse gas emissions in the process.

Today, the way most of these decisions are being made is with very static, generalized assumptions, with an eye toward avoiding bad weather — and not how to fully optimize voyages and produce the lowest amounts of emissions,” Matt Heider, CEO of Nautilus Labs, told Canary Media.

An illustration of Nautilus Labs' voyage optimization platform displayed on a laptop. (Nautilus Labs)

On many vessels, which can sail for weeks at a time at sea, engineers still manually type information about a ship’s speed, fuel use and location into computer spreadsheets and email those to shore in a daily document known as a noon report.” It can take days for analysts to digest those data points and update a ship’s trajectory. Nautilus and other smart-shipping players such as Eniram and private weather firm DTN aim to deliver their results in near-real time.

If you’re operating with a single data point per day, you’re not going to be able to make the most effective decisions,” Heider said.

Hundreds of cargo ships already use Nautilus’ software system to monitor and optimize their voyages, according to the company. That includes vessels owned or operated by the French oil and gas giant TotalEnergies, Eastern Pacific Shipping and Emirates Shipping Line. So far, Nautilus clients have saved up to 12 percent on fuel costs per voyage, with the overall savings potential expected to reach as high as 30 percent.

Heider said the new $34 million investment will allow the startup to expand its presence in Europe and the Asia-Pacific region, where the majority of the world’s shipowners are based. Microsoft led the Series B funding round through its venture fund M12 and its $1 billion climate innovation fund for developing and deploying carbon-cutting technologies. With this round, Nautilus has raised $48 million to date.

Nautilus is a business that can be both high-growth and deliver on significant decarbonization targets at scale,” Mark Kroese, Microsoft’s general manager of sustainability solutions, said in a statement. He added that this round marks the first time Microsoft’s two funds are co-investing in a single company.

Reducing cargo-ship pollution — and climate-change risks

Curbing fuel consumption is among the most immediately impactful ways for shipping companies to reduce the greenhouse gases and toxic air pollutants that spew from vessels’ smokestacks.

The global shipping industry accounts for nearly 3 percent of the world’s annual carbon dioxide emissions, a figure that’s projected to grow in coming decades as more ships move greater volumes of cargo. Although smaller vessels are increasingly trading diesel engines for battery packs and hydrogen fuel cells, cleaner alternatives for large, ocean-crossing vessels — including ammonia made from renewable electricity — are still in the early stages of development.

The International Maritime Organization, the United Nations body that regulates the industry, has set a goal to reduce cargo-shipping emissions to 50 percent below 2008 levels by 2050. Starting next year, the IMO will begin requiring large ships to lower their carbon-intensity, which is measured in grams of CO2 emitted per cargo-carrying capacity and nautical mile. Meanwhile, in the European Union, officials are considering adding cargo shipping to the EU’s carbon-trading system for the first time.

(A visualization of global cargo ship traffic created by Kiln and the UCL Energy Institute)

Heider said that when Nautilus Labs first launched in 2017, shipping companies were mainly concerned about saving money on fuel, which can represent as much as 70 percent of a ship’s total operating cost during an oceangoing voyage. Recently, however, the main priority has shifted to curbing carbon emissions, in response to mounting pressure from regulators, consumers and large retail importers such as Amazon, Ikea and Target.

Shipping companies face more than regulatory penalties or tarnished reputations if they don’t eliminate their emissions. Climate-change impacts could cost the industry up to $25 billion every year by the end of the century, in the way of infrastructure damage and trade disruptions due to rising sea levels, inland flooding and increased storm activity, according to a new report by the Environmental Defense Fund and the nonprofit research institute RTI International.

Just as the Covid-19 pandemic threw our ports and the global supply chain into crisis mode, the climate emergency will have major consequences for international shipping,” Marie Hubatova, senior manager for Environmental Defense Fund’s global transport team, said in a statement.

By stepping up to reduce emissions and invest in zero-carbon fuels, shipping leaders could help avoid these costly consequences and build a more sustainable future for the industry,” she added.

Voyage-optimization tools could help ship operators adapt to such climate-related disruptions while expelling fewer planet-warming gases in the process. More immediately, companies are using Nautilus Labs’ platform to adjust to recent spikes in fuel prices, port closures and altered trade patterns from Russia’s war in Ukraine and the resulting U.S. and European sanctions.

We see ships in the platform today actively changing their route,” Heider said. One client carrying bulk commodities in Northern Europe has added vessels to the platform to reduce its fuel expenses. As prices rise, voyages that were once considered economically viable are now becoming costly. In this chaotic environment, companies are using smart-planning systems to adjust on the fly.

We see ourselves taking into account a kaleidoscopic view of all the changes happening — new weather patterns, new trading patterns, disruptions around ports — and simplifying it down to the types of decisions that people can take,” Heider said.

Maria Gallucci is a senior reporter at Canary Media. She covers emerging clean energy technologies and efforts to electrify transportation and decarbonize heavy industry.