Shonagh Ross looks at recent developments to reduce the
shipping industry’s carbon footprint.

 

Photo of a ship being constructed in a shipyardPractical steps to
reduce greenhouse gas emissions by the international shipping
industry are finally to be adopted.

The topic has been the subject of
lengthy debate for many years in a variety of forums, including the
International Maritime Organisation (IMO), the United Nations
shipping agency, and at meetings under the UN Framework Convention
on Climate Change.

Despite multiple failures to agree
a way forward, in July the IMO voted in favour of the first-ever
mandatory international shipping emissions regulations.

International shipping represents
3% to 4% of greenhouse gas emissions worldwide and, with the
predicted growth in world trade, it’s anticipated that this
percentage will more than double by 2050 if nothing is done.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

There has been significant
political will, particularly within the European Union, to tackle
the issue head on, although this has not been matched in all
jurisdictions.

What do the regulations say?

The IMO has sought to address
greenhouse gas emissions in shipping by imposing energy efficiency
standards on new ships. All ships over 400 tonnes built after the
expected introduction date of 1 January 2013 will be required to
meet the minimum standards set out in the Energy Efficiency Design
Index, which has been developed by the IMO.

These minimum standards increase
incrementally over time and different standards apply to different
classes of ship.

In broad terms, they require:


a 10% increase in fuel efficiency for ships built after 2013;


a 15% to 20% increase for the years between 2020 and 2024
(depending on the class of ship); and


a 30% increase for ships delivered after 2024.

In addition, all new and existing
ships in operation will be required to keep on board a ship energy
efficiency management plan (known as a SEEMP), which is intended to
be a tool to ensure best practices among owners and operators in
managing the ongoing environmental performance and energy
efficiency of their ships.

After intense lobbying, China,
Brazil, and South Africa (and, rather oddly, Saudi Arabia) won some
concessions for developing countries.

These will enable them to apply for
a waiver of the regulations for ships registered in developing
countries and whose building contract is signed within four years
of the regulation’s entry into force, or whose delivery is up to
six-and-a-half years following entry into force.

Critics of the waiver have been
quick to point out that it is possible for ship owners in developed
countries to take advantage of this waiver by flagging their new
ships in a developing country. But will they?

Certainly, yards in the Far East
are gearing up for designing ships which are EEDI compliant as the
norm, and orders for these more energy efficient ships are being
placed.

A number of environmental groups
also rate ship efficiency and the EEDI itself will rank some ships
as more efficient than others, so efficiency standards could become
an important factor in selling and trading ships in the
not-too-distant future.

Also, with owners and operators
eyeing ever-increasing operational costs, improved fuel efficiency
is appealing.

The next big question

The next big question is what the
EU makes of these efforts?

In the past, the EU has been clear
that, while it would prefer the IMO to spearhead a reduction of
shipping emissions, it has been frustrated by the lack of progress
made.

An EU spokesman has described the
regulations as “a major step forward” but added: “This does not
mean that the Commission will not propose anything for maritime
next year. We are looking at the options on how the maritime sector
can further contribute to the emissions reduction efforts.”

These “further contributions from
the maritime sector” have been expected to be effected by bringing
shipping into the EU emissions trading scheme (ETS), the aim of
which is to reduce emissions in a cost effective manner through a
cap and trade scheme.

Aviation has already been brought
into the scope of the EU ETS and trading is set to begin in January
2012. The EU has long favoured such market-based measures. It is
thought likely that the IMO’s EEDI method of slowing emission
growth over the coming years will not be enough to satisfy the
EU.

However, the question of the
potential inclusion of shipping in the EU ETS appears to be
increasingly uncertain given the apparent deepening of
international objection to the EU’s regulation of international
aviation emissions.

Looking to the future

The aviation industry may provide
some clues as to how the emissions issues will play out in the
shipping sector. Certain US airlines are currently bringing a case
against the UK Secretary of State for Energy and Climate Change,
which has been referred to the European Court of Justice.

The case concerns the legality of
the inclusion of international airlines in the EU ETS by virtue of
its application to all internal and international flights to and
from EU airports. Meanwhile, draft legislation has been prepared in
the US Congress which would prevent US aircraft operators from
complying with their obligations under the EU ETS.

Pressure is also understood to be
mounting at the International Civil Aviation Organisation in
advance of its upcoming meeting. Further, the cancellation of
Airbus orders in apparent protest at the EU ETS aviation provisions
has raised the spectre of trade retaliation.

Whatever the outcome of these
multiple challenges, the political will, particularly in Europe, to
reduce greenhouse gas emissions in the transport sector is
deep-rooted, but balancing this with the commercial interests of
the operators is likely to encounter difficulties. The IMO’s
regulations are therefore likely to be a starter for 10.

y Shonagh Ross is an associate
at Norton Rose