World Bunkering > News > Spring 2009 > Shipping splits over emissions trading

Last October’s meeting of IMO’s Marine Environment Protection Committee (MEPC) was unable to make any real progress on what IMO now calls “market based instruments” (MBI) emissions trading schemes (ETS) or carbon levies. As reported in the IBIA Convention special edition of World Bunkering (pages 14-15), the Greek Shipping Co-operation Committee (GSCC) – the organisation representing the London Greek shipping community – submitted a paper to IMO strongly opposing any form of ETS or levy.

UKCS speaks out

The UK’s Chamber of Shipping (UKCS), on the other hand, had already been moving towards MBI, describing them as the “least bad pragmatic option”. In mid-December the UKCS took the plunge and held a press conference at which it committed itself to a global ETS. The new policy was presented by a panel including UKCS president Martin Watson and Martin Ferstl of Shell Shipping and a carbon trader, Toby Campbell-Colquhoun from Shell Ltd . Also at the policy launch and supporting the ETS concept were Jesper Kjaedegaard of Maersk, Stuart Greenfield of Carnival and John Garner of P&O Ferries. In a statement the UKCS described itself as taking a leading position in the international shipping industry’s response to climate change by advocating a global and open emissions trading scheme.

“This is a bold and far-reaching decision that gives a lead to the rest of the shipping world,” said Martin Watson, president of the UKCS. “The UK industry recognises that shipping, which carries 80% of all world trade goods – and 90% of the UK’s trade – must make a significant contribution to the battle to reduce mankind’s carbon emissions.

“The carbon cost of carrying a ton of freight by ship is 10 times less than by road – and 100 times less than by air. Shipping is by far the most carbon-friendly transport mode. However, because so much freight is carried by sea, shipping does produce nearly 3% of total emissions. We need to take whatever action is needed to try to limit those emissions – but without accidentally causing freight to be shifted from ships to other, less carbon-friendly forms of transport. That would be catastrophic in terms of total emissions.”

Peter Lockley, Head of Transport Policy at environmental group WWF-UK welcomed the move, saying: “I’m very pleased that the UK shipping industry is advocating an emissions trading system for ships and I look forward to working with them to refine and build support for the proposal. If designed well, the scheme would put a price on maritime carbon emissions, speeding up the drive for cleaner ships and helping to pay for low-carbon development in poorer countries. It would position shipping as a progressive and responsible industry, and I very much hope that it will be part of a global climate change deal in Copenhagen.”

The international element

The UKCS says that the challenge that faces the industry and legislators is that there is no effective way to include shipping in a national carbon emissions reduction process. Ships, by their very nature, move between countries (sometimes never even visiting their countries of ownership). This raises very challenging questions about the allocation of their emissions. Ships can also easily be moved between jurisdictions to avoid carbon regulation unless that regulation is applied on an international level.

Shipping is therefore, the UKCS notes, one of the last significant global industries to remain outside any governmental framework for the reduction of carbon emissions. Although the UK’s Climate Change Act will bring in monitoring of (rather than setting targets for) emissions from shipping, it is not yet clear how or what measurements will be made. The statement continues: “What is clear is that the industry has already made significant improvements; there have been continuous increases in fuel (and therefore carbon) efficiency through economies of scale and technological advances. A modern containership emits about a quarter of the CO2 that a containership did in the 1970s – while carrying up to 10 times as many containers.”

The UKCS says it supports the IMO initiatives in creating a new Ship Design Index which will encourage technical innovation for new ships, while an operational index will encourage fuel efficiency measures on existing ships. However, controversially, its statement adds that “scope for improvement in these areas is limited”. It continues: “The high carbon efficiency of this mature industry means further operational and technical improvements are unlikely to be able to keep pace with reductions expected from other sectors.” The UKCS says it believes that shipping can most effectively contribute through emissions trading. “This will enable ship operators to decide whether to invest in emissions reducing technology/ research or operating practice and thereby qualify for carbon credits. Alternatively, ship operators can decide to support significant improvements in efficiency in high polluting industries, particularly those in the developing world.”

Watson says: “The Chamber’s move is very much in line with the UK government’s policy in the Climate Change Act adopted last month and the ‘carbon budget’ recommendations published by the Climate Change Committee two weeks ago.” He says: “Although an emissions trading scheme for the shipping industry remains a concept rather than a defined path (and many parts of the global industry are still to be convinced that this is the best course of action), we believe that the industry – if it wishes to remain in control of its own destiny – must decide upon a direction of travel and strive to deliver it. I believe that if we can provide leadership and make a coherent and compelling case then other national associations will follow and that this will empower our parent body – the International Chamber of Shipping – to adopt a robust and convincing position in the vital international negotiations ahead of the Climate Change Conference in Copenhagen in December 2009.”

Intertanko holds back

The UKCS will have its work cut out trying to unite the global shipping industry in support of an ETS. Dr Peter Swift, managing director of the Independent Tanker Owners’ Association (Intertanko) is frank about his reservations over the UKCS’s support for an ETS.

He observes: “It is very unfortunate that the Chamber says that scope for improvement in fuel efficiency measures on existing ships is limited, since this might be taken to mean that nothing, or little, can be done – which could rather pull the rug from under the feet of those who have been making progress and achieving significant reductions, and could undermine the work done and the investments made by shipowners in improving the efficiency on existing ships. It might also undermine the only major way of reducing emissions from ships, namely from new ship designs. If the opportunities to reduce GHG through new design, new technologies and operational improvements for both new ships and existing ships are indeed limited, the argument that MBIs would provide incentives to actually reduce CO2 emissions through exactly the same type of improvements becomes redundant.”

Swift says: “We are keeping an open mind on MBIs and on all the suggestions presented so far. Before we make comments or express support for one or another MBI, we need to learn more about each of them and understand their functionality, far beyond the principles and concepts on which they are based.” “In general,” Swift adds, “for any MBI/market mechanism, our guiding principles are that they must:

• Be effective in reducing global GHG emissions
• Be binding on and applicable to all flag states
• Be cost effective
• Not distort competition
• Support sustainable environmental development without penalising trade growth
• Promote technical innovation and leading technologies
• Be practical, transparent, fraud-free, easy to administer.”

He notes that the EU have so far not been specific on how the EU-ETS might include ships. “The good news here,“ he says, “is that the EU is allowing us a little more time, until 2011 instead of the end of 2009. That allows us to see what comes out of the 2009 Copenhagen conference.”

While it may be keeping an “open mind” on MBIs, Intertanko is concerned that a “global and open ETS could be extremely complex to define, to enforce and to monitor”. Swift observes: “At the moment, there is no global ETS, only regional ETSs. Also many ETSs are sector-specific or non-inclusive. Having reviewed and discussed extensively existing and proposed ETSs, there are few real views as to how a scheme for shipping would work in practice and even within that group there are conflicting ideas. It would need to be applied to all ships, which means that emissions from all ships have to be measured and monitored – a major undertaking.”

Intertanko also want to see more details on proposals for other MBIs such as bunker levies/compensation schemes or differentiated charging, to stimulate and reward those who achieve environmentally friendly operations, and penalise those who do nothing.