It looks like choppy waters ahead for the proposed market-based measures (MBMs) against greenhouse gas (GHG) emissions from ships. Ahead of the 63rd session of the IMO Marine Environment Protection Committee (MEPC) from 27th February to 2nd March, the Round Table of international shipping associations has issued two position papers. The first declares that MBMs are not justified at this time. The second recommends against the application of the Energy Efficiency Design Index (EEDI) to existing ships. The full text of the Round Table manifestos:
ON GHG AND MARKET-BASED MEASURES (MBMs)
Shipping is a global industry where all players are competing for the same cargo on reasonable and equitable terms. The system of international trade carried by sea must be based on a transparent and harmonised set of rules and regulations that apply to all, irrespective of nationality or location. The International Maritime Organization has consistently demonstrated its ability to develop globally acceptable regulatory instruments for shipping and the Round Table of international shipping associations (RT) believes that IMO should be allowed to complete its work on CO2 emissions from ships without obstruction from regional and national bodies with specific agendas. It is far preferable that all States and IGOs bring their knowledge and, when agreed, their requirements to the IMO in order to contribute to a truly global solution. The ultimate goal of the RT is the adoption of a meaningful international regulatory instrument that will provide for real and efficient GHG emission reduction controls in a fair, non-discriminatory and orderly fashion.
The RT fully supported the adoption at IMO of the mandatory Energy Efficiency Design Index (EEDI) for new ships and also the Ship Energy Efficiency Management Plan (SEEMP) for all ships as effective regulation of CO2 emissions. Furthermore, the RT is convinced that the SEEMP will allow shipowners to better gauge their energy consumption, in their efforts to enhance existing operational efficiency. Fuel is the single highest operational cost factor and this fact alone has already induced ship-owners to become more energy efficient. The SEEMP will provide the framework allowing shipowners a degree of flexibility in how best to adapt it to individual ships.
It is the task of Governments to establish realistic and achievable relative targets for CO2 emissions, duly recognising the characteristics of a particular industry and in proportion to the amount of CO2 emitted by that particular industry. In order to ascertain what constitutes a realistic target, governments should collect and provide exact and reliable data. For the shipping industry, the main objective remains to limit the emission of CO2 from ships whilst fulfilling the industry’s irreplaceable role in the global supply chain. That shipping is the most environmentally friendly and cost-effective mode of transportation per ton/mile is uncontested, supported by the evidence that around 90% of world trade is transported by sea. Once governments have established realistic and globally accepted relative emission reduction targets for shipping, shipowners and operators will be much better equipped to explore further all possible technical and operational means of meeting those targets.
The RT is of the view that Market Based Measures (MBMs) are not justified at this particular time. In the event that Market Based Measures (MBMs) are eventually introduced to shipping, these should apply globally and should completely address the nine principles adopted by IMO: Effective; Binding and equally applicable; Cost-effective; Limiting distortion; Not penalising trade and growth; Goal-based; Promoting R&D; Accommodating energy-efficient technology; Practical, transparent, fraud-free and easy to administer. The RT supports regulation that provides incentives for owners to invest in low-carbon technology. If ultimately it is found that technical and operational measures cannot wholly meet the agreed reduction targets, then any funds generated by means of a globally applied MBM for shipping must be controlled by IMO and, in large part, be disbursed to support further technological development focused on energy efficiency in shipping. Collection and distribution of such funds should be based on a very simple, transparent, verifiable and auditable scheme which minimises any additional bureaucratic and financial burdens on shipping companies.
While fully acknowledging the existence of the UNFCCC “Common But Differentiated Responsibility” (CBDR) principle, the RT is of the view that this principle cannot be practically applied to ships in light of the very nature of international shipping operations. The RT therefore prefers the non-discriminatory principle of the IMO Convention generally referred to as “no more favorable treatment”, in order to maintain a level playing field for international shipping. Before finally deciding on an MBM for international shipping, a cost/benefit analysis and impact assessment should be completed paying particular attention to impacts on the industry, the global supply chain and developing countries. The RT strongly defends these fundamental conditions in line with its objective of promoting fair business practices and defending free trade as well as open access to markets.
The RT does not believe that an Emissions Trading Scheme (ETS) can be practically and effectively applied to shipping, as the shipping industry in concept and functionality is global and relies on mobility, diversity, open access to markets and free trade. A ship and its cargo constitute a moving asset serving a range of stakeholders including shipowners and charterers, and spanning several importing and exporting countries. The very complexity of international seaborne trade renders the concept of ETS unworkable for the shipping industry. In addition, the effects of an ETS based on full auctioning will severely impact world trade and unfairly penalise shipping
The RT recognises the political reality of the Green Fund agreed by member States at UNFCCC. However it believes that the debate about any shipping MBM must be held at IMO where the nature of the industry is understood and the ultimate impact of a fiscal measure can be measured. In any event, whereas shipping will continue to find solutions to reduce its carbon footprint, any contribution in the form of MBMs should only be at a level proportional to shipping’s share of total global carbon emissions. Under no circumstances does the RT believe that shipping should be subject to a separate UNFCCC or regional MBM as well as an MBM under IMO.
ON THE APPLICATION OF EEDI TO EXISTING SHIPS
The Round Table of international shipping associations (RT) supports the adoption of the new energy efficiency regulations for ships by the IMO in July 2011, which demonstrated the effective role of IMO in regulating worldwide shipping CO2 emissions. The measures include the Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships in service.
The EEDI formula in its present form is, however, not supposed to be applicable to all ships. Indeed, it is explicitly recognised that it is not suitable for all ship types (particularly those not designed to transport cargo) nor for all types of propulsion systems.
Parallel to the regulatory developments at IMO, a number of initiatives are seeking to apply the EEDI formula also to existing ships, using speculative data to establish the values. The RT strongly recommends against the application of EEDI to existing ships, as the values generated by such application can be misleading and can create unintended consequences. The focus for ships in service is – and should continue to be – on operational and commercial efficiencies.
The EEDI separates the technical and design-based measures from the operational and commercial ones. It was developed as a regulatory tool with the objective of mandating improvement in the energy efficiency of new designs by stimulating continued technical development of all the components influencing the fuel efficiency of a ship. Such a mandate cannot be applied to ships already in service, as their basic design is not changeable after construction.
The RT will continue to support the important work on energy efficiency for ships at IMO with a view to ensuring a rigid implementation of EEDI for new ships and SEEMP for all ships. Effective implementation of the measures already adopted globally will bring about considerable and tangible reduction of GHG emissions from ships.
Note: The Round Table is composed of BIMCO, Intercargo, International Chamber of Shipping (ICS) and Intertanko.
