GHG abatement debate morphs to survive

Most of the news stories published after MEPC65 hailed the progress made towards reducing greenhouse gas emissions. What wasn’t discussed at the meeting, though, was market based measures for funding change so the industry can reduce its CO2 footprint. This had been shelved well before MEPC65 because member states could not reconcile IMO’s ideology of no favourable treatment with the United Nations ideology of shared but differentiated responsibility where developed nations should contribute more to solutions than developing ones.

Instead MEPC65, following unsuccessful discussions at MEPC64, agreed on a Resolution on Promotion of Technical Co-operation and Transfer of Technology relating to the Improvement of Energy Efficiency of Ships to enable cooperation in the transfer of energy efficient technologies to developing countries. It relates back to the EEDI and Marpol Annex VI where developing nations felt their opposition was overruled. A quick skim through the wording reveals its essence: “assist in the sourcing of funding for capacity building”, “establish with full stakeholder participation an ad-hoc expert working group”, “development of model agreements enabling the transfer of financial and technical resources”, “respect property rights including intellectual property and be on mutually agreed terms”.

Sceptics are saying ‘yet another working group’ and questioning how any action could result from an agreement that respects intellectual property. Sceptics from previously great European shipbuilding nations are asking: “Hasn’t the technology transfer already happened?”

Yet there may be scope for future collaboration that supports the Transfer of Technology ambitions. DNV intends to strengthen its technology focus further through the merger with GL, and as most shipowners have limited technical staff, and as shipyards have a need for technical assistance, the group believes that the role of class has to be further developed to take an even stronger position when it comes to technology development.

A possible project that could be used to demonstrate the spirit of the IMO agreement through its potential for developing nation involvement is DNV’s initiative to develop an onboard carbon capture and temporary storage (CCS) system. The concept would enable ships to emit less CO2 en route and to transform CO2 emissions to a tradable product. The CCS project has involved the development of a system design by DNV and Process Systems Enterprise, a global provider of advanced process modelling technology. It was jointly financed by the two partners, the UK’s Technology Strategy Board and the Research Council of Norway under the Eurostars initiative. The next step is to develop a prototype unit, and project leader Dr Nikolaos Kakalis says it is an ideal opportunity for developing nations to get involved in research involving new abatement technologies.

Now that the Transfer of Technology has been agreed, and moving up to replace discussion on market based measures, is ‘the new black’ in CO2 discussions, that is, monitoring, reporting and verification (MRV). An earlier US proposal on market based measures has been modified to become a three-phase operational measure to reduce CO2 emissions. The idea is to keep the discussions open at some level.

The first phase of the US proposal involves data collection to accurately assess emissions from individual ships. An efficiency standard will then be developed that would, in the third phase, be used to implement mandatory targets for ship performance. Currently, though, the US proposal appears to focus on fuel consumption rather than cargo transport efficiency, so an empty vessel would probably perform better than a similar laden one. There are five different MRV schemes that have been proposed to IMO. Further proposals have been invited and are expected to be discussed at MEPC66.

Reconciling developed and developing nation views may still be a challenge as one delegation at MEPC65 expressed the view that the United Nations Framework Convention on Climate Change already provides basic principles for determine monitoring, reporting and verification and that there is a clear distinction made in the reporting requirements for developed and developing countries.

BIMCO believes that reasonable and realistic targets for the level of emissions reduction should be set based on reliable data. Once this is done shipowners and operators will be much better equipped to explore further all possible technical and operational means of meeting those targets. The organisation does not believe that market based measures are warranted at this time.

“The reason the Danish Shipowners’ Association supports MRV is that while no one discusses market based measures right now, we know that it might pop up on the political agenda again at some point in the future. Only with a solid dataset can the industry then prove its energy efficiency and thereby avoid becoming a mere cash cow. Moreover, in Europe, we constantly face the threat of regional legislation. The EU came out in public last year and said they are not going to table a proposal for a market based measures but rather the MRV system,” says Maria Bruun Skipper, senior advisor at the Danish Shipowners’ Association (DSA). “They will table a legislative proposal in July this year so it is extremely important for us that the EU and the IMO systems can be merged. The EU will adopt its proposals faster than IMO so it is vital that any EU MRV can be lifted to become an IMO one.” If it comes to market based measures, the DSA has all along supported the Danish proposal for a levy model, Ms Bruun Skipper explains. Underlying such a system, though, is the need for good data collection which could be gained through MRV.

“An optimal industry outcome will only be achieved if it is unilateral,” says Warwick Norman, CEO of third party ship vetting agency RightShip. “Legislation moves slowly, protecting the slowest member of the herd – in the case of the shipping sector it’s developing countries. While the IMO should be congratulated on introducing the EEDI for new ships built from 1 January 2013, it does little to reduce the emissions of the existing fleet which are comparable to those of a major national economy.”

RightShip has developed the Existing Vessel Design Index (EVDI) and Greenhouse Gas Emissions Rating as a systematic and transparent means of comparing the relative theoretical efficiency of the existing fleet. “The market will always move faster than legislation and 11 major charterers factor energy efficiency into their vessel vetting selection process. Collectively, these customers ship over one billion tonnes of cargo annually,” says Mr Norman.

From 2020 developed economies have pledged to generate $100 billion to finance climate mitigation and adaptation in developing countries through the Green Climate Fund. The International Monetary Fund (IMF) has suggested that international shipping should contribute $25 billion to the Green Climate Fund and have flagged the introduction of a carbon charge of $25/tonne to raise the funds. “While a fuel tax will raise money it won’t do anything meaningful to reduce carbon dioxide emissions,” says Mr Norman.

“By using informed selection through the EVDI to charter the more efficient vessels in the market it has been estimated that US$70 billion can be saved annually – this is almost three times the proposed amount to be raised by the IMF. By incentivizing sustainability through market based solutions and informed decisions rather than penalising emissions through a tax, a much bigger win for industry and the environment is achievable.”

Shipping companies are responding to the business opportunities generated by being overtly energy efficient. Hudson Shipping Lines, a dry bulk supply chain management company operating a fleet of 42 dry bulk vessels, recently announced their fleet has achieved an average carbon dioxide efficiency rating of “C” using RightShip’s EVDI and GHG Emissions Rating. This puts Hudson in the top one-third of the global fleet for energy efficiency.

Meanwhile EEDI is incentivising ship designers and ship builders to increase the efficiency of their newbuilds. The requirements are effective from this year and MEPC continues to work on the technical detail. At MEPC65 calculation methods for ro-ro and ro-pax ships, LNG carriers and cruise ships with non-conventional propulsion (diesel-electric, turbines or hybrid propulsion systems) were agreed and are expected to enter into force late in 2015. Additionally, the 2013 interim guidelines for determining minimum propulsion power to maintain manoeuvrability of ships in adverse conditions was adopted. These guidelines set minimum power requirements for bulk carriers and tankers larger than 20,000dwt.

The issue of how EEDI targets will be met is still contentious. There is a focus on efficiency which can compromise safety, said Katharina Stanzel, managing director of Intertanko at a recent industry conference, citing the risk that ship designers and shipyards might get rid of redundant engine power to lower CO2 emissions and meet EEDI targets. This could compromise safety. “Our biggest challenge is still the sea, and how our people and equipment manage it and survive it,” said Ms Stanzel. “I highlight the need for early and close cooperation among all industry stakeholders. Only by working together here at the IMO can we eliminate unintended consequences of regulation, sometimes too focused on solving one problem while creating another.”