Shipping still undecided on emissions legislation

By the time this issue appears in print, ships in ECAs will be mandated to cut sulphur emissions to 0.1% fuel content, or take equivalent appropriate measures, while the global 0.5% limit edges closer, and attention is turning to carbon emissions. Yet even with such a short time scale, there is still controversy and indecision.

According to global trade association International Chamber of Shipping (ICS), the shipping industry is fully committed to total compliance with the 0.1% sulphur in fuel requirements in Emission Control Areas from 1 January 2015, with no reason to suggest that there will not be full compliance.

But – and there is always a big ‘but’ – “There is nevertheless concern amongst those owners who know that they themselves will comply but who may worry about their competitors” ICS director of policy and external relations Simon Bennett says.

Mr Bennett continued “The shipping industry will be investing billions of dollars in order to ensure compliance with this major regulatory change. It therefore seems only fair that governments should implement the rules in a uniform manner as we enter a brave new world in which fuel costs, for some ships, will increase overnight by around 50%”.

Mr Bennett suggested that, unlike some of the national authorities in Europe, the US had made its approach to enforcement relatively clear. “The real crime in the US is to be caught providing false information to the Federal authorities,” he said. “This is a criminal offence, attracting the possibility of multi-million dollar fines. If a ship has been found to supply false information, the US Department of Justice can be expected to throw the book at the operator. The DOJ is always very motivated by the chance to secure relatively easy prosecutions and shipping companies are easy pickings.”

Looking forward to the implementation of the global sulphur cap, most likely in 2020, it was still unknown whether significant numbers of ships would make use of options for alternative compliance instead of burning low sulphur fuel, a provision for which ICS had fought hard for during MARPOL negotiations at IMO. One of the stumbling blocks is likely to be port state control, as there is, as yet, no harmonised approach about the acceptability of ‘closed loop’ and ‘open loop’ systems, and the extent to which overboard discharges would be subject to inspection.

Of course, the third alternative, LNG as fuel, should avoid these difficulties, but ICS still has concerns, mainly concerning supply. Mr Bennett points out that while new some ships are being fitted with dual fuel systems, for most existing vessels the engineering involved would probably be too costly to encourage retrofitting, while it is still completely unknown whether the current lack of LNG infrastructure will be addressed before 2020. Apart from uncertainly about the comparative costs of LNG and distillate, there are uncertainties about the future of the US shale gas revolution.

In the medium term, alternative fuels such as methanol might produce a clean and economically viable alternative for some ships. But as with all low flashpoint fuels, there are genuine concerns about safety. Although, according to ICS, if handled correctly these fuels arguably present little difference in risks from those surrounding LNG, so trials using such alternatives should therefore be permitted.

Another suggestion is that the availability of distillate fuel oil could be immediately increased by lowering the minimum permitted flashpoint from 60°C, which is the requirement under the SOLAS Convention, to something comparable to conventional diesel. Mr Bennett stressed that: “this is highly controversial because of the danger of fuel coming into contact with hot surfaces in ship’s engine rooms, with the potential for catastrophic explosions and loss of life.”

Because of legitimate concerns about safety, simply lowering the flashpoint of diesel on existing ships, in the belief that it will lower the price, may well prove a step too far for the regulators, even though it is being considered at IMO. “But there is a school of thought that says that a future generation of ships, with appropriately trained crews, could be constructed or operated in a manner such that use of low flashpoint diesel would be safe, just in the same way that LNG has proven to be safe and cost effective fuel,” Mr Bennett added. “This is not yet the current position of ICS, but a discussion is starting to take place.”

Responsible shipowners, concerned about the need for robust enforcement of maritime sulphur regulations, have formed a group known as the Trident Alliance. Its ranks have rapidly increased in the approach to the 2015 ECA sulphur deadline, with 14 companies added to the existing membership, taking the total to 31. The latest intake includes some of Germany’s and Denmark’s most prominent shipping companies together with new members from Chile, Greece, the Netherlands, Sweden, Norway and Belgium.

Trident Alliance chairman Roger Strevens, speaking in November, said he was delighted at the level of industry engagement. “We are just a few weeks away from what will be a sea-change in the regulatory landscape for shipping, namely the introduction of the 0.1% sulphur limits in ECA zones on 1 January 2015. It is reassuring to witness that so many companies want to make sure the new regulations are implemented in a way that ensures the intended environmental benefits as well as a level playing field.”

The latest affiliates are Hapag-Lloyd, DFDS, Ionic Shipping, Euro Marine Logistics, Marinvest, Grieg Star, Wijnne Barends, Seatrade, Spliethoff, Transfennica, Biglift, Ultrabulk, Ultragas and Ultratank.

Each member company CEO has signed a statement of commitment, supporting robust and transparent enforcement of sulphur regulations as well as to compliance with those regulations.

Trident Alliance says it was due to participate at a European Parliament event on sulphur compliance on 11 December, while it reports positive developments in the US in relation to how the US Coast Guard and EPA will take a coordinate approach to the new requirements. “We welcome recent statements from the US Coast Guard and EPA, acknowledging their important role in maintaining a level playing field as well as showing they will be stepping up enforcement activities to ensure compliance. The announced combination of checking bunker delivery notes, fuel oil sampling and in-the-field screening should be effective,” said Mr Strevens.

Meanwhile, the EU plans to introduce monitoring, reporting and verification (MRV) of ships’ carbon emissions in advance of an IMO decision on the same subject have received a mixed reception. One of the problem areas is the European Commission’s requirement to include cargo-related information in the reports, which shipowner organisation BIMCO regards as commercially sensitive and unhelpful.

According to BIMCO, the EC regulation as recently informally agreedcreates a unilateral European MRV system that will become operational as of 2018, applying to ships above 5,000gt arriving and/or departing from EU ports. The system is claimed to be neutral regarding flag and ownership. BIMCO believes that the system will create additional red tape for shipping without any positive impact on the environment and may well negatively affect the prospect of an international agreement on the issue in IMO.

Lars Robert Pedersen, BIMCO deputy secretary general said: “We view the EU MRV Regulation as unhelpful in terms of reaching an international agreement on the crucial issue of CO₂ monitoring. We also find it hard to see how the cargo data required from ships will be of value as it relates to past commercial utilisation of ships and serves no purpose for limiting future CO₂ emissions or assessing ships’ future performance capabilities.”

The agreement on the EU MRV Regulation still needs formal endorsement from the European Parliament and Council of Ministers, but BIMCO believes it is unlikely that this will change any specifics of the agreement, which is expected to be finalised by January 2015.

ICS is, likewise, disappointed and concerned about the EU action. Although ICS says that it, and the industry in general, fully supports the development of a global data collection system by IMO, the adoption of a regional EU regime, which may not be compatible with whatever is agreed at IMO, will certainly complicate and perhaps jeopardise IMO negotiations.

ICS says that agreement at IMO will require the support of non-EU nations with which the vast majority of the global fleet is registered, including developing countries such as China and India for whom additional CO₂ regulations are a politically sensitive issue.

ICS appreciates that the draft EU Regulation can be amended to reflect any IMO decision, but believes the EC may be unwilling to realign the EU rules with the agreed international consensus. ICS secretary general, Peter Hinchliffe, said: “If the negotiations at IMO are to succeed it will be incumbent on the EU Member States to explain that they are acting in good faith and that the outcome at IMO will be the product of a genuine global consensus achieved through negotiation rather than as a result of a pre-existing unilateral regional arrangement.”

The inclusion of data on cargo carried by ships in the EU Regulation will need to be handled with particular sensitivity because of the suspicion that the intent is for this to lead to the development of a mandatory operational efficiency index. This could be used by governments to impose financial penalties on ships, regardless of their actual fuel consumption and CO₂ emissions, with the risk of a serious market distortion.

ICS goes on to say that shipping, as a global industry, requires global regulation, and believes it would be far better for the EU to delay action until it can see whether or not IMO can build on the good progress it has already made in this matter, including the EEDI and SEEMP regulations.

The European Community Shipowners Association, however, gave a cautious welcome to the EC move. Although it would have preferred not to have cargo reporting included in the system, ECSA sees the EU initiative as being an important first step towards a global agreement on MRV.

On a global basis, ICS makes the point that current data suggest that shipping transports around 90% of world trade, but produces only some 2.2% of the world’s total greenhouse gas emissions. At the same time, shipping’s total emissions have reduced by more than 10%. This was the theme of a submission by ICS to the UN Climate Conference in Lima (COP 20).

Going forward, ICS believes shipping is on track to reduce its emissions by more than 20% by 2020 (compared to 2005) with further reductions to come.

ICS explains that shipping is the only industrial sector which is already covered by a binding global agreement to reduce its CO₂ emissions, agreed through IMO, a United Nations body. With IMO developing additional measures to reduce CO₂ emissions from shipping, the UN needs to maintain its support for IMO as the principal forum for addressing emissions from maritime transport, rather than devolving responsibility to national economies.

ICS emphasises that any decision, for example on whether to develop a Market Based Measure for shipping, should be a matter for IMO member states. Only IMO can develop an approach that can reconcile the UNFCCC principle of ‘common but differentiated responsibility’ (CBDR) – whereby developing countries are treated differently – with the need for all ships, regardless of flag, to be treated in a uniform manner.

A global approach is needed, because market distortion must be avoided, and only about 35% of the world fleet is registered with developed nations committed to emission reduction under the existing Kyoto Protocol. ICS believes that shipping’s contribution to any global carbon fund must reflect the sector’s modest contribution to total global CO₂ emissions. ICS is firmly opposed to any charge on the industry amounting to tens of billions of dollars each year, stressing that the industry is not a ‘cash cow’.

Uniting commercial growth and sustainable behaviour is the aim of the Sustainable Shipping Initiative (SSI), which says charterers are becoming a powerful force in driving sustainable shipping standards and becoming a catalyst for instigating industry change beyond regulation.

Initiatives by SSI members such as AkzoNobel, Cargill and Bunge have highlighted the clear link between pro-actively implementing new, innovative measures within their operations to achieve significant tangible financial and environmental benefits. AkzoNobel has incorporated the use of a ship ratings scheme in its tendering process, with positive results, while Bunge has saved about 10,000 tonnes of fuel by running 25% of its fleet at slower speeds, and has created a transparent global emissions index to promote building and use of more fuel efficient ships. Cargill has committed to using the RightShip Green Rankings system and will only charter vessels that meet particular efficiency ratings levels.

Maersk Line has also reported customers enquiring about the social and environmental impacts of its operations. Today, up to 19% of its customers are requesting sustainability information as part of their contracted relationship with the company. Signe Bruun Jensen, head of sustainability, Maersk Line said: “We are keen to collaborate with first-movers to accelerate the development, promotion and adoption of best practices for integrating sustainability into logistics and procurement strategies as ultimately we believe that this will benefit our business, our customers and the industry as a whole.”

The SSI anticipates that charterers’ sustainability and procurement processes will become increasingly interlinked, but that challenges remain in terms of ensuring this integration is smooth and mutually beneficial. The organisation emphasises that greater global standardisation across ship ratings schemes and the measurement parameters for CO2, SOx and NOx emissions could help to drive greater transparency, efficiency and more consistent benchmarking for future improvements.

Alastair Fischbacher, SSI director, said: “Charterers will play an increasingly significant role in defining how the shipping industry integrates sustainability into strategy and operations. Demonstrating how shipping can strengthen, not compromise, their customers’ supply chains is a powerful commercial tool and drives home the business imperative for carriers to embrace sustainable practices. By doing so, the industry as a whole can raise its game.”