In recent months the shipping industry has danced on and off the Paris COP21 Climate Change Conference’s negotiation text. This is thanks to its historic exclusion from international climate negotiations and the fact that to-date, the huge volume of GHG emissions for which this industry is accountable has not been bound by an international emissions reduction target.
Sights are locked on a new international climate change deal being developed and rubber stamped in Paris. That deal will be hammered out from the negotiation text, on which the industry currently resides. Therefore, the industry’s emissions will be under the spotlight during negotiations and may be bound by international regulation within the climate deal that is brokered.
With the industry still sitting on the negotiation text at COP21, we examine why stakeholders in the shipping industry should be keeping a close eye on what happens in Paris.
What Is “COP21”, The “UNFCCC” And The “Kyoto Protocol”?
The widely used acronym “COP” stands for “Conference of the Parties”. The COP is the supreme decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC).
The UNFCCC is an international environmental treaty which was negotiated upon in 1992 and entered into force in March 1994. According to the Convention text, the objective of the treaty is to stabilise GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.
The Kyoto Protocol is an international agreement, negotiated in 1997 and adopted in 2005, that ‘operationalises’ the UNFCCC treaty with the main goal of controlling emissions of the main anthropogenic GHGs in ways that reflect underlying national differences in GHG emissions, wealth, and capacity to make the reductions. Something to note is that ship emissions were in fact omitted from national commitments under the Kyoto Protocol, which ceded control to its shipping agency, the International Maritime Organization (IMO).
As of March 2014, UNFCCC had 196 States that are Party to the Convention. These Parties meet periodically, usually on an annual basis unless they decide otherwise, to review the implementation of the UNFCCC and any other legal instruments that the COP adopts.
For the 2015 meeting, 196 countries will gather in Paris for the 21st Conference of Parties (COP21) between November 30 and December 11, 2015. The aim of the COP21 summit is for the COP to reach, for the first time, a new legally binding international climate agreement by the conclusion of COP21 to limit the rise in global temperatures to 1.5°C or 2°C above pre-industrial times.
Why Is The International Shipping Industry In the COP21 Spotlight?
Whilst it is true that the international shipping industry is the most carbon efficient mode of freight transportation, it is the massive size of the global shipping fleet (approximately 60,000+ ships moving about 90% of global trade) traversing the oceans that keeps the industry and its GHG emissions firmly in the spotlight. The eyes of the regulators remain fixed on the industry as a vital puzzle piece for any solutions or agreements that will ensure a global reduction of GHG emissions.
An IMO Study (the Third IMO GHG Study) projected that shipping’s carbon dioxide (CO2) emissions would rise and could grow by 50-250% on 2012 emissions, by 2050. The range in emissions growth represents different scenarios considered, with differing assumptions for the drivers of trade and shipping. These scenarios all include the impact of existing regulation, both the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP), and MARPOL Annex VI air pollution regulations, therefore also recognise substantial further increases in average efficiency for the world fleet.
To put that figure into perspective with regards to the scale of fuel consumption and CO2 emissions within the industry, over the period 2007–2012, average annual fuel consumption ranged between approximately 247 million and 325 million tonnes by all ships globally. This fuel consumption translates into estimated annual CO2 emissions from shipping ranging between approximately 739 million and 795 million tonnes per year (this figure is approximately equal to Germany’s annual CO2emissions).
The Third IMO GHG Study also stated in its findings that in 2012 the shipping industry was accountable for 2.2% of the amount of global CO2 and GHG emissions. There was controversy surrounding the publication of this figure as the Study proved that there had been a significant drop in the percentage of global CO2 and GHG emissions for which the shipping industry was accountable from 2.7% in 2009. In fact, if you examine each year the amount of CO2 that the shipping industry is accountable for globally, it is decreasing (almost) every year; in 2008 it was 2.9%, in 2009 it was 2.7%, in 2010 it was 2.3%, 2011 it rose slightly to 2.4% and in 2012 it was 2.2%.
However, caution must be taken when commending these falling figures and applying them to the logic that the industry should not be in the COP21 spotlight. The evidence noted in the Third IMO GHG Study was that the emissions reduction was due to widespread slow-steaming, a short-term response resulting from the global financial crisis. However, the slow-steaming induced change in energy efficiency is not necessarily a permanent change, it is one that we could see reverse if/when market conditions return to their long-run trends.
Further to all of these statistics, one of the reasons that the shipping industry may be on the COP’s radar this year is due to the fact that concern has arisen around the IMO’s failure to set up a process to establish an emissions target, despite there being mitigation options that would permit the global shipping fleet to grow in size whilst also achieving absolute emission reduction.
Putting The Shipping Industry Into The Wider Picture
You don’t have to be a mathematician to acknowledge that a 50-250% increase in shipping’s emissions between now and 2050 would be immensely problematic for the climate and wholly important in the UNFCCC target of achieving a potential 2°C stabilisation. In fact to achieve that stabilisation, globally emissions will need to approximately halve by 2050 (on 2012 levels) and then reduced to zero sometime before the end of the century.
For all countries and industries with growing emissions, halving them by 2050 is a big task.
But a process has already been set into motion in the lead up to COP21. In preparation for a new international climate agreement being set at COP21, countries have agreed to publicly outline what post-2020 climate actions they intend to take under a new international agreement, known as their Intended Nationally Determined Contributions (INDCs). The INDCs will largely determine whether the world achieves an ambitious 2015 agreement and is put on a path toward a low-carbon, climate-resilient future.
The INDCs have already harvested firm pledges and commitments of limitations and absolute reductions by 146 countries. That list of countries includes both the usual suspects such as the European Union (EU), but importantly also the big emitters: China and USA, as well as a host of developing countries.
So far we know two things: those pledges aren’t enough to ‘solve’ the climate change problem, in fact taken at face value, they are estimated to create a temperature rise of 2.7°C. And also, that there are notable omissions of aviation and shipping.
With a gap still to be bridged and commitments ‘to do their bit’ made by even the poorest countries, how tenable and politically sustainable is it for IMO to simultaneously forecast rising CO2emissions and ask to be left alone?
Key Milestones In The Industry’s Journey To COP21
Over the course of 2015, there has been much spectacle and corresponding arguments within the industry when it comes to GHG emissions and the IMO’s role in facilitating and driving GHG emission reductions. When examining some of the key milestones and happenings on the industry’s journey to COP21, some of the issues, barriers and glimmers of proactivity of the industry can be unravelled.
The IMO Takes Action, Albeit Slowly
Even though talk is of the IMO failing to act fast enough, we mustn’t forget that to-date the IMO is the only international organisation to have adopted global legislation with the aim of significantly reducing CO2 emissions from a particular industry.
In 2011, the organisation introduced the EEDI which sets compulsory energy efficiency standards for new ships. This mandatory requirement to enhance ships’ energy efficiency applies to all new ships of and above 400 gross tonnage and entered into force 1 January 2013. They also introduced the SEEMP, which is an operational measure that applies to all ships that establishes a mechanism to improve the energy efficiency of a ship in a cost-effective manner. The SEEMP also provides an approach for shipping companies to manage ship and fleet efficiency performance over time using, for example, the Energy Efficiency Operational Indicator (EEOI) as a monitoring tool.
The IMO Secretary Calls for Global leaders Not To Intervene at COP21
The current IMO Secretary-General, Koji Sekimuzu was heavily criticised when he urged world leaders in an official statement to decide against the idea of an overall emissions cap for the shipping industry at COP21.
This was a move that wasn’t taken well by many within the industry, especially certain member States within the IMO. In his response to the statement, the Foreign Minister of the Marshall Islands Tony de Brum expressed great concern on the Secretary-General’s actions. De Brum said at the time that the Secretary General’s tactic was not just a danger to the planet, but also to the shipping industry’s future prosperity, and therefore the future stability of world trade.
The IMO Secretary General Comes Under Fire For Misuse Of Shipping GHG Statistics
In the same statement, the IMO Secretary General alluded to the industry’s great efforts manifesting as decreasing ship emissions.
This position was received with great alarm and he was slammed for his misuse and misunderstanding of the evidence-base on shipping and its GHG pollution, namely the fact that the practice of slow steaming ships was to thank for decreasing industry emissions, as identified in the Third IMO GHG Study.
His statement illustrated to many why the IMO has thus far failed to grasp the nettle over ship GHG emissions and why its future role must be guided by an agreement in Paris.
Proposal For Industry Global CO2 Target Is Shot Down By The IMO
In May 2015, the IMO shelved a proposal for a global CO2 target for the shipping industry that was put forward by the Republic of the Marshall Islands.
The IMO decided not to grant the Republic of the Marshall Islands’ request, citing the need to complete its work on agreeing a data collection, monitoring and evaluation process for shipping and to consider the outcomes from COP21 in Paris.
The European Commission Puts It Foot Down And Imposes Its CO2 Regulation For Shipping
The European Commission (EC), much to the dismay of many in the industry, put their foot down and said ‘no more’ to the dilly dallying of the IMO by rubber stamping a regional CO2 regulation that established an European Union-based system for the monitoring, reporting and verifying (MRV) of CO2 emissions from maritime transport.
This legislation governs all ships (regardless of their flag) above 5,000 GT that transit to and from EU ports.
READ MORE ABOUT THE MRV REGULATION HERE
Shipping Is Removed From The COP21 Negotiation Text… But Is Then Re-Inserted
The shipping industry was re-inserted into the draft COP21 negotiating text on October 14, 2015 after it was controversially dropped from the text on October 5.
This came after EU parliamentarians called for emissions reduction targets for both the shipping and aviation sectors to be set before the end of 2016 by the corresponding UN agencies, the IMO and the International Civil Aviation Organisation (ICAO).
Echoing comments from the OECD’s International Transport Forum that it would be odd for countries to have to adhere to emissions reduction targets but not the international shipping sector, the EU Parliament’s plenary voted for parties to the Paris deal to ensure that aviation and shipping are regulated.
The draft text that sits within the 34-page draft COP21 negotiation text now states:
“Parties [shall][should][other] pursue limitation or reduction of greenhouse gas emissions from international aviation and marine bunker fuels, working through the International Civil Aviation Organization and the International Maritime Organization, respectively, with a view to agreeing concrete measures addressing these emissions, including developing procedures for incorporating emissions from international aviation and marine bunker fuels into low-emission development strategies.”
READ MORE ABOUT THE RE-INSERTION OF SHIPPING INTO THE COP21 DRAFT TEXT HERE.
What Will Be The Impact of COP21 On The Industry?
The IMO Secretary General previously dismissed putting a price on shipping’s carbon emissions, a.k.a. a carbon tax, but some industry sources say some form of taxation or global fuel levy is expected to come in the wake of any deal at the Paris COP21 summit. Some even say that the industry expects to be stung by a global fuel levy or carbon tax at some point and it’s a case of if, not when.
According to the industry association International Chamber of Shipping (ICS), if the industry has to have a market based measure, their preference would be to have a global fuel levy, rather than emissions trading or alternatives.
In a paper published in October, the International Transport Forum recommended a carbon tax for shipping, with the case that it could generate money for the UN-backed Green Climate Fund if needed.
However, the ICS believes that any money collected from the shipping industry for the green Climate Fund should be proportionate to international shipping’s CO2 emissions.
Whilst carbon taxes and global fuel levies are one form of action, the question of what to do about shipping’s emissions problem and how to meet specified emissions targets is still left open. Would taxation be enough to solve the problem of the shipping industry’s rising emissions?
Some industry experts suggest that the industry needs a market-based measure, in the form of a levy or a tax or mandatory standard that uses the carbon price not to generate revenue to contribute to a ‘fund’ but rather to act as a lever to incentivise low carbon technologies. The deployment of low carbon technologies would significantly reduce the sector’s emissions.
But what that lever would look like, or be in the form of is unclear, yet to effectively enable shipping to meet a stringent target, it would almost certainly need to go above $25/tCO2 by most modeller’s expectations.
It certainly seems like COP21 may serve up some definitive actions for the industry if shipping remains on the agenda for the negotiations of emissions targets and new international climate agreements. However, there is also some low level fog around what measures would be best for impacting the sector’s growing emissions problem and what could be put in place to actually help the industry to reduce its emissions, rather than just taxing emissions or further regulation.
COP21 will take place between November 30 – December 11, 2015. Watch this space.
