Reducing shipping’s CO2 emissions: what next after Copenhagen?

As everyone in the shipping industry will be aware, the United Nations Climate Change Conference, which met in Copenhagen last December was unable to agree a clear mandate for the International Maritime Organization (IMO) to help it complete its work on reducing CO2 emissions from international shipping. In particular, the Conference made no statement on whether UNFCCC principle of Common but Differentiated Responsibility (CBDR) should be respected in future IMO work. It will be recalled that CBDR is the concept whereby developing nations should not be subject to the same immediate commitments to reduce CO2 as developed nations (with whom only about 35% of the world fleet is currently registered).

However, although the ‘Copenhagen Accord’ issued after the UN Conference was silent on the treatment of shipping (and aviation), this does not mean that shipping has been dropped from the UNFCCC agenda. On the contrary, text developed by an ‘Ad hoc Working Group on Long term Cooperative Action (AWGLCA) will be issued shortly (hopefully prior to the next IMO Marine Environment Protection Committee meeting in March) and will offer options for dealing with bunker fuel that were developed at Copenhagen but not discussed in Plenary. These will most likely be discussed at a meeting in Bonn (31 May to 11 June). The Copenhagen Accord, albeit in general terms, clearly states, as part of any future UNFCCC agreement, that the developed nations will be expected to direct billions of dollars to ‘non Annex I’ nations to help them reduce emissions, and that much of this money should be raised through the private sector. During the Copenhagen meeting, several political statements, at the highest levels, included proposals whereby shipping (and aviation) would be expected to contribute a significant proportion of such money, potentially amounting to tens of billions of dollars a year.

At the time of writing, it is not possible to be clear on the status of these proposals as national positions are presumably being revised prior to the next UNFCCC meeting in Bonn. However, it is strongly expected that these ideas will be resurrected during the year ahead prior to the next major UNFCCC Conference in Mexico in December 2010, at which a more definitive agreement, which may well specifically address shipping, is still likely to be finalised.

Meanwhile, IMO is continuing its work on a package of measures which will next be discussed by the Marine Environment Protection Committee from 22-26 March (MEPC 60). The International Chamber of Shipping and its member national ship owners’ associations are currently fine tuning their position in response to submissions now being made by governments.

ICS has already made a submission to IMO and our broad position remains unchanged. In short, ICS continues to promote the use of technical and operational measures, while acknowledging different views among national associations as to the extent, or means, by which they might become mandatory, given concerns about verification. ICS also acknowledges the importance of market-based instruments as part of any IMO package and has clearly specified the criteria which any such scheme should meet, without giving firm support for any particular form of MBI.

Some national ship owners’ associations have expressed a preference for an Emissions Trade Scheme, while others favour a Compensation Fund (with money raised through a ‘levy’ on bunkers) – the scheme being promoted by the Danish government.

There is also a new proposal being tabled by the United States, and separately by Japan, which uses the Energy Efficiency Design Index (EEDI) – developed and adopted by IMO last year - and applies it to existing ships to provide a vehicle for mandatory efficiency improvements and to reward efficient performance. Although IMO may appear to have gained some time for the finalisation of a package of measures as result of the ‘silence’ from Copenhagen, the serious possibility remains of unilateral action outside of IMO. For example, the European Union is expected to hold to its demand that IMO should have regulations in place by 2011. It is also unknown whether developing nations, such as China and India, will modify their opposition to globally uniform measures for shipping, given that clarification on this issue was not achieved in Copenhagen. If, as seems probable, their opposition does not change then regional legislation, at least in the EU and US, would appear to be more likely. At the time of writing there is one important issue on which ICS (and the industry as a whole) has so far not decided to take a position. This concerns any firm commitment by the industry to emissions reductions targets, as opposed to stating what might be achieved (a figure of between 15-20% by 2020 on a per tonne mile basis is sometimes suggested, though to a large extent this an informed guess based on the technical and operation measures currently being considered). The aviation industry, for example, is publicly committed to ‘carbon neutral growth’ from 2020 and a 50% cut in total emissions by 2050. Apart from the possible advantages and disadvantages of the shipping industry making any firm commitment to targets, there are several aspects to consider:

• Any commitment that might reasonably be set for the sector as a whole on a per tonne mile basis. This would amount to an efficiency based approach;

• The desirability of a commitment being applied to individual ships with regard to reduction targets (when what is possible will vary according to the ship, sector and trade);

 • The commitment that might be given for absolute reductions for the sector as a whole, which it might be impossible to achieve if world trade and the demand for shipping continues to expand, perhaps implying that additional emissions would have to paid for;

• Any commitment that might be made towards the money that could be raised by shipping to help developing world countries.

Wrongly or rightly, it should perhaps be borne in mind that in UNFCCC circles (and at the high political level at which the industry has least influence) the amount of money that could be raised from shipping is arguably of greater interest than the emissions reduction that might be achieved. It should also be recalled that the EU negotiating position in Copenhagen was that the international shipping sector should reduce its total emissions by 20% by 2020 (although for aviation this figure was only 10%). The situation may become clearer after the next meeting of the IMO Marine Environment Protection Committee in March, but despite the uncertainty created by the outcome in Copenhagen, the issue of reducing CO2, with all its technical and political complexity, will remain one of the most serious challenges for the international shipping industry in the years ahead.

The International Chamber of Shipping (ICS) is the principal international trade association for the merchant shipping industry. It has member national ship owners’ associations in 33 countries, representing all sectors and trades and 75% of the world merchant fleet. ICS was present throughout the UN Climate Change Conference in Copenhagen, and continues to lead industry representation on the discussions on CO2 emission reductions both at meetings of the United Nations Framework Convention on Climate Change (UNFCCC) and at the International Maritime Organization (IMO.)

What did ICS think about the outcome at Copenhagen?

 The International Chamber of Shipping acknowledged the progress made by governments, reflected in the ‘Copenhagen Accord’, at the UNFCCC Conference in Copenhagen. However, ICS was disappointed that the text of the Accord was silent on the treatment of international shipping in the delivery of further CO2 emission reductions, to which the industry remains firmly committed. For the moment at least, UNFCCC has been unable to agree a clear mandate for the industry’s regulator, IMO, on how to build upon the considerable work already undertaken on a package of technical, operational and economic measures for reducing shipping’s emissions on a global basis - a mandate strongly advocated by the shipping industry. In particular, it remains unclear how the Kyoto Protocol principle of ‘Common But Differentiated Responsibility’ (CBDR) should be reconciled with the important need for global rules on CO2 reductions for the carriage of world trade – about 90% of which is carried by ships (acknowledged as the most carbon efficient mode of commercial transport). Shipping is a uniquely international industry that can only work efficiently when operating within a framework of uniform global regulation that applies equally to all ships regardless of flag. CBDR, at least at ship or company level, will simply not work without the possibility of ‘carbon leakage’, given that around 65% of the world fleet is currently registered with ‘Non-Annex I’ nations under the existing Kyoto Protocol. The shipping industry is still firmly committed to helping IMO develop a global solution for shipping on CO2 at the next meeting of the IMO Marine Environment Protection Committee in March 2010. But it is vital for all governments to understand that, in the absence of a global package agreed by IMO, there is a serious risk that some countries will develop unilateral measures to regulate at national or regional level the CO2 emissions of ships trading internationally. Such unilateral measures would likely result in serious market distortions and - most importantly - be far less effective in ensuring the reduction of CO2 emissions by the global shipping sector as a whole.