New ECAs still faced with uncertainty, as rules and regulations are “flooding” the shipping industry

The global shipping industry is faced with a flurry of new rules and regulations, often unilateral, as has been the case with EU’s recent decision to impose the monitoring of shipping emissions from ships on the region water’s. Hellenic Shipping News Worldwide interviewed Mr. Patrick Verhoeven Secretary General of the European Community Shipowners’ Associations (ECSA), on the most pressing issues that shipping is dealing with at the moment, from the upcoming ECAs and the operational problems that ship owners will be faced with, to the adoption of the new Polar Code by the IMO and the recent decision of Ballast Water Treatment systems. Mr. Verhoeven also highlighted the upcoming European Shipping Week, whose aim is to make European policy-makers aware of the added value shipping brings for Europe and its citizens.

Maritime regulations are changing left and right these days, often leaving ship owners bewildered as to what measures they should implement onboard their vessels, in order to comply with all the latest rules. Can you summarize the most important ones and how are they beginning to affect maritime operations?

The most important regulatory issues for shipping are to be found in the environmental field these days. Sulphur and CO2 emissions dominate the agenda at the moment, but there are several other topics: ballast water, ship recycling, NOx emissions, port reception facilities … just to name but a few.

These and other regulations have an impact on both cost and efficiency of shipping operations. In many cases, there is considerable uncertainty about application, which makes it very difficult for operators to take sound commercial decisions to comply with the rules. This is for instance the case with sulphur and ballast water rules.

Which are your aspirations and goals with the upcoming European Shipping Week?

The main aim of European Shipping Week is to make European policy-makers aware of the value-added shipping brings for Europe and its citizens. Now that we have both a new European Parliament and European Commission in office, the time is right to demonstrate what our industry is all about.

At the same time, it is a unique occasion to show in real terms the diverse range of operations shipping represents: containers, bulk, general cargo, ferry, roro, cruise, offshore … Next to the main conference and related seminars, we will do that through a series of on-site visits to the main seaports neighbouring Brussels.

Do you feel that the reception so far is positive?

Yes, very positive! We are very honoured to have support from the European Parliament and the European Commission (DG Move) as well as from the European Maritime Safety Agency. Industry engagement is coming on nicely as well. Several top names from shipping companies have confirmed their attendance already.

Do you expect to see problems arising in the new ECAs at the start of 2015?

There are still quite a few challenges out there I am afraid. They relate to some extent to regulatory uncertainties, for instance regarding the possibility to discharge washwater from scrubbers in ports and coastal areas. This is absolutely unclear at the moment. In some ports, there will be no problem, in others it will be forbidden. We have asked regulators to grant a grandfather clause for operators who invested in good faith in scrubber installations.

There are technical concerns as well, such as changeover problems from heavy to low sulphur fuel. This can lead to blackouts and accidental contamination. Together with our international sister organisation, the International Chamber of Shipping, we have developed guidance on how to deal with these problems, which is addressed to both administrations and industry.

And, in general, we expect there will be price increases. The question is then whether customers will be prepared to pay for them or will seek alternatives. At least four shipping companies have already announced closures of routes and we expect there may be more to come.

How is the ECSA’s ESSF sulphur survey progressing? Do you have any preliminary results/conclusions?

We have just closed the first round of the survey, which asked ship operators to provide information on what happened during the first three quarters of 2014. We are currently processing the results and will present a full report to the European Sustainable Shipping Forum later this month, after which we can go public. We will repeat this survey during 2015, on a quarterly basis.

A few weeks back the EU reached an informal agreement on the issue of CO2 monitoring for ships. What will this entail, when do you expect it to take place and what’s your initial reaction as ECSA?

The agreement, which still needs formal endorsement, paves the way for a European ‘Monitoring, Reporting and Verification’ (MRV) system that will become operational as of 2018, applying to ships above 5000 GT arriving and departing from EU ports, regardless of their flag and ownership. The Regulation is meant to be a stepping stone towards a global MRV instrument, which is currently being discussed at the International Maritime Organisation (IMO). Apart from data on CO2 emissions and distance sailed, the negotiators agreed that the Regulation will also require ships to report cargo-related information.

Whilst the inclusion of cargo-related information allows the measurement of energy efficiency of vessels, there are concerns regarding data reliability and confidentiality as well as reporting responsibilities and obligations. This explains why IMO approaches the issue with great care. As ECSA we would have preferred the inclusion of cargo-related data to have simply been postponed until an agreement was reached at IMO. We do however acknowledge that the negotiators took some of our concerns into account and have strengthened provisions on international alignment. We are now assessing these changes. We believe it is essential that industry is closely involved in any further steps, for instance on defining the metrics of cargo data.

Most importantly, we call upon the European Commission to actively engage in a confidence-building exercise with non-European Member States at IMO, to ensure that the common objective of establishing an international MRV instrument will be achieved.

Do you feel that LNG bunkering will be the norm by the end of the decade, or could a sustained lower oil price environment slow down the turn towards LNG, at least for the shipping industry?

This is difficult to predict, because we don’t know what the future evolution of oil and gas prices will be. LNG is definitely a promising alternative, which can remedy all kinds of emissions, not just sulphur. But before LNG can really become the norm for shipping, there must be adequate bunkering facilities in ports and all regulatory uncertainty regarding bunkering operations must be lifted. In that respect, it is a pity that EU Member States did not agree upon more stringent deadlines for core EU ports to be equipped with bunkering facilities.

IMO recently adopted new rules on the Arctic navigation. Do you think that the decision paves the way for a new shipping route, or will more caution be needed?

For sure, the Polar Code marks a historic milestone and we welcome its adoption. But there are still various challenges to secure safe navigation in the Arctic and to reinforce prevention of marine pollution in the area. This includes better international sharing of knowledge and experience on preventive steps and cooperation, especially in the Arctic Council and in IMO. Adequate onshore facilities must be available, as well as accurate and more extensive chart coverage and improved knowledge of the nature of ice, its age, position and likely future disposition. The ability to conduct search and rescue at long range and in extreme cold or ice conditions must be improved and there should be more places of refuge.

From a shipping perspective, the Arctic is for the time being primarily a niche destination, related to extraction of natural resources, maritime tourism, local trade and fisheries. Apart from safety and environmental considerations, there are other obstacles that influence the commercial viability of Arctic transit routes, such as the seasonal character, the fact that there are no intermediate markets, lack of scale economies, icebreaker, pilotage and other charges and insurance premiums. Also, the interest of large trading nations such as China and the geopolitical strategy of Russia play a considerable role.

The Union of Greek Shipowners has advocated for a long time the introduction of a “Green Levy” to be imposed in shipping, in essence streamlining all of the latest low sulphur guidelines, as well as additional regulations into one coherent “tax”. In that way, they feel that shipping will assume its responsibility towards its contribution to environmental protection, while also avoiding a flurry of new rules and regulations, often imposed unilateraly by various countries around the world. Do you think that this proposal can ever be realized?

We should certainly consider it, together with other alternatives, as a way to establish a more stable, long-term sustainability policy for shipping. If we want to prevent the ongoing flurry of regulation, we must come up with a credible policy proposal ourselves. This will not be an easy task, given the diverse operations and business models we have in the shipping industry, but we should definitely try. The current situation is highly unsatisfactory, we seem to be engaged in constant fire-fighting battles, whereas we should be looking at the bigger picture. This also requires an open mindset from regulators, taking into account the socio-economic contribution the shipping industry brings to the world and Europe in particular. If we just look at the ecological dimension, we are not really talking about ‘sustainability’.

What’s your take on the recent IMO Environmental committee resolution (MEPC) on the issue of ballast water management systems?

Overall, we share the views of the International Chamber of Shipping, welcoming the progress governments made at the last MEPC meeting towards agreeing solutions to major issues that have previously impeded ratification of the IMO Ballast Water Management Convention. Like ICS, we are very pleased that IMO Member States have fully acknowledged the shipping industry’s concerns by agreeing to start work immediately on a revision of the G8 type-approval guidelines to make the process for approving ballast water treatment equipment more robust. In the meantime, it has also been agreed, in principle, that any shipowner that has invested in first generation treatment equipment, type-approved under the current G8 guidelines, should not be penalised, provided that the equipment is operated and maintained correctly. The adoption by IMO of new Port State Control guidelines reflecting a fair and pragmatic approach to inspection is also an important additional step.

We are still very much concerned though about the impact the Convention will have on short sea operations. Whilst for these operations the risk of contaminating ecosystems with invasive species is limited, the cost of installing ballast water treatment systems is tremendous. This will come in addition to the cost increases imposed by low sulphur regulations and thus further disadvantage the competitive position of short sea shipping. The provisions for exceptions and exemptions foreseen in the Ballast Water Management Convention must therefore be urgently clarified, so that they can be applied in an efficient and cost-effective manner.

Nikos Roussanoglou, Hellenic Shipping News Worldwide