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UN Shipping Regulator Breaks Climate Pledge. What Next For Global Shipping?

Country delegates at the UN agency responsible for global shipping voted on Tuesday on a controversial measure that will lead to higher carbon emissions over the decade.

The measure and vote has been widely criticized by leading environmental NGOs, representatives from small island states and protestors who had gathered outside the London-headquarters of the International Maritime Organization on Sunday.

Under the Paris Climate Agreement, countries had committed to reduce greenhouse gas emissions by 40% by 2030. To meet such goals, bold emission reduction targets needed to be set by Governments to regulate emissions pushed by the private sector.

For example, countries like the U.K., today announced plans to end all petrol car sales in 2030 as part of a $16 billion 10-point ‘Green Industrial Revolution’ spearheaded by British Prime Minister Boris Johnson.

However, the world’s sixth highest emitter of greenhouse gases, global shipping, has avoided any meaningful intervention in the sector. The industry continues to operate largely outside of any enforceable international law or external scrutiny, in spite of safer, cleaner and efficient technologies being available.

Governments afraid of regulating shipping

The global shipping industry, responsible for transporting 90% of global goods, has continued to operate with impunity, ignoring calls for tighter regulation.

This lax adherence and enforcement of international maritime laws has led to major oil spills in Mauritius, Venezuela and Russia this summer, the loss of lives (41 lost with the Gulf Livestock 1 cattle ship in September off the coast of Japan), and dangerous vessels (such as the exploding oil supertanker off the coast of Sri Lanka and dangerous cargo exploding in the Port of Beirut). Much of this can be linked to the use of ‘flags of convenience’ states permitted by the IMO to govern global shipping, such as Panama, the world’s largest ship registry.

In addition to environmental challenges, shipping is facing a ‘humanitarian crisis’ with almost half million seafarers stranded on ships around the world, many for over a year. World leaders have largely remained silent on the issue, as shipping company stocks have rebounded 85% to pre-crisis levels.

To respond to NGO pressure after opting out of the Paris Agreement, global shipping opted for a voluntary approach that 100 countries voted on in 2018 to reduce emissions by 2050. NGOs had pressured companies for clearer targets over the next decade to 2030 to show the industry was serious about making this change, rather than a long term target thirty years from now, which a new set of executives would have to deliver against.

Today’s vote was to supposed to ensure the industry starts moving forward toward that target. However, the outcome of today’s vote shows countries are more interested in protecting national corporate interests than protecting the planet.

What happened today?

The IMO’s Marine Environment Protection Committee voted on a proposal that will now greenlight the shipping industry’s 1 billion tons of annual greenhouse gas emissions to keep rising for the rest of this decade – the very decade when leading climate scientists say the world must halve global greenhouse gas (GHG) emissions to stay within a relatively safer 1.5℃ of global warming as committed to under the Paris Agreement.

Dan Hubbell, shipping emissions campaign manager for Ocean Conservancy, reacted to the news. “Instead of charting a course for rapid decarbonization, the IMO has moved in a dangerous direction that will allow global shipping to continue with business as usual during perhaps the most critical decade to deliver on climate action,” he said, speaking after the vote.

Vote on wrong side of history at the IMO

The meeting of the environment committee of the IMO (the Marine Environment Protection Committee meeting or MEPC75), took place over the last two days, and will formally conclude on Friday November 20.

Today it approved the controversial policy recommendation known as Annex 1 of ISWG-GHG7-WP.1- Rev.1, (previously called the J/5.rev1 proposal) that had originally been made in October by an IMO working group. This proposal, put forward by Japan, who also chair the IMO’s Environment Committee, undermines Paris Climate Agreement targets.

Environmental groups such as Pacific Environment, WWF , the Clean Shipping Coalition and Ocean Conservancy have highlighted three main weaknesses of the regulation:

  • No carbon intensity target, and a weakened Energy Efficiency of Existing Ships Index (EEXI): The proposal still contains no carbon intensity target compatible with 1.5ºC trajectory, and reduces the stringency of the required EEXI for many ship types.
    Loopholes: non-compliant ships will be able to continue underperforming for three consecutive years before they even have to file a plan to make improvements, and can easily dodge the rules and continue underperforming indefinitely by ensuring one compliant year every three years.
  • No actual enforcement: All clauses that would create consequences for non-compliance – such as revoking a ship’s statement of compliance – have been removed. The environmental groups of the Clean Shipping Coalition and Pacific Environment’s moderate enforcement proposal (of limiting time at sea in the following year, in proportion to non-compliance) – has been excluded. These sorts of measures would have also created safer conditions at sea, as seen in the case of the Wakashio this summer where safety warnings over multiple months were not acted upon.

Negligible impact on shipping’s carbon emissions

These purposefully designed weaknesses means the proposal would now curb only about 1% of greenhouse gas emissions from a business-as-usual growth pathway by 2030, according to environmental analysts, The International Council on Clean Transportation. The ‘business as usual’ pathway for global shipping is 15% above the industry’s 2008 baseline. This leaves shipping sector emissions around 14% higher in 10 years time than today.

“We cannot afford to put off action when the evidence of climate change impacts—extreme weather events, warming waters, ocean acidification—is this clear. The IMO can and must do better than offer watered-down strategies to tackle one of the greatest global challenges of our time,” said Ocean Conservancy’s Dan Hubbell.

John Maggs, President of the Clean Shipping Coalition said, “As scientists are telling us we have less than 10 years to stop our headlong rush to climate catastrophe, the IMO has decided that emissions can keep on growing for ten years at least. Their complacency is breathtaking. Our thoughts are with the most vulnerable who will pay the highest price for this act of extreme folly.”

What next?

Global shipping is now at a crossroad. Many shipping companies and Governments will continue to pollute with increasing greenhouse gas emissions.

However, a breakaway faction of important companies and Governments may push for stricter disclosures and regulation.

Here are three potential outcomes from today’s vote.

Procedures at the IMO

Procedurally, today’s measure only becomes law next year when the same Environment Committee votes a second time to ‘adopt’ the measure for it to pass into law. It then needs to be ratified by countries that have 50% of global shipping registered with them (70% of global shipping is controlled by just six ‘flags of convenience’ nations, making this a forgone conclusion).

It also shows how out of touch the International Maritime Organization is with the pace of the modern economy and urgency of the climate crisis. It is almost as if such glacial bureaucracy was designed intentionally to prevent any meaningful legislation on global shipping.

In the meantime, some of the details of the measure that was voted on today will be decided upon.

1. Transparency of data

There is a proposal to rate ships based on an ‘A to E’ efficiency rating (similar to household appliances like washing machines). Shipping companies are lobbying for this data to be held privately, with only a small handful of regulators at each port able to view it once a year.

Making this data public, will force a lot more transparency by customers, charterers and cargo owners about the most polluting ships.

A working session at the IMO in May 2021 will make a decision on how public the Ship Efficiency Rating system will be.

The ship efficiency labels have been criticized for greenwashing, as the labels only reveal the theoretical efficiency of vessels. The single biggest driver of emissions is how a vessel is operated. New sensors from satellites can easily detect how much emissions are being released, and so the choice of an ‘Efficiency Certification’ tool is largely seen as greenwashing, when more effective alternatives were available on the market to show actual emissions from each individual ship.

2. Regional approach

Several Governments are growing increasingly frustrated with the IMO’s approach to greenhouse gas emissions from shipping.

Three island nations voted against today’s measures. They were Solomon Islands (that experienced a major oil spill in an important UNESCO nature reserve last year), Marshall Islands (which has 15% of all shipping registered with it) and the Pacific Island nation of Tuvalu.

Already, the EU, U.K. and the U.S. have discussed an emission trading scheme and emission monitoring scheme (MRV) respectively. The IMO’s Secretary General attempted to interfere with the EU’s tighter regional emissions approach this summer, but this was rejected by the EU. The EU is not a member of the IMO, but members of the EU are significant contributors to the IMO’s $80 million a year operating budget.

The European Commission has already called for global shipping to be included in the European Green Deal, in a speech by Commissioner to the Environment Committee of the European Parliament on October 29.

In a response to the vote happening this week, a spokesperson at the European Commission said on Monday, “The European Commission will continue to push for greater ambition to decarbonize the shipping sector at the IMO, and will work on the basket of EU measures to address emissions from shipping as part of the European Green Deal and Climate Target Plan for 2030 in the short term, and climate neutrality by 2050.

This basket of measures will be proposed in the first half of next year and will include a proposal to extend the European emissions trading system to maritime emissions, but also other measures such as a dedicated initiative to boost the demand of sustainable alternative fuels used in ships and the revision of existing directives dealing with energy taxation, alternative fuel infrastructure or renewable energy.

The Commission has also volunteered to coordinate the IMO Correspondence Group which will focus on the accompanying guidelines on the short term energy efficiency measures due to be adopted; the Commission will continue to press for the uptake of sustainable alternative fuels as well as medium and long term measures both at global and regional level.”

German MEP, Jutta Paulus, from the Green Party has been driving a lot of the change within the … [+] Jutta Paulus

German MEP from the Green Party, Jutta Paulus, has been driving change at the EU for greener shipping. This summer the European Parliament voted in favor of the Emission Trading Scheme for shipping in EU waters. Next year, member states will vote at the European Council level. The law should then come into force in 2022. Given the size and influence of the European market, this should start to shift the behavior of the major European shipping companies and other global shipping companies interested in trading with Europe.

The U.S. is foreshadowing this with a new bill in Congress called the Ocean Climate Based Solutions Act (OBSCA), that proposes a Monitoring, Reporting and Verification (MRV) scheme, that would form the basis for a carbon price and hence emissions trading in U.S. waters. Having both the EU and U.S. committed toward a carbon price and emissions trading would be a powerful signal by two of the world’s largest trading blocks.

The U.K. published its Clean Maritime Plan in July 2019, that focusses on strategically evaluating the various pathways to decarbonize shipping, setting targets and incentives for shipping to meet these. It could attempt to harmonize its shipping emissions framework with the U.S. and EU proposals.

3. Private action: a campaign of shipping divestment

It is unlikely that environmental activists will leave shipping alone under the current regulatory regime and growing climate crisis.

Several groups are already exploring a range of levers such as using finance to divest from shipping companies that do not publish transparent emissions data.

A set of ship sustainability finance principles, called the Poseidon Principles was signed last year to get one third of ship finance companies to link lending with decarbonization.

However, it is unclear whether the Poseidon Principles will set their own path for decarbonization for the next decade, or follow the IMO’s weaker path.

A spokesperson for the Poseidon Principles said, “The Poseidon Principles use carbon intensity relative to established decarbonization trajectories to measure climate alignment.

Climate alignment is defined as the degree to which a vessel, product, or portfolio’s carbon intensity is in line with a decarbonization trajectory that meets the International Maritime Organization’s ambition of reducing total annual greenhouse gas emissions by at least 50% by 2050 based on 2008 levels.

The Poseidon Principles rely specifically on the Annual Efficiency Ratio as the carbon intensity metric. The Annual Efficiency Ratio uses the parameters of fuel consumption, distance travelled, and deadweight tonnage at summer draught.

To assess climate alignment of a single vessel, the vessel’s annual carbon intensity is compared with the decarbonization trajectory for its ship type and size class. The climate alignment of a product and or portfolio is a weighted average of the vessel carbon intensities in each product or portfolio.”

There is likely to be a lot more scrutiny of the robustness of such voluntary measures given the IMO vote today. What is clear, is that the emissions of individual companies will continued to be tracked by global environmental groups.

The big unknown: the new U.S. Presidential response

The big unknown in global shipping is the impact and influence of the new U.S. Presidential team. This will significantly influence the next few years in global shipping.

President-elect Biden and Vice President-elect Harris have already made ‘enforceable emissions agreements in international shipping’ a campaign pledge. This shows how seriously they are taking the issue.

Should the U.S. choose to lean into global maritime discussions on shipping emissions, there may be a lot of new levers that could become available to the largest economy in the world, to reign in the excesses of the sixth largest polluter in the world.
Source: Forbes

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