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Changing the face of shipping?

By BCShippingNews 25 October 2018
Michele Acciaro, Trevor Heaver, Jane Lister
How climate change is posing dramatic challenges to the maritime industry

By Michele Acciaro, Trevor Heaver and Jane Lister

Under mounting industry, government and public pressures, in April, the International Maritime Organization (IMO) reached a landmark decision to commit to reduce Greenhouse Gas (GHG) emissions by 2050 by at least 50 per cent of 2008 emission levels. The decision is the result of the work of the IMO Maritime Environmental Protection Committee (MEPC) and comes following over a decade of discussions among IMO signatory parties. Notwithstanding the opposition of the United States, Russia, Panama and Saudi Arabia, the decision has seen the support of major maritime nations such as China and EU countries and is the most recent and substantial effort of the IMO to address GHG emissions from international shipping.

The UN agency started its work on GHG emissions over a decade ago and commissioned three main studies to investigate the contribution of international shipping to climate change, the potential GHG-emission growth pathways and what measures are available to the sector to reduce emissions. The reports were instrumental in collating evidence together and starting the discussion on policy to reduce emissions from the sector. Estimation of the total GHG emission from shipping is a complex exercise given the fragmented and international nature of the industry.

The most recent estimates place the contribution between two and 3.5 per cent of global GHG emissions, an amount equivalent to that of a large industrialized country such as Canada or Germany. The most comprehensive study on the total emissions of the sector is the 3rd IMO GHG Study, published in 2014. The study reviewed published literature and came up with its own estimates which slightly revised downwards the results of the 2nd IMO GHG Study. CO2 emissions from shipping averaged 3.1 per cent of annual global CO2 emissions for the period 2007-2012 however that is considered low due to the corresponding global economic crisis. International shipping, excluding domestic shipping, military and fishing vessels, accounts on average for 2.6 per cent of annual global CO2 emissions for the same period (2007-2012), while CO2e emissions for international shipping, including other GHG such as methane (CH4) and nitrous oxides (N2O), are estimated at an average 2.4 per cent of global emissions, again for the same period. It is important to observe that these estimates are averages and, in the same period, CO2 emissions from shipping and international shipping respectively reached a peak of 3.5 per cent and 2.9 per cent of total yearly emissions.

What makes the reduction of emissions particularly urgent is that while other sectors of the economy are likely to bring down the relative weight of total global emissions as a result of national targets, the substantial growth of the shipping sector expected for the coming decades might shoot its contribution to over 10 per cent. The 3rd IMO GHG report projects emissions to rise by 2050 between 50 and 250 per cent compared to the 2008 level, while the global effort is to reduce emissions. In 2014, the International Panel on Climate Change suggested the need for a global CO2e reduction in emissions from the 2010 baseline by 2050 in the range of 72 per cent to 41 per cent to be able to maintain global warming below 2 degrees, and even higher reductions by 2100.

The IMO’s April decision is the most recent in a sequence of policy measures that have been slowly changing the maritime sector, but it is the one that is likely to have the most substantial impact. Already in 2006, the IMO defined a work plan that called for the development of technical and economic measures to curb GHG emissions from the sector. In 2009, it was recognized the technical measures would not be sufficient for an emission reduction that was aligned with the other efforts and international level and this resulted in 2010 in a proposal for a set of market-based measures.

Following the lack of consensus on the adoption of these measures, discussion turned to technical measures, resulting in a comprehensive package of mandatory requirements for all new ships adopted in July 2011. This package is the first mandatory global GHG reduction regime for an entire industry sector. In October 2016, the agency approved a roadmap to 2023 that outlines all necessary steps for the adoption of a comprehensive strategy to reduce emissions. The strategy required the definition of a target, adopted this April that represents the first firm commitment from the IMO for a substantial and sustained GHG emission reduction from the sector.

The policy instruments that will have to be adopted by signatory countries in the coming years are still being debated but considering that the required reductions are substantial and ships have an economic life that is counted in decades, a combination of technical, operational and economic incentives will be necessary, as well as, consistent and effective monitoring and enforcement mechanisms. An absolute reduction of emission of at least 50 per cent on 2008 levels in about 30 years will require ships to become progressively more fuel efficient.

Substantial hope has been placed on new technologies, as a mixture of renewable energy, such as wind and solar power, coupled with alternative low-emission fuels, such as hydrogen and biofuels and improved technical designs, appear promising avenues for substantial reductions. But even in the most optimistic scenarios, it will take considerable efforts and more than an ambitious target to deliver the desired results. Change is challenged as large portions of the shipping industry operate with little margin and new technologies are expensive and risky. As a result, a change of such magnitude will likely require restrictive regulatory measures aimed at fast-tracking the adoption of new promising technologies.

Among the options on the table are: an emission trading scheme that could favour the more energy efficient ships and reward the early adopters of low- emission technologies; and industry-wide fuel taxation that could contribute to raising finance for investment in new energy efficient ships by transferring emission costs to the cargo owners. This is generally considered to result only in a marginal overall transport cost increase, although some sectors, such as bulk commodities are going to be affected more heavily and these costs, compounded with other regulatory initiatives, could become substantial.

The low-emission ship of the future will need to take advantage of all known technologies and will need to cut all inefficiencies, from operations to propulsion and onboard technology. Most likely, the ship of the future will make extensive use of digital technologies to take advantage of weather patterns and currents, and to minimize human error and optimize operations. But this change will also require adaptation of port infrastructure and hinterland supply chains. This is not only because these sectors are also under pressure to cut emissions, but also because berthing, loading and unloading and bunkering operations will need to adapt to the new low-emission ship reality. Furthermore, GHG emission reduction is only one of the facets of the overall sustainability spectrum that is changing the industry. Ballast water, spill prevention and waste management are being increasingly regulated and many more, such as underwater noise, soot and ship recycling are gaining global policy attention.

The need to further reduce the environmental and social external effects of shipping gives rise to a complex interaction between corporate and public interests. On the one hand, firms need reliable decision support tools for investment and the development and deployment of new technologies and processes. On the other hand, policy-making needs to be supported by rigorous sector and societal analyses of the measures designed to achieve environmental goals so that sound policies can be developed. Ideally, decision support tools and analyses should be developed through the collaboration of all supply chain components of the industry, from ship-owners to operators, to yards, classification societies and cargo owners, with academia, policy experts and lobby groups.

It is in recognition of the urgency of such collaboration and of the importance of better understanding how to redefine greener shipping governance that the Social Science and Humanities Research Council of Canada has funded a new six-year research project led by the University of British Columbia and to which the authors of this article are associated. The project brings together global expertise on sustainable shipping aimed at increasing international collaboration and contributing to the innovative thinking that is required to solve global epochal challenges faced by the shipping industry in the coming three decades.

*The authors are respectively Visiting Professor, Professor Emeritus and Associate Director, Centre for Transportation Studies, Sauder School of Business, UBC. Michele Acciaro is also Associate Professor at Kühne Logistics University, Hamburg, Germany.