Regional regulation has, in the past, been criticised for unfairly skewing a global market, but localised shipping rules can also be viewed through a positive lens.
Speaking with The Baltic, James Corbett, environmental director for Europe at the World Shipping Council (WSC), said that regional regulation could be seen as an “attractor”, presaging and influencing global action.
He gave the example of the regional Emissions Control Areas for sulphur, which came into force before a global limit was set on sulphur content in marine fuels. And for the switch from single to double hulls, it was regulations in North America and Europe that set the stage for a global agreement.
“I wouldn’t be immediately too despairing over the idea of things happening regionally, where the will and the capacity is first identified,” Corbett said. However, there is the risk that regional regulations attract the newest, most innovative technologies, he added. “We must avoid the situation of having a performance segregated route, where a green fleet serves one region, and the brown fleet serves the rest.”
He praised green corridors – specific trade routes between major port hubs where zero-emission solutions are encouraged and supported – for creating macro-scale connectivity and linkages, ensuring that capacity is developed in other places. While on a micro scale, investments are being made in fuel supply and production in many places and at a good level of detail.
Corbett highlighted China and Asia in general for its high level of investment in renewable energy, with Europe being the second most aggressive investor, even before the publication of its Fit for 55 package. North America sits in third place. “The good news is that there is investment happening in all areas and it’s not isolated to the renewable production of energy needed for fuel.”
Carbon trading
Turning to carbon trading schemes, Corbett described the European Union Emissions Trading Scheme as “doing good things”, including serving the European Green Deal ambition to create a net zero and circular economy to reduce greenhouse gases and to transform the EU’s economy. “Shipping needs to be a part of that regional transformation,” he said.
However, he noted a downside to this regional action. Asked whether a regional, open sector trading system would create the right price for shipping, Corbett answered no. “That won’t work and it won’t be global,” he said. “And until we get a global market-based measure at IMO, we won’t get there.”
There are strengths to the EU ETS scheme worth noting though, he added. “Impact assessments said that a significant fraction of the behaviour of the maritime sector in the open sector emissions trading system will be used to buy allowances for greenhouse gas emissions in advance of their own ability to reduce their emissions themselves.”
With carbon-free fuels still not available at scale and new ships now coming online, ship owners need alternative options. “When ships buy an allowance to emit a tonne of greenhouse gas, they will be buying that from a factory, another installation, or another industry sector who will be able to achieve investment with those costs that will reduce greenhouse gases – so it is not bad for Europe.” Prior to adding shipping, the emissions trading system in Europe covered about 40% of the greenhouse gases in the European economy. After shipping is added to the scheme, according to the claims from the European Commission, that figure will be increased to nearer to 70% of emissions.
Pricing could be a sticking point though when it comes to translating regional trading schemes to a global scale. “The price currently being used in the EU ETS is a lower price than is being discussed by most observing delegations and most member delegations at IMO. Therefore, the market-based measure (MBM) for shipping will likely be at least as high and could be more than the price that the EU ETS regional open market will be,” Corbett said.
Market-based measures
In terms of timescales, Corbett said that there will likely be a narrowing of MBM options this year at the IMO and that target setting will help bring clarity into different types of market-based mechanisms and pricing. “Setting carbon pricing targets will be critically important for IMO.”
In advance of agreements on both regional and international MBMs, Corbett said that the WSC is helping to identify and clarify multiple pathways to decarbonisation. “We are confident that the industry will reach zero emission by 2050, even if we don’t know today what fuels or technologies will be used. Market-based measures reflecting lifecycle emission performance will help drive demand for and availability of the best performing fuels for the future.”
He said that WSC members are already building future-ready ships and taking delivery of them without a reliable renewable fuel supply. Therefore, they will have to operate those ships for some years on the fuels that are available. While those fuels are still fossil derived, they perform better than conventional fuels. “But that isn’t enough,” he said. “Our members are working to be sure that the renewable fuel supply needs for the future are met. Moreover, our members are investing now to reduce emissions across the shipping fleet and throughout the energy lifecycle.”
“We are not as a group looking to buy a green blanket from another industry,” he concluded.
Source: Hellenic Shipping News
