January 14, 2016
Ship-owners are going to have a lot to cope with this year. In the main, low rates and some stubbornly high costs, more regulation and uncertainty around the strength of the forecast economic recovery.
But while the vagaries of the market will keep the analysts happy, the greatest of the challenges is in some ways the most abstract – what to do about shipping’s CO2 emissions.
To hear the comments of some shipping industry leaders and the green NGOs during last year’s COP21 climate talks, one might think that the industry has done little or nothing to date to curb its contribution to climate change.
In fact shipping has already made significant progress and is in fact the only industrial sector that has in place binding regulations aimed at increasing energy efficiency and therefore reducing emissions.
The demands that shipping be included in the agreement that came out of the COP21 meeting came from all quarters, though in the end, the UNFCCC maintained the status quo by confirming that shipping’s CO2 emissions remain the responsibility of the IMO.
That the calls for inclusion were not heeded is probably a good thing for the industry as the agreement, while hailed as ground-breaking by the great and the good, is in practice pretty weak where it matters.
On the plus side, developed economies will play a leading role in funding efforts to curb future temperature rises but developing ones have pledged to deliver too, mostly through increased use of cleaner renewables.
The latter may be difficult to deliver in practice due to the lack of good quality data and a desire by some developing nations to continue fossil fuel consumption alongside investment in cleaner fuels.
But while parts of the agreement are more about intention and direction than delivery, there is one morsel of comfort for those who hope to see progress when MEPC reconvenes in April this year.
Previous efforts to legislate for a market-based mechanism – a carbon trading system or a bunker levy for example – had foundered on the developing nations’ argument that the Kyoto Protocol’s concept of contributions on ‘common but differentiated responsibilities’ contradicted the IMO concept of ‘no more favourable treatment’.
In other words, at IMO, equal treatment regardless of national fleet size is guaranteed even though some of the developing economies are sizable (and major contributors to climate change) and others tiny island states. Some have a lot to lose, while others seem more concerned with using the bandwidth allowed to them to make noise out of proportion to their relevance.
The Paris agreement moves the signatories – including many developing nations – significantly away from the CDBR approach and towards a shared goal of limiting climate change where possible and paying to limit the damage where the effects are already irreversible.
It is probably too early to celebrate a break-through but there is probably more good to have come out of this process than might have been predicted.
Since the countries that signed up in Paris will be making contributions towards either adaptation or mitigation, they may find it possible to shift the conversation at IMO away from the traditional sticking point towards some new commonality.
For the developing nations, there is less opportunity to hide behind the Annexes of the Kyoto Protocol and the IMO may be able to invoke the spirit and the letter of the Paris agreement while paying the Kyoto principle due deference.
Addressing this issue with the countries that have previously resisted change is probably the biggest challenge facing new IMO secretary-general Ki-tack Lim. He needs to energise the existing IMO process while also encouraging innovative thinking to begin to tackle the industry’s reliance on fossil fuels.
The NGO lobby meanwhile will doubtless be unhappy at the outcome of the Paris talks but they should take heart. The agreement calls for much more regular updates and reporting – rather than the fire and forget process of the past. Countries should be increasingly held to account.
Neither should the shipping industry sit back and imagine that Paris proves it is a special cases, it should be treated like one. Instead, it is time for the majority of member states who want to tackle climate change to address the countries which have blocked previous progress. At the same time they should challenge the NGOs to deliver a positive programme of engagement with the industry.
Since carbon emissions from shipping remain the responsibility of IMO, a collaborative process is the only one that stands a chance of success. To achieve that 2016 must be the year that the countries that signed up in Paris as well as anyone interested in a sustainable shipping industry, accepts that ‘no more favourable treatment’ means just that.