Alignment of IMO and EU CO2 Reporting Regimes

In October 2016, following several years of work, IMO Member States adopted a mandatory global system of data collection from CO2 emissions from international shipping, as a precursor to the development of additional CO2 reduction measures. 

The final system adopted is viewed by ICS as an acceptable compromise between those IMO Member States which are primarily interested in having reliable information about fuel consumption and CO2 emissions in order to inform the development of future IMO work, and those that wished to collect more detailed information about fuel efficiency and so called ‘transport work’.

However, ICS support for this IMO compromise has been given with the understanding that the mechanism should be simple for ships to administer and primarily be based on fuel consumption. ICS and most non-EU IMO Member States remain strongly opposed to the use of such a mechanism as a means for eventually establishing a mandatory system of operational efficiency indexing for application to individual ships, the ultimate purpose of which would be to penalise vessels on the basis of a theoretical and arbitrary operational rating. This is because of the potential inaccuracies of such a metric and thus the significant danger of market distortion. 

For example, the fuel consumed by two identical ships during two similar voyages will vary considerably due to factors such as currents, ocean conditions and weather. Similarly, fuel consumed by individual ships, particularly those in tramp sectors, may vary considerably from one year to the next, being dependent on trading patterns and the nature of charters over which the ship operator has little control. 

In the interest of maintaining the primacy of IMO, ICS has argued throughout the process that the question of additional CO2 reduction measures should be left open until a mandatory CO2 emissions reporting system has been agreed. It is with this broad understanding that IMO has since pursued its work, including the important decision in 2016 to develop a Road Map for CO2 reduction in line with the Paris Agreement on climate change. 

ICS has therefore been most concerned by the European Union’s decision to pre-empt the IMO negotiations by unilaterally adopting a regional Regulation on the Monitoring, Reporting and Verification (MRV) of individual ship emissions, in advance of IMO completing its work on data collection. The EU Regulation will also apply to non-EU flag ships trading to Europe, with the apparent intention of subsequently developing this into a mandatory operational efficiency indexing system, i.e. an unacceptable form of Market Based Measure by stealth. 

The EU Regulation was adopted during 2015, and includes controversial provisions for the submission of data by ships on so called ‘transport work’ using different metrics to those now agreed at IMO, in addition to data on fuel consumption. Moreover, discussions in which ICS has been participating, within the European Sustainable Shipping Forum, suggest that the verification and certification method being developed will be overly complex and unfit for purpose. EU climate officials seemingly wish to ignore the tried and tested processes for statutory certification used in international shipping, instead proposing an unjustifiably large administrative burden for ship operators.

Of even greater concern is that commercially sensitive information will be published annually by the European Commission, along with ship name and company identifiers. This is with the intention of facilitating comparison of the supposed operational efficiency of individual ships – which is very likely to be inaccurate and very different to the actual fuel efficiency or CO2 emitted in real life. In short, the EU Regulation contains many of the elements which most IMO Member States have chosen to reject when adopting the global system. 

The EU Regulation is meant to be fully implemented in 2018 (one year before the IMO system) although it also contains text to the effect that the system can be amended to reflect the final outcome of any agreement at IMO. In practice, however, there is no guarantee that the EU will be willing to fully align its rules with the agreed international consensus. 

In January 2017, ICS – in conjunction with the European Community Shipowners’ Associations (ECSA), the Asian Shipowners’ Association (ASA) and other international associations – sent a letter to the three EU Commissioners for environment, climate change and transport, requesting them to ensure that the EU regime will be aligned as far as possible with the system now agreed by IMO. The industry emphasised its concern that, in addition to complying with the IMO system, all ships calling at EU ports – including non-EU flag ships – will soon have to comply and send data about their ships directly to the European Commission. Some of the requirements under the EU Regulation actually have to be complied with during 2017. 

Apart from the need to have global regulatory uniformity and avoid dual systems, ICS believes it will be important for the EU to send an early signal to other IMO Member States that it intends to help achieve a single CO2 data collection system for international shipping. 

With encouragement from the industry, non-EU Member States have been persuaded to accept the IMO ‘three step’ process and the adoption of the CO2 data collection system, as a precursor to consideration of additional measures, but with the understanding that this would help to prevent unilateral action. 

A signal from the Commission confirming that it is taking the necessary steps to align the EU regime with the IMO data collection regulation would therefore be most helpful to avoid polarisation during the next round of discussions in 2017 as work begins on the IMO Road Map, stimulating further progress towards an ambitious global solution.


Significant differences that currently exist between the IMO and EU CO2 reporting regimes for ships


Metrics
The metrics which the EU requires ships to report (including non-EU flag ships calling at EU ports) are far more detailed than those required under the IMO regime. Apart from the administrative burden created, there is a concern among many IMO Member States that the next step may be for the EU to use this data to develop a unilateral operational efficiency index, which in turn might be used to penalise individual ships unfairly, using abstract metrics that have no relation to the ship’s actual carbon efficiency or CO2 emissions.

Verification
The EU verification system requires the use of nationally accredited verifier bodies similar to those associated with the EU Emissions Trading System, rather than Recognized Organizations (primarily classification societies) authorised to work on behalf of flag administrations under IMO Conventions.

Publication of Data
The EU Regulation requires the European Commission to publish the data received complete with company and individual ship identifiers, so that it can be used by third parties with the specific intent of affecting the commercial market. Under the IMO system, the information from ships submitted to IMO via the flag state is anonymous to third parties. The purpose of the IMO regime is simply to establish the total CO2 emissions of the international shipping sector, to facilitate further policy decisions and consideration of additional GHG reduction measures. But the EU wishes to publish detailed (and commercially sensitive) data about individual ships visiting EU ports, which may be misused, resulting in the unfair penalisation of ships, and leading to market distortion as a consequence.
 


  • International Chamber of Shipping
  • 38 St Mary Axe, London
  • EC3A 8BH