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CO2 Emission Reporting

An EU initiative to publish ships’ CO2 emissions could have serious economic consequences for the industry without delivering environmental benefits

Since April 2019, ships have been required to submit verified data on CO2 emissions to the European Commission, which will publish the information from June 2019 onwards accompanied by ship and company identifiers.
This follows the extension of the EU Regulation on the Reporting, Monitoring and Verification (MRV) of CO2 emissions to all merchant ships trading to Europe regardless of the flag state. The apparent intention is to develop this into some kind of regional operational efficiency indexing system.

Penalising vessels twice

Regardless of whether mandatory operational efficiency indexing is implemented unilaterally or globally by IMO, ICS remains strongly opposed to the concept whereby metrics derived from individual ships’ CO2 emissions are placed in the public domain where they can then be misused and wrongly interpreted by third parties, such as charterers, when making commercial decisions about which ships to hire or the freight rates they wish to pay. ICS fears this will lead to serious market distortion without delivering any additional environmental benefit.
CO2 efficient ships are correctly rewarded by the market because their lower fuel costs make them more commercially competitive. The ultimate purpose of operational efficiency indexing, however, is to penalise individual vessels twice, on the basis of a theoretical and arbitrary rating that has little relation to the actual CO2 efficiency of the ship in real life.
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 changing trading patterns and the nature of charters over which the ship operator has little control.

A contrary approach to the IMO

The publication of individual ship’s emissions data, which is a prerequisite for operational indexing, is also completely contrary to the approach agreed by IMO Member States when they established the IMO Fuel Oil Data Collection System (DCS) which will be fully up and running during 2019.
When adopted in 2016, the IMO DCS was viewed as an acceptable compromise between those IMO Member States which are interested in having reliable information about fuel consumption and CO2 emissions within the sector as a whole, in order to inform the development of future IMO work, and those nations that wished to collect more detailed information about fuel efficiency and ‘transport work’. The current purpose of the IMO DCS is simply to inform future policy making rather than to penalise or reward individual ships.
ICS encouraged support by governments for this IMO compromise with the understanding that the DCS should be simple for ships to administer and primarily be based on fuel consumption. Most importantly, data relating to fuel consumption of individual ships under the IMO system will remain anonymous, in order to prevent the serious danger of misuse by third parties who can all too easily misinterpret the meaning of the information and then use it to penalise individual ships unfairly.
Shipping is a global industry requiring uniform global rules. ICS and its members therefore continue to be very unhappy about the European Union’s unilateral decision to proceed with the implementation of its own regional MRV regime for the collection and publication of data on individual ship emissions, at variance to the approach agreed by EU Member States at IMO for the global DCS under which the data is anonymised.

Risk of a unilateral approach

In February 2019, the European Commission issued recommendations on possible alignment with the IMO regime for the collection of data on ship’s CO2 emissions, following the consultation that the Commission concluded in 2018 to which ICS and the European Community Shipowners’ Associations (ECSA) submitted detailed comments. However, as anticipated, the Commission has not proposed any significant changes with regard to its approach to the publication of ships’ data, although it has suggested some possible adjustments to the metrics that must be reported.

The Commission has initiated fresh consultations on these proposals prior to their consideration by the European Parliament (which had elections in May 2019) and EU Member States. ICS and ECSA submitted further comments in March 2019, expressing their disappointment that, rather than seeking a full alignment with the IMO system, the Commission still wishes to proceed with the publication of potentially misleading data, having merely sought to make its system slightly more compatible with the IMO regime.
Meanwhile, the dangers of the EU taking a unilateral approach, which undermines the authority of IMO and might be emulated by others, has been demonstrated by the announcement by China, in January 2019, that it too is introducing its own unilateral MRV regulation, whereby visiting ships will have to submit data about fuel efficiency to the China Maritime Safety Agency (MSA).
In addition to the administrative burden created by having to report different data under different systems, this also raises questions about how this potentially commercially sensitive information might be used by the Chinese authorities. In March 2019, ICS met with representatives of the China MCA to voice concern about this and other recent unilateral regulations on environmental issues that are applicable to visiting ships. This dialogue with China will hopefully continue.