As new shipping emissions regimes emerge across the world, an effective dialogue between regulators and operators will be critical to ensure measures are successful.
24 June 2022
Increasingly localised emissions governance is creeping into the maritime sector. For shipowners and operators, a fragmented global regime is far from ideal, adding costs in compliance and associated paperwork. For ports and governments, local regulations are fundamental to their own air pollution and climate ambitions. Reconciling those two perspectives is key to meeting environmental targets without hindering maritime trade.
Two current pieces of legislation highlight the trend. In Europe, a regulation on the use of renewable and low-carbon fuels in maritime transport, known as FuelEU Maritime, is due to come into effect in 2024. Complementary to shipping’s inclusion in the European Emissions Trading Scheme (ETS), FuelEU Maritime determines stepped reductions in the carbon intensity of fuel used for shipping – starting at 2% in 2025 and reaching 75% by 2050 – as well as demanding zero emissions at berth for container, ropax and passenger vessels.
Reducing emissions at berth is also the focus of the California Air Resources Board’s latest update to its Ocean-Going Vessels At Berth Regulation. Next year container, reefer and cruise vessels at berth in California ports will need to use shore power or an approved alternative technology to reduce emissions including particulate matter, NOx, SOx and greenhouse and reactive organic gases. Under a new extension to the regulation, car carriers and tankers will need to comply by 2025 (or 2027 for tankers visiting Northern Californian ports).
Ship operator concerns
Those regulations may be outliers in setting local emissions requirements, but further fragmentation is anticipated. Discussions are already taking place on including shipping in emissions trading schemes in Japan and China. Shipowners are monitoring these moves with concern, if not trepidation. John Michael Radziwill, Chairman and CEO of C Transport Maritime, notes that fragmentation and the uncertain regulatory environment are a source of extra cost and work for everyone in the industry.
“In addition, the lack of clarity regarding the implementation of some upcoming regulations is making it difficult to anticipate properly their impact and to commit to any significant investment.”
Radziwill cites shipping’s inclusion in the European ETS, which was recently postponed by a year to 2024, with full emissions now included from that date rather than the gradual step up previously envisaged.
“The lack of guidance and change of plan means it is complicated to understand the real impact of regulations and how to be compliant,” says Radziwill.
For other operators, regional fragmentation is not only a compliance headache but a threat to the integrity of the global regime governing shipping. For Ioanna Procopiou, CEO of Sea Traders and founder of Prominence Maritime, there are several reasons for concern. She also references the European ETS.
“Shipping is a global industry requiring global rules. A regional measure will undermine the role of IMO and could lead to carbon leakage, meaning higher CO2 emissions outside the EU. It will distort competition by adding a cost element to the ships trading at European ports. And as shipping is the most environmentally friendly form of transportation, if you shift to other means of transport, you will increase pollution and make the problem worse.”
The global regime
Views on the global regime for shipping emissions, as dictated by IMO regulations, lie at the heart of arguments for both those advocating regional incentives and those who argue against them. In many instances – including California and Europe – IMO’s current emissions regulations do not come close to matching local ambitions.
One of the precursors to California’s At-Berth Regulation was the Los Angeles-Long Beach Clean Air Action Plan, introduced by the ports in 2006 to tackle sulphur emissions. The plan, which was later updated to tackle wider emissions and include shore power requirements, was eventually succeeded by action on a state level. According to Dr Geraldine Katz, Executive Director of the Port of Los Angeles at the time that the Clean Air Action Plan was introduced, IMO’s progress was simply too slow for California in light of community demands to cut air pollution.
“There were active community interests that would have blocked our investment plans if we hadn’t taken action,” she explains. “As a major port you cannot afford to not develop for five years. The lowest common denominator approach [to regulating emissions globally via IMO] was not good enough for us. Today, where you have major ocean ports and active community concern, I think you will continue to see those ports stepping out.”
It is a similar case in Europe, where the FuelEU Maritime regulation is proposed as part of an economy-wide package driving EU towards carbon neutrality by 2050. Ricardo Batista, Policy Officer at the European Commission’s DG-MOVE Waterborne Directorate, suggests that the EU initiative is not out of step with IMO, but is rather intended as a catalyser for decarbonisation at an international scale.
“The incremental ambition proposed by FuelEU, with mild targets for the initial years – a 6% reduction in carbon intensity for energy used onboard for 2030, for example – will allow operators to start the transition at minimum cost.” says Batista. “That can easily be achieved by drop-in biofuels at a lower blend than is usually found in road diesel today.”
Such a target plays an important role for later moves at a global level, he adds, providing an example for the wider scale transition. The regulation also allows for revision if the IMO targets progress to a position where they meet or surpass FuelEU Maritime requirements. EU member states and the European Commission are working at IMO level to try to achieve this.
“We see this as taking a short-term leadership position with a goal of long-term global harmonisation,” he explains.
Ricardo also notes that the Commission’s target for shipping emissions is not to reach net-zero by 2050 but was set slightly lower, at 75%, in recognition of the challenges the sector faces in abating emissions. Counting shore power as zero emissions under FuelEU Maritime is another such recognition. Currently no shore power is carbon neutral, but recognising it as such for shipping places the onus on other elements of the economy to deliver those emissions reductions.
The California Air Resources Board (CARB) has been similarly mindful of the impact of its measures on ship operators, according to regulators. Bonnie Soriano, Freight Activity Branch Chief at CARB’s Transportation and Toxics Division, notes that the updated At-Berth Regulation involved a four-year assessment period during which CARB held more than 400 meetings with stakeholders including major ship operators using Californian ports. The wide range of contingency measures offered and the long lead-in time until the regulation is enforced both testify to that consideration.
Regulations in Europe and US are likely to be far from the last that diverge from IMO’s global regime. Indeed, a new proposal currently under draft in California – the South Coast Air Quality Management District’s Ports Indirect Source Rule – could place further requirements on ports to ensure they only cater for low-emission vessels.
A gold-standard local regulation should take into account both the impact on ship operators and a harmonious fit with a global regime governing a global industry. But shipping will need to adapt too. As disparate regulations increase the demand for efficiency and higher operating standards, Radziwill argues that shipping could learn from the cooperation that C Transport Maritime often finds working with owners across its bulk carrier pools: “It is more important than ever for the shipping community to get together and share knowledge, costs and opinions to reach economies of scale and greater efficiency”.