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July 13, 2016

Voyager News

Right next time?

Contrary to the protestations of a growing number of NGOs, regulation is a constant in the shipping industry. It guides and governs almost every aspect of shipbuilding and operations and is even moving into the end of life phase.

Still, ask a shipowner his top five complaints and at least three will be regulation-related. Many shipowners believe that their business should be free from the influence of lawmakers and bureaucrats who have never spent time before the mast.

And yet though they dislike regulation, many more are often more confused than dissenting. Given a cohesive argument, most are compliance-minded; they want a licence to trade and will pay the price to do so, if grudgingly.

But recent years have seen growing reason for complaint. Traditionally, maritime regulation was designed to deliver safety and mitigate risk through some well-established instruments. SOLAS, MARPOL, STCW and lately the MLC are all designed to set minimum standards on which the industry can agree.

This work continues but much has changed. From the single hull tanker ban to the revision of Annex VI, the Ballast Water Management Convention and its US counterpart, maritime regulation has moved into a new sphere of proactive environmental protection often based on political, rather than technical drivers.

And while the evidence supporting the safety argument for double hull tankers was compelling, the requirement for owners to comply with sulphur and nitrogen oxide emission levels, ballast water – and soon carbon – depends on their acceptance of scientific evidence and social trends with which many do not agree.

It was not surprising that the double hull tanker ban moved the market – though this is not normally the intention of regulation – but the imposition of sulphur levels in marine fuel will have a different effect – a direct impact on costs which are already subject to huge volatility. The science behind the need to combat acid rain – which saw the sulphur limits first imposed – was solid, but it was inevitably seen as a portent of tighter environmental controls to come.

The issue of invasive species in ballast water is hard to argue against when confronted with the impact on specific seas and rivers, but the remedy was subject to a regulatory misstep which saw the regulation adopted before the technology was available to enable owners to comply. A decade after adoption, ratification is still awaited.

The hard lessons of Annex VI and the BWM Convention have made shipowners far more concerned about what comes next: carbon.

The issue of how to price and pay for shipping’s contribution to climate change is the biggest challenge facing the IMO in the next decade. From a technical viewpoint it presents numerous challenges – from a political one it is a Gordian knot that if unravelled threatens the industry status quo and the IMO’s authority.

First, the industry must coalesce around agreement that climate change exists, that shipping contributes to it and as such is due for a share of the costs to mitigate the effects.

The COP21 meeting in Paris last year was the clearest progress on the issue to date, though just as in the Kyoto Protocol, it left shipping out of the concluding text and assigned the responsibilities to nations and governments rather than industry groups.

What happens next is pretty well understood – though how it is handled will have huge long term consequences. The IMO has adopted a three-phase approach to what it calls Further Technical and Operational Measures for Enhancing Energy Efficiency. In shorthand and in the lobbies, this is referred to as the MRV discussion after the EU’s own data collection of carbon emitted from ships sailing in its waters.

In taking the issue of carbon emissions forward, the IMO is working on the collection of data from the global fleet, its analysis and subsequently some decision-making based on what further measures if any are needed. This has not been an easy discussion. Despite an agreement being made to move ahead there are suspicions that because the IMO is collecting data it will inevitably want to do something with it.

Those same lobby conversations – perhaps they could be called conspiracy theories – are that there is an ambition to introduce mandatory energy efficiency standards for the global fleet. However it should be noted that the IMO has been careful to word this agenda item as referring to technical and operational measures to frame the action in terms that will be relevant for shipowners.

At the same time there is a separate agenda item at the IMO – the Reduction of Greenhouse Gas Emissions from Ships which is much more linked to the political discussion and the outcome of the COP 21 meeting. This is supported by a group of Pacific Island States which want to see a firm action plan to be enacted by IMO that would support the COP21 signatories’ ambition to limit the rise in average global temperatures to no more than two degrees.

For its part, the IMO has decided that to enable it to continue the work already started it should concentrate on technical and operational measures and then decide what action it should take. Despite the protests, there will be no jump to implementing measures that support UNFCCC ambitions.

This decision was enough for NGO Sustainable Shipping Initiative to launch an outspoken – and much criticised – attack on the process, claiming the 69th Marine Environment Protection Committee “failed to achieve the required minimum outcome” and this failure to agree a process for emissions reduction would “not only damage the industry’s reputation, it also runs the risk of external regulators taking the matter into their own hands and circumnavigating the IMO.”

That suggests continuing challenges ahead and questions that have yet to be answered. Principally, has the IMO learned enough from recent experience to manage with delicacy the issue of carbon that makes it palatable and practical for shipowners?

And can it ignore the clamour from NGOs – who believe that the IMO’s failure to confront its carbon contribution is its greatest failing – long enough to put in place a workable regime that scales ambition against both market reality and political sentiment?

The former may be a given – the latter remains to be seen.

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