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American ShipperShippingTrade and Compliance

International Chamber of Shipping slams EU emissions trading plan

The International Chamber of Shipping said emissions trading is not appropriate for international shipping and is mostly comprised of small-and-medium-sized enterprises that typically operate with less than 10 ships.

   The International Chamber of Shipping (ICS), a global trade association for shipowners, said that a proposal by the European Parliament Environment Committee to incorporate international shipping into the European Union’s carbon dioxide trading system will polarize and impede current discussions on additional CO2 reduction measures at the UN International Maritime Organization (IMO).
   ICS Director of Policy and External Relations Simon Bennett said that nations outside of the EU will be disappointed and very concerned by a vote by the committee.
   “In the absence of a comparable system operating under the International Maritime Organization (IMO), CO2 emissions in EU ports and during voyages to and from them should be accounted for,” the Parliament said in a press release.
   Members of Parliament said they “propose setting up a fund to compensate for maritime emissions, improve energy efficiency, facilitate investments in innovative technologies and reduce CO2 emissions from the sector. Revenues from auctioning of allowances in the aviation sector would be used for climate action in the EU and third countries.”
   Bennett said the action follows the IMO’s adoption of a comprehensive road map for action just a few weeks ago.
   “We hope that EU governments and the European Commission will see sense and recognize that threats to their trading partners will not serve the development of the global solution, which both they and the shipping industry want and need,” he said.
   In addition, he said the ICS “is confident that IMO member states, most of which are developing nations, will adopt a CO2 reduction strategy in 2018 that will include ambitious CO2 reduction goals and the development of a mechanism for delivery. But threats of EU unilateral action will do nothing to help this complex process.”
   The ICS said emissions trading is not appropriate for international shipping and is mostly comprised of small-and-medium-sized enterprises that typically operate with less than 10 ships. Emissions trading was primarily developed for industries such as power generation, and cement and steel production, the ICS said.
   Bennett said the EU emissions trading system (ETS) “has been an abject failure. Its unilateral application to global shipping would create market distortion while generating trade disputes with China and other Asian nations, as happened when the EU tried unsuccessfully to impose its ETS on international aviation.”
   The ICS said its position is “that if IMO member states should decide to apply a market based measure for CO2 reduction to international shipping, the preference of the industry would be for a global fuel levy.”
   In addition, the ICS said the shipping industry fully accepts responsibility for reducing its CO2 and building on the 10 percent reduction already achieved by the sector during the last five-year period for which IMO data is available (2007-2012). However, the ICS asserted that if the IMO decides to develop a fuel levy, this would require the full support of developing nations, which are worried about the potential impact on trade and economic development.
   “Even if market based measures are found necessary to achieve the objectives which IMO sets for the sector, threatening non-EU partners with unilateral action is not going to help them to overcome their legitimate concerns,” Bennett said. “The only forum in which to have this debate is at IMO.”
   ICS said it is “working closely with the European Community Shipowners’ Associations (ECSA) to persuade the plenary of the European Parliament, as well as EU Member States and the European Commission, to reject the EP Environment Committee’s report. The plenary of the European Parliament is expected to vote on the committee’s report in early 2017.”
   Bryan Wood-Thomas, vice president of environmental policy at the World Shipping Council (WSC), the primary trade organization for the liner shipping industry, said that details of the European plan would not be decided for some time.
   “They may adopt something, but it is not going to be clear what it is exactly and its trigger is not until 2021,” he said.
   “The legislation will be put to a vote by the full House in February,” the European Parliament said in a press release. “Parliament, Council and the Commission will then start the so-called ‘trilogue’ three-way negotiations.”
   Wood-Thomas said if the IMO takes some global action that is acceptable to the European Parliament, yesterday’s proposal may not move forward.
   However, he said, “If the European Parliament and legislative bodies were to actually put this into place, we believe what they’re likely to do is create a technical framework where you could participate in the emissions trading systems, but that they would make that so onerous that it would be designed that you would of course choose their second option and the second option is that you pay money into a fund.”
   One complication, he said, is there are indications that the system being proposed might include emissions that are not really limited to Europe.
   In addition to including ships that just trade within Europe, he said there has been indications that the emissions on a ship’s last voyage into the EU and first voyage out of the EU might be included. That might be a very short leg indeed – a quick hop across the Mediterranean from Marseilles to Tangier, or following Brexit, across the North Sea from Rotterdam to London. Or, it may be a very long leg, extending from Rotterdam all the way back to Singapore or Shanghai.
   Wood-Thomas said creating an emissions trading system on a global scale would be very difficult.
   While the ICS has suggested a tax on fuel, he said, “You need a suite of mechanisms or actions that actually result in reductions in emissions in the world fleet. If you collect money, write a check and send it outside the industry, you’re not accomplishing anything.”
   In addition, he said the industry already has a strong incentive to reduce fuel use, and hence carbon emissions, because of the huge losses most shipowners are incurring.
   That incentive will become dramatically stronger in 2020 when the allowable amount of sulfur in fuel that ships use globally will be reduced from 3.5 percent to 0.5 percent, he said. The limit on sulfur in fuel is already lower in some Emission Control Areas (ECAs), such as the one along the U.S. and Canadian coastline. That is expected to result in a dramatic increase in fuel costs.
   The WSC said, “This global limit is estimated by the Organization for Economic Cooperation and Development (OECD) to cost between $5 billion and $30 billion in additional fuel costs.”

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.

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