2021: Europe’s year for shipping’s regulations

By this time next year, the European Commission will have unveiled exactly how it wants to regulate shipping emissions, while the International Maritime Organization may have begun its own debate on market-based measures.

News ID: 80531

Date: 19 December 2020 - 09:55

The International Maritime Organization will likely finalise its short-term GHG emissions measure in 2021; but it is the European Commission that will step forward with a market-based measure proposal that could alter maritime regulations as we know them.

THE year 2021 will see shipping’s emissions regulations take a consequential turn, with the prospect of regional regulations becoming a fact of life.

With two International Maritime Organization environmental committee meetings scheduled for 2021, the global maritime regulator should be tying up loose ends before embarking on what could be an uphill battle to deliver the regulatory coup de grâce.

The IMO will have to finalise the short-term GHG emissions measure it approved this year, pending an important impact assessment on countries, if it were implemented.

Though the measure that brings in energy-efficiency requirements on existing ships in 2023 and mandatory carbon-intensity requirements from 2026 is widely expected to be adopted next year, the outstanding finishing touches are far from procedural.

The levels of the carbon-intensity indicators and the guidelines for their calculation still need to be defined. Their finalisation next year will allow us to fully assess the potential efficacy of the stringency of the measures.

The dust settling on the short-term measures means governments at the IMO will have to confront far more daunting decisions.

The elephant in the room, the market-based measures on ships, is not only gaining significant traction within an industry that is accepting its fate, but now also has open backing from governments in the European Union and the Pacific. Other countries, such as Japan, have also signalled their willingness to begin MBM talks.

The resistance, however, is still strong and the negotiation of MBMs will be far harsher and more politicised than others in the IMO’s history.

Regardless of its form, an MBM is a money-extracting policy or, on the flipside, a revenue-generating tool. Agreeing on how those costs and revenues should be allocated and used will require time, willingness to compromise and diplomacy.

Some governments will even oppose starting talks on MBMs and/or other longer-term measures in 2021.

Even if the talks on MBMs begin next year, do not expect governments to make any agreements in 2021 and potentially not even in 2022.

Some will argue this slow procedure is necessary to maintain unity among member states and facilitate as many needs as possible. Critics, who are already displeased with the pace of decisions out of London, will claim the IMO is displaying typical behaviour that, when applying to climate crisis response, amounts to inertia, they feel others should take the reins.

And, lo and behold, others are about to pounce...

For all the high stakes being played in London — hopefully in person, rather than online — the most important developments for global shipping next year will likely come out of Brussels, where the European Union’s ambitions on control of shipping emissions and the industry’s capability to influence them will become clear.

The European Commission will unveil its proposal to include shipping in the EU Emissions Trading System in 2021, following an ongoing impact assessment.

With a strong commitment to bring the maritime sector into the EU carbon market, the commission will have to decide whether it wants that to cover all voyages to and from the bloc, only domestic voyages — or some compromise between the two.

The commission will also need to take a position on whether it should be charterers or shipowners that pay the cost — a crucial and divisive issue for the container line and tramp sectors.

The Japanese and South Korean governments have spoken out against the ETS, as has China’s shipping industry.

Whatever the commission’s final decision, it will have an impact not only on shipping’s financial pockets, but the pace of global emissions negotiations.

It could spur on other regional jurisdictions to develop their own emissions measures and — just as importantly — set the precedent for who is responsible for paying the cost of market-based measures when those arrive.

Negotiations with the European Parliament and the council, which represents EU governments, may not conclude until 2022. However, the commission’s position will be influential in these.

The EU should also begin negotiating the parliament’s proposed own amendments for the Monitoring Reporting and Verification reguation, the bloc’s emissions data collection system.

Among its core recommendations is that all ships falling under the MRV should comply with a minimum 40% carbon-intensity improvement by 2030, likely compared with the years of 2018 and 2019.

In this proposal, the parliament has also demanded that shipping be included in the ETS in 2022, without any free allowances and with domestic and international voyages covered.

However, the commission does not support the idea of lumping the ETS and the MRV together — and the fact that it is rolling out its own ETS plan suggests the parliament’s ETS ambitions may be cut short.

In a non-emissions measure coming out of Brussels again next year, ships calling at EU ports will need to have an inventory of hazardous materials on board, a requirement that is part of the EU Ship Recycling Regulation.