Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
The EU is planning to curb growing emissions from ships by
adding two more low-sulfur emissions zones in the southern part of
the bloc, on the Mediterranean and Black seas, and possibly extend
its carbon price regime into international waters.
Global shipping emissions are expected to increase 90-130% from
2008 levels by 2050, according to the fourth GHG study by the International
Maritime Organization (IMO).
Attempting to achieve "zero pollution" in shipping, the European
Commission (EC) sent EU governing bodies a communication outlining
environmental policies for so-called "blue economy" sectors. The
term captures not just the shipping sector but also fisheries,
aquaculture, coastal tourism, port activities, and
shipbuilding.
The EC plans to reduce shipping sulfur emissions in the
Mediterranean and Black seas by imposing controls similar to those
in Sulfur Emission Control Areas (SECAs) in the North and Baltic
seas (0.1% sulfur). This is stricter than the current global limit
set by the IMO of 0.5% sulfur.
If the Mediterranean were to be designated as a SECA, sulfur and
nitrous oxide emissions produced by international shipping could be
cut by 80% and 20%, respectively, by 2030, the EC said in the
communication.
But according to IHS Markit Executive Director and Head of
Europe/CIS Refining Research Hédi Grati, the EU must secure
agreements for areas beyond EU states' Exclusive Economic Zones,
for example with non-EU states with a Mediterranean or Black Sea
coast, or else it will wind up with partial SECAs. Whether it can
do this remains to be seen.
Targeting shipping emissions, the EC might also extend fuel
excise duties and requirements for shipping operators to buy
allowances under the EU Emission Trading System (ETS) covering the
fuel used by international ships. Proposals for revisions of the
ETS are expected to be announced on 14 July.
The EC has long mulled including shipping emissions in the ETS.
The EC commissioned a 2009 study and a 2013 impact assessment weighing up
the option, but the studies convinced it to wait for an IMO-led
system.
The current EU executive has dusted off the proposal. "The new
Von Der Leyen Commission committed in 2019 through the European
Green Deal to include shipping in the ETS. The EC in fact said in
2002 that it would regulate shipping emissions if no action was
taken in the IMO by 2003, so action through the ETS is welcome, if
a little overdue," Delphine Gozillon, policy officer for
sustainable shipping with European NGO group Transport &
Environment (T&E), told IHS Markit.
Hazel Brasington, a consultant for London-headquartered law firm
Ashurst, sees the EU move as a bold step. "I think the policy
driver in the EU is the very strong environmental policy that they
are producing, which is very ambitious and far-reaching in some
ways. The EU has tried consciously to get ahead of the
international bodies that so far have been entrusted with these
issues because they perceive that the progress is not fast enough,"
she said.
Reach into international waters
Globally, shipping emissions regulations in international
waters, the EU's waters, and the national waters of states like
China target the sulfur levels of fuel, and there are slight
differences between limits in national and international waters.
Emissions in international waters are less restricted.
About 30% of total shipping emissions fall directly within
national waters, and can thus be regulated by states, while the
emissions that occur when ships voyage between two countries are
usually the responsibility of the IMO.
For these ships, the IMO is working to finalize a
Market-Based-Measure (MBM), a global financial incentive such as an
emissions trading system to drive uptake of low-emissions
technologies. Existing IMO rules under the International Convention
for the Prevention of Pollution from Ships (MARPOL) imposed a 0.5%
limit on sulfur in fuel for all ships starting January 2020.
If the EU goes ahead with a sulfur price for ships this year, it
could conflict with the IMO's international regime, for example
where both IMO and EU rules apply to ships in international waters.
"The EU will have jurisdiction within its waters, that's not
objectionable, but when it comes to the EU ETS, there have been
many questions raised as to whether it's an extra-jurisdictional
grab. The EU will regard any voyage from, for example, a French
territory in the Pacific to the EU as an EU domestic equivalent
voyage because it's from a French protectorate," said
Brasington.
Such a regime may mean higher costs for European shipping
companies and consumers. "It is a very invasive way to approach the
regulation of an international industry, and that's certainly
caused some disquiet. While the frustration with the IMO has been
very apparent from the EU, it is a global industry, and the
shipping industry has to move in a global way or we end up with a
very broken-up compliance world where there's a whole lot of extra
compliance costs within the EU, which probably get passed back to
the freight user," said Brasington.
A T&E study, however, found that EU
shipping companies can absorb compliance costs because of their
ability to pass on costs to consumers.
A further issue for expanding the ETS that the EC noted during a
public consultation in 2012 is that applying a carbon price to
voyages outside the EU could lead to a breakdown in negotiations
over the global IMO MBM. "Extension of Europe's ETS to shipping has
been on the cards for a while, but is highly contested as many
market participants claim that shipping governance should remain
under the IMO, rather than have different regions move at different
speeds," according to Grati.
And an EU ETS expansion to shipping risks failing at the first
hurdle. "It is not entirely clear whether all European state
leaders are aligned on this matter, and at what level of IMO
ambition the EU will be satisfied in order not to include shipping
in its ETS," said Grati.
Gozillon agreed that the ETS expansion raises difficult
questions. "The biggest issue at the moment is geographical scope:
whether the maritime ETS will include all shipping emissions
related to European ports or just emissions between European ports.
From the environmental point of view, the largest scope is clearly
preferable. No sector linked to the European economy should be
allowed to pollute for free, and a limited, intra-EU scope would
exempt 60% of shipping emissions to and from European ports," she
said.
If the EU chooses to price carbon for ships traveling between EU
ports, then poorer ship operators will "carry the burden of
decarbonization for transcontinental shipping," she added.
Not just the EU, but certain European shipping operators want an
MBM for levelling the playing field and spurring fuel
infrastructure investments. Some have argued for the EU to move to
an expanded ETS in the absence of a global MBM by 2025, suggesting
the ETS applies to intra-EU voyages in the meantime.
Racing ahead of the EU, the Marshall Islands and the Solomon
Islands have already proposed tax of $100 per mt of carbon dioxide
emissions from ships, and plan to use the revenue to fund climate
adaptation measures.
Challenges for zero-pollution ship fuel
The EU also faces a challenge to its "zero-pollution" goal in
the lack of technologies available.
The port state control (PSC) regime, put in place through
international conventions brokered by the IMO, can detain ships
carrying non-compliant fuels under the 2020 MARPOL sulfur
limit.
IMO rules have proven effective at preventing the use of
high-sulfur fuel, said Brasington, but they depend on ships using
scrubbers on emissions stacks, and then dumping acidic washwater
into the ocean.
The nonprofit International Council on Clean Transportation
(ICCT) has recommended that scrubbers be banned on new ships in
favor of low-sulfur fuels that can achieve similar emissions
goals.
Tackling this problem, the EC announced it would set a deadline
of 2030 for the bloc to build zero-emissions ships that are
engineered to use new fuels under its December 2020 communication
on a sustainable and smart mobility strategy. "The right
technologies do not exist to make net-zero vessels, or do not exist
in a commercially or safety proven example. There are many, many
technical and risk hurdles to accomplish," Brasington noted.
Ensuring zero-emissions ships are on the market by 2030 is a
must if the EU as a whole is to reach net-zero, said Grati.
"Besides net-zero vessels, the fuels will have to be available of
course, and the FuelEU Maritime publication has been delayed on a
few occasions, [which is] now understood to be finalized in July,"
said Grati.
The EU communication promotes dockside electrification, and use
of biofuel and hydrogen blends solutions. To encourage the supply
of low-carbon fuels, the EU's FuelEU Maritime initiative would
boost the production of such fuels, and the TEN-T Regulation and
the Alternative Fuels Infrastructure Directives would be revised to
fund and spur the construction of refueling infrastructure.
Likewise, the World Bank and the International Energy Agency
have highlighted the potential to use zero-emissions hydrogen and
ammonia fuels in shipping. "Green hydrogen and green ammonia
produced from hydrogen count among the happy few sustainable and
scalable fuels for maritime" transportation, Gozillon said.
Hydrogen as a ship fuel has been demonstrated using small
passenger ships, for example powered by fuel cells using compressed
hydrogen, since about 2003. Currently, an EU-funded research
project is aiming to create two small hydrogen vessels: a hydrogen
cargo transport vessel in France and a car ferry in Norway.
Operations for the cargo vessel are slated for 2021.
But with any new technology, unforeseen issues are likely to
arise. The global switch to low-sulfur fuel under IMO regulations
in 2020 resulted in the use of fuel blends that brought a wave of
legal claims over fuel quality, damaged ship engines, and lost
time, according to maritime insurer
UKDC. Brasington cites "quite a lot of private disputes" in the
shipping industry going to arbitration as a result of performance
issues with blended fuels.
Fuel markets in their early days do not always fulfill high
expectations set out for them. A recent T&E study found that biofuels made
from certain crops have higher emissions than marine fuel oil over
their whole lifecycle and can lead to polluting imports, and the
World Bank has raised a similar questions about the lifecycle
emissions of LNG as a fuel. "FuelEU Maritime can either give the
right impulse for green [shipping] fuels or risk letting the market
decide on cheap fossil LNG and scarce biofuels," said Gozillon.
Posted 25 May 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability