Issue of decarbonisation to dominate talks at Singapore Maritime Week

A GLANCE at the programme for next week’s Singapore Maritime Week (SMW) immediately reveals the topic now dominating discussion at shipping events: decarbonisation.

It is popping up in various guises in the very titles of events multiple times on each of SMW’s five days, making this a good time to take stock of where we are in terms of global strategies to achieve net-zero greenhouse gas (GHG) emissions.

In principle, ongoing discussions at the International Maritime Organization (IMO) – and its strategy that is already in place – are key to reducing GHG emissions. In practice, however, much of the industry is preoccupied with coping with the newly implemented European Union Emissions Trading Scheme (EU ETS).

The EU ETS, applicable to certain emissions from maritime transport from 2024, imposes costs on ship operators for their GHG emissions. The controversial scheme aims to lower emissions and generate revenues to finance the EU’s green transition.

Ship emissions and sustainability consultancy OceanScore has been crunching the numbers. It has estimated – based on its tracking, mainly of container vessels – that when ships re-route to avoid the Suez Canal and instead go round South Africa’s Cape of Good Hope, bunker consumption trebles as a result of the longer distance. Fuel consumption is also higher because vessels are going 25 per cent faster.

OceanScore estimates that the number of EU Allowances (EUA), or carbon credits, necessary to cover emissions from a 14,000 twenty-foot equivalent container ship would rise from 1,800 to 5,200 per voyage.

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It adds that this would, in turn, translate into an increase in EUA costs from 98,000 euros (S$143,324) to 285,000 euros per voyage this year, based on the current carbon price of around 55 euros per tonne of carbon dioxide emitted.

The ETS embodies pretty much everything that the industry tends to dislike: It is complicated, based on a volatile carbon price, and so generates uncertainty. It also creates extra work and costs, such as that from engaging specialist EUA traders.

In general, if financial incentives to encourage moves to alternative fuels and technologies are inevitable – and they almost certainly are – the shipping industry would much prefer a simple levy on bunker consumption. And this is precisely what the International Chamber of Shipping (ICS) has been pushing for at IMO for some time now.

Numerous proposals

Last month’s IMO Marine Environment Protection Committee (MEPC81) meeting covered a lot of ground.

It might be thought that the most important subject on MEPC81’s agenda was to secure agreement on the details of IMO’s decarbonisation strategy. That would be right, but it was only one of many highly technical issues dealt with by the committee.

A good summary of the proceedings has been published by classification society Lloyd’s Register (LR). This concise summary ran into 22 pages, and seven of those pages concerned decarbonisation.

LR details eight proposals for “market-based measures” to encourage the use of zero-emission fuels and technologies. One was from EU members countries and the European Commission, raising hopes that an IMO scheme could replace the ETS.

ICS appears quite pleased with MEPC81. It issued a statement that said: “We welcome the progress made during these intensive negotiations to achieve net-zero emissions from shipping, and the support received from around 60 member states for a flat-rate contribution system per tonne of GHG.”

The chamber conceded that an agreement had not been reached, but added: “We have gained a better understanding of the concerns of those governments which still have questions about our proposed ‘feebate’ mechanism. ICS will seek to address these concerns with all governments before the next round of IMO negotiations in September, to help ensure that the necessary regulatory framework can be adopted next year for global implementation by 2027.”

ICS also declared itself “delighted” to see a number of “positive outcomes” from MEPC81 that it was “proud to have contributed to”. As just mentioned, not everything that was decided was linked to decarbonisation. Other decisions related to ballast water, fuel oil sampling and ship recycling.

However, as well considering what market-based measures should be adopted, MEPC81 also established a correspondence group on onboard carbon capture and storage (CCS). This was important, because considerable resources are now being put into developing CCS.

Also important, but quite technical, were the agreed draft amendments to the 2021 guidelines on overridable shaft/engine power-limitation systems.

There was disappointment for ICS. A proposed resolution that it had co-sponsored, clarifying the current status of the Carbon Intensity Indicator (CII) rating system, did not receive enough support to be accepted.

“However, we were heartened to see wide acknowledgement of the need to address the irregularities that have emerged,” it said.

“This heightened awareness is a positive outcome for the ongoing CII review, as it is vital that we have a workable system to ensure the industry reduces emissions. ICS trusts that all delegations can work towards an improved CII system that incentivises correct behaviours and fully aligns with the objectives of the 2023 IMO GHG strategy.”

ICS was, as ever, being polite. The CII system is widely regarded as not being fit for purpose. It will need to be robust and universally trusted if it is to underpin, as planned, the implementation of the whole IMO decarbonisation strategy.

On the subject of CII, LR’s Class News reported in March Canada’s introduction of its own version of CII for ships of 5,000 gross tonnage and up, and which operate either only in domestic trade or, with restrictions, sail to the US.

LR reported that Transport Canada found through studies that “most of the Canadian fleet could not meet the GHG reduction requirements of the IMO CII”.

“This was due to the unique design and operational characteristics of the Canadian fleet, such as deeper draughts, energy-intensive self-unloading operations in ports without shore-side equipment, lock transits, ice escort, shallow water and speed restrictions,” LR reported. “All have a negative impact on fuel consumption/energy efficiency compared to that for the international fleet.”

There has been a chorus of similar complaints that other specific fleets or types of ship are unfairly impacted by the current CII.

There will be a lot to talk about on decarbonisation next week, including about the relative advantages of various alternative fuels and technologies. But the success of the IMO strategy depends on securing agreement on an effective, market-based measure and coming up with a version of CII that can actually do the job.

It will be up to MEPC82 in October this year to grasp the nettle if IMO’s credibility on decarbonisation is to be maintained or, as its critics would argue, restored.