Roundtable Associations: Timing Not Right for MBM

Intertanko February 22, 2012

The RT fully supports the adoption at IMO of mandatory Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. It is convinced that the SEEMP will allow shipowners to better gauge their energy consumption and thereby enhance existing operational efficiency, since fuel is the single highest operational cost factor and this fact alone has already induced ship-owners to become more energy efficient.

In the event that Market Based Measures (MBMs) are eventually introduced to shipping by IMO, these should apply globally and should completely address the nine principles adopted by IMO, it says.

If ultimately it is found that technical and operational measures cannot wholly meet the agreed reduction targets, then any funds generated by means of a globally applied MBM for shipping must be controlled by IMO, says the RT, and, in large part, be disbursed to support further technological development focused on energy efficiency in shipping. It further maintains that the collection and distribution of such funds should be based on a very simple, transparent, verifiable and auditable scheme which minimises any additional bureaucratic and financial burdens on shipping companies.

The RT strongly believes that the debate about any shipping MBM must be held at IMO where the nature of the industry is understood and the ultimate impact of a fiscal measure can be measured. Under no circumstances does the RT believe that shipping should be subject to a separate UNFCCC or regional MBM as well as an MBM under IMO.

Round Table associations position paper on GHG+MBMs

Shipping is a global industry where all players are competing for the same cargo on reasonable and equitable terms. The system of international trade carried by sea must be based on a transparent and harmonised set of rules and regulations that apply to all, irrespective of nationality or location. The International Maritime Organization has consistently demonstrated its ability to develop globally acceptable regulatory instruments for shipping and the Round Table of international shipping associations (RT) believes that IMO should be allowed to complete its work on CO2 emissions from ships without obstruction from regional and national bodies with specific agendas. It is far preferable that all States and IGOs bring their knowledge and, when agreed, their requirements to the IMO in order to contribute to a truly global solution. The ultimate goal of the RT is the adoption of a meaningful international regulatory instrument that will provide for real and efficient GHG emission reduction controls in a fair, non-discriminatory and orderly fashion.

The RT fully supported the adoption at IMO of the mandatory Energy Efficiency Design Index (EEDI) for new ships and also the Ship Energy Efficiency Management Plan (SEEMP) for all ships as effective regulation of CO2 emissions. Furthermore, the RT is convinced that the SEEMP will allow shipowners to better gauge their energy consumption, in their efforts to enhance existing operational efficiency. Fuel is the single highest operational cost factor and this fact alone has already induced ship-owners to become more energy efficient. The SEEMP will provide the framework allowing shipowners a degree of flexibility in how best to adapt it to individual ships.

It is the task of Governments to establish realistic and achievable relative targets for CO2 emissions, duly recognising the characteristics of a particular industry and in proportion to the amount of CO2 emitted by that particular industry. In order to ascertain what constitutes a realistic target, governments should collect and provide exact and reliable data. For the shipping industry, the main objective remains to limit the emission of CO2 from ships whilst fulfilling the industry’s irreplaceable role in the global supply chain. That shipping is the most environmentally friendly and cost-effective mode of transportation per ton/mile is uncontested, supported by the evidence that around 90% of world trade is transported by sea. Once governments have established realistic and globally accepted relative emission reduction targets for shipping, shipowners and operators will be much better equipped to explore further all possible technical and operational means of meeting those targets.

The RT is of the view that Market Based Measures (MBMs) are not justified at this particular time. In the event that Market Based Measures (MBMs) are eventually introduced to shipping, these should apply globally and should completely address the nine principles adopted by IMO: Effective; Binding and equally applicable; Cost-effective; Limiting distortion; Not penalising trade and growth; Goal-based; Promoting R&D; Accommodating energy-efficient technology; Practical, transparent, fraud-free and easy to administer. The RT supports regulation that provides incentives for owners to invest in low-carbon technology. If ultimately it is found that technical and operational measures cannot wholly meet the agreed reduction targets, then any funds generated by means of a globally applied MBM for shipping must be controlled by IMO and, in large part, be disbursed to support further technological development focused on energy efficiency in shipping. Collection and distribution of such funds should be based on a very simple, transparent, verifiable and auditable scheme which minimises any additional bureaucratic and financial burdens on shipping companies.

While fully acknowledging the existence of the UNFCCC “Common But Differentiated Responsibility” (CBDR) principle, the RT is of the view that this principle cannot be practically applied to ships in light of the very nature of international shipping operations. The RT therefore prefers the non-discriminatory principle of the IMO Convention generally referred to as “no more favorable treatment”, in order to maintain a level playing field for international shipping. Before finally deciding on an MBM for international shipping, a cost/benefit analysis and impact assessment should be completed paying particular attention to impacts on the industry, the global supply chain and developing countries. The RT strongly defends these fundamental conditions in line with its objective of promoting fair business practices and defending free trade as well as open access to markets.

The RT does not believe that an Emissions Trading Scheme (ETS) can be practically and effectively applied to shipping, as the shipping industry in concept and functionality is global and relies on mobility, diversity, open access to markets and free trade. A ship and its cargo constitute a moving asset serving a range of stakeholders including shipowners and charterers, and spanning several importing and exporting countries. The very complexity of international seaborne trade renders the concept of ETS unworkable for the shipping industry. In addition, the effects of an ETS based on full auctioning will severely impact world trade and unfairly penalise shipping

The RT recognises the political reality of the Green Fund agreed by member States at UNFCCC. However it believes that the debate about any shipping MBM must be held at IMO where the nature of the industry is understood and the ultimate impact of a fiscal measure can be measured. In any event, whereas shipping will continue to find solutions to reduce its carbon footprint, any contribution in the form of MBMs should only be at a level proportional to shipping’s share of total global carbon emissions. Under no circumstances does the RT believe that shipping should be subject to a separate UNFCCC or regional MBM as well as an MBM under IMO.