But already there is disagreement about how it will work given the complexities of the shipping industry and how fast it can decarbonize.

Here is what is known so far about the process ahead.

Why should shipping be included in the ETS?
With about 90% of world trade transported by sea, shipping accounts for nearly 3% of the world’s CO2 emissions.

Environmental campaigners say efforts by the industry to cut emissions are too slow and that including shipping in the European Union Emissions Trading System (ETS) will speed up decarbonization.

What are the proposals at the moment?
Launched in 2005, the ETS compels manufacturers, power companies and airlines to buy permits to cover each tonne of carbon dioxide they emit.

Prices for permits in the scheme are nearing 100 euros ($114.44) a tonne, a level analysts say will spur further investment in low-carbon energy sources.

Last July the European Commission proposed adding shipping to the ETS gradually from 2023 until 2026 when shipowners would need to buy permits covering all their emissions inside the EU and 50% of their emissions from international voyages starting and ending in the EU.

The proposal must be negotiated by the European Parliament and EU countries before it becomes law.

However, the European Parliament wants shipping phased into the ETS earlier, by 2025.

It also wants the entity responsible for decisions affecting CO2 emissions such as buying the fuel to pay, meaning they would need to buy carbon permits. That could be the shipowner, or the commercial charterer or operator of a ship.

In contrast, the Commission has said shipowners should always bear CO2 costs.

Parliament wants the EU to consider extending the ETS to cover all shipping emissions to and from Europe, if regulatory efforts to curb emissions by the UN shipping agency, the International Maritime Organization (IMO), fall short.

If IMO measures cut emissions quickly enough to avert disastrous climate change, the EU could roll back its inclusion of shipping in the carbon market, Parliament’s draft proposal said.

The European Commission’s proposal faces months of discussions. The European Parliament and EU countries can ask for changes to the text and agree on a final version.

How does the shipping industry view the proposals?
There are divergent views within the commercial shipping industry, which is made up of different segments including container, oil tanker and dry bulk.

There is disagreement over who will pick up the bill and whether it falls to the shipowner or the party that hires a ship, known as the charterer.

With millions of dollars in fuel costs for every voyage, the stakes are high.

The Union of Greek Shipowners, representing dry bulk, and tanker association INTERTANKO welcomed the inclusion of charterers saying those responsible for and benefiting from transporting cargo are responsible for emissions.

In contrast, the World Shipping Council (WSC) – representing container lines – says shipowners should share responsibility for decarbonization and that the proposed definition of a responsible entity “would corrupt the ETS”.

“Ship greenhouse gas emissions result from the combination of design technology, fuel consumed, and operational practice,” said WSC Chief Executive John Butler.

“A regional EU ETS carbon price must apply to all parties who have a role in GHG reductions – shipowners and operators.”

Pressure is building on the regulatory side too.

The IMO’s goal is to reduce overall GHG emissions from ships by 50% from 2008 levels by 2050, below targets set by countries such as the United States which have pushed for the agency to adopt a zero emissions target by 2050.

The IMO has said concrete progress was made in 2021 to combat climate change including new regulations to improve the energy efficiency of the world fleet, adding that it would work this year on revising its GHG strategy and finalize it in 2023.

The IMO has said regulations should come through the agency and be global in contrast to the EU’s approach, adding that regional legislation would not favor the concerns of developing countries.

Source: www.marinelink.com

Image: www.pexels.com

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Shipping, which transports about 90% of world trade and accounts for nearly 3% of the world’s CO2 emissions, is under growing pressure from environmentalists to deliver more concrete action including a carbon levy.

The International Maritime Organization (IMO), the UN’s specialist shipping agency, has said it has made progress on short-term greenhouse gas (GHG) reduction measures.

But that timeline is not seen as fast enough by environmentalists and a number of the IMO’s 175 member countries.

“At the MEPC (IMO committee) meeting in June next year there will be a lot of heat and pressure on regulators to ensure that they come prepared to negotiate a solution rather than kicking the can down the road because of misalignment or negotiation tactics. It is really not acceptable,” said Christian Michael Ingerslev, chief executive of Maersk Tankers.

Last month countries including the United States at the COP 26 climate summit pushed for the IMO to adopt a zero emissions target by 2050.
So far, its goal is to reduce overall GHG emissions from ships by 50% from 2008 levels by 2050.

“As far as the IMO is concerned, the negotiations process in 2022 will likely be very slow and onerous,” said Faig Abbasov with green group Transport & Environment.

“The problem is in the very belief that a U.N. organisation with 175 members can come together and take tough decisions to decarbonise an entire economic sector.”

The IMO said concrete progress was made in 2021 on combating climate change including new regulations to improve the energy efficiency of the world fleet, adding that it would “work very hard” next year on the development of a revised GHG strategy, which will be finalised in 2023.
“Where this is willingness to act, then processes can move faster,” said Roel Hoenders, head, air pollution and energy efficiency with the IMO.
A proposal submitted at the IMO to create a $5 billion research and development fund to find the right technology to meet the targets is still under discussion with further talks kicked forward to next year.

Underscoring the challenges ahead will be the impact on poorer countries such as Pakistan.

While the country was a small carbon emitter, climate change had “directly impacted us hard”, Pakistan’s Federal Minister of Maritime Affairs Ali Haider Zaidi said.

“Developing countries cannot afford to spend on the type of infrastructure needed and therefore, developed countries must support the process at the IMO,” he told Reuters referring to the R&D fund.

Financing the path ahead is another hurdle. Shipping will need $2.4 trillion to achieve net-zero emissions by 2050, with around $500 billion required by 2030, according analyst estimates.

“Certainly, the European banks at least and not far behind the American banks will have to meet criteria that satisfy sustainable finance,” said Tony Foster, chief executive of specialist asset manager Marine Capital.

“When it comes to new assets it is going to be increasingly difficult to fund anything that does not quite qualify and the same will be true, perhaps even more so, with existing assets.”

Darren Maupin, founder of leading fund manager Pilgrim Global, said companies in the shipping sector were grappling with how to secure finance with more ESG pressure.

“Capital is afraid – how do you invest in a 25-year asset when you have no idea what the IMO is going to do in five years,” Maupin said.
“The industry has a far reduced ability to build ships and limited capital available to do so. Simple supply-demand suggests rates are going to be higher and the industry is going to have to generate more capital to fund itself.”

Source: www.marinelink.com

Image: www.pexels.com

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According to the latest UN estimate, cargo ships carry 10.7 billion tones of cargo in the oceans each year. Almost all carriers have so far used fossil fuels, which currently account for 2% -3% of global carbon dioxide emissions. This means that if the shipping industry were a country, it would be the sixth largest emitter of carbon in the world. If shipping companies do not take additional measures to reduce emissions in the coming years, the sector’s CO2 emissions are projected to increase by 50-250% by 2050.

Carbon emissions are one of the main causes of adverse climate change, including rising average air temperatures and increasing rainfall, which in turn is accelerating the melting of ice, increasing salinity and water levels in water bodies, and increasing coastal erosion.

To prevent the world from reaching a climate crisis, many industries, including logistics, are looking for effective ways to reduce their negative impact on nature.

The goal is to become a carbon neutral industry

At present, maritime freight companies are ambitiously moving towards the goal of becoming a carbon-neutral industry. However, this is not a one-day issue, and carbon emissions need to be reduced gradually to reach this goal. The International Maritime Organization (IMO) has set a target of reducing total international GHG emissions from international shipping by at least 50% by 2050 compared to 2008.

The decarbonization of the shipping industry will not only help reduce the sector’s negative impact on the environment but will also help to achieve other climate-related goals, such as the switch to renewable fuels by 2050. The Environmental Defence Fund estimates that this could boost up to $ 6 trillion in renewable energy infrastructure worldwide.

The first steps towards the goal

The Danish freight company Maersk has taken the first serious step towards decarbonization. The company has announced the purchase of eight cargo ships that will run on methanol, reducing CO2 emissions by 1 million tones. This decision follows the carrier’s commitment to become a fully climate-neutral company by 2050.

Maersk is not the only industry to start realizing its ambitions to become an environmentally friendly company. Similar decisions have been made by other companies, such as DHL and UPS, which offer their customers the option of delivering orders using sustainable fuels for a fee. Amazon, meanwhile, signed a commitment in October with companies such as Ikea and Unilever to make sure that by 2040 they could only transport goods on carbon-free ships.

Choice or necessity?

Over the last five years, the number of players in the logistics, freight and shipping sectors that are moving towards a greener future is growing, and the above companies are just some of the players in the logistics sector who have already made their first choice in favor of decarbonization. That, of course, is to be welcomed, but before companies are praised and put on the podium, it would be important to understand their motivation. Here are some facts that can help you find the answer to this question!

A study on corporate social responsibility conducted in 2017 found that consumers today increasingly choose companies that adhere to the principles of sustainable business. 87% of people are more positive about companies trying to reduce the environmental impact of their industry in various ways. In turn, 88% of respondents trust service providers to contribute to the fight against social and environmental issues. The research data show that the position of companies on environmental issues is especially important for the younger generation of adults and millennials. This means that promoting an environmental awareness plan is an effective strategy to increase customer purchases, gain trust and maintain loyalty.

Account must also be taken of the fact that the goal of making shipping an environmentally friendly industry is being set not only by companies or leading associations, but also by countries. For example, from 2030, Norway has committed to purchase only those cargo ships that will have access to zero-emission technologies. Norway’s climate strategy also provides for an international ban on the use of non-climate-neutral fuels from 2050 onwards. This, in turn, could mean that the demand for water transport that is not fueled by this type of fuel will fall sharply over the years.

Under the EU Emissions Trading Scheme, which will be phased starting 2023, the European Union (EU) will also start regulating shipping emissions. In addition, legislation is being proposed requiring shipping companies to pay for the carbon dioxide emissions they emit when traveling to, from and between EU ports.

These are just some of the facts that make it clear that the noble step towards climate-neutral action is not only a free choice of companies, but also a strategic step in gaining customer loyalty and surviving at a time when tackling the climate crisis is a top priority. As the Latvian poet Rainis wrote: “Only that which remains in constant change, shall persist!”

Author: Roland Peterson, logistics expert

Image: www.pexel.com

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Shipping, which transports about 90% of world trade, accounts for nearly 3% of the world’s CO2 emissions.

U.N. shipping agency the International Maritime Organization (IMO) has said it aims to reduce overall greenhouse gas emissions from ships by 50% from 2008 levels by 2050. The goal is not aligned with the 2015 Paris Agreement on climate change and the sector is under pressure to be more ambitious.

The signatory countries involved in the ‘Clydebank Declaration’, which was launched at the COP26 climate summit in Glasgow, agreed to support the establishment of at least six green corridors by 2025, which will require developing supplies of zero emissions fuels, the infrastructure required for decarbonization and regulatory frameworks.

“It is our aspiration to see many more corridors in operation by 2030,” their mission statement said.

Britain’s maritime minister Robert Courts said countries alone would not be able to decarbonize shipping routes without the commitment of private and non-governmental sectors.

“The UK and indeed many of the countries, companies and NGOs here today believe zero emissions international shipping is possible by 2050,” Courts said at the launch.

U.S. Transportation Secretary Pete Buttigieg said the declaration was “a big step forward for green shipping corridors and collective action”.

Buttigieg added that the United States was “pressing for the IMO to adopt a goal of zero emissions for international shipping by 2050”.

The IMO’s Secretary General Kitack Lim said on Saturday “we must upgrade our ambition, keeping up with the latest developments in the global community”.

Industry needs regulatory help
Jan Dieleman, president of ocean transportation with agri business giant Cargill, one of the world’s biggest ship charterers, said “the real challenge is to turn any statements (at COP26) into something meaningful”.

“The majority of the industry has accepted we need to decarbonize,” he told Reuters.

“Industry leadership needs to be followed up with global regulation and policies to ensure industry-wide transformation. We will not succeed without global regulation.”

Christian Ingerslev, chief executive of Maersk Tankers, which has over 210 oil products tankers under commercial management, said it had spent over $30 million over the last three years to bring their carbon emissions down through digital solutions.

“We need governments to not only back the regulatory push but also to help create the zero emissions fuels at scale,” he said.

“The only way this is going to work is to set a market-based measure through a carbon tax.”

Other signatory countries are Australia, Belgium, Canada, Chile, Costa Rica, Denmark, Fiji, Finland, France, Germany, Republic of Ireland, Japan, Marshall Islands, Netherlands, New Zealand, Norway and Sweden.

Source: www.marinelink.com

Image: www.pexel.com

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