CO2 Flyer Nov 2011 LR

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Shipping, World Tradeand the Reduction o

United Nations Framework Convention on Climate Change

International Maritime OrganizationMarine Environment Protection Committee

International Chamber o ShippingRepresenting the Global Shipping Industry CO

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35000

30000

25000

20000

15000

Growth in world seaborne trade (billion tonne-miles)Source: Fearnleys

International Shipping -

Servant o World Trade

The international shipping industry is responsible or the carriage o about

90% o world trade and is vital to the unctioning o the global economy.

Intercontinental trade, the bulk transport o raw materials and the

import/export o aordable ood and goods would simply not be possible

without shipping.

It is the availability, low cost and efciency o maritime transport that has

made possible the major shit towards industrial production in Asia and other

emerging economies, which has in large part been responsible, in recent

years, or dramatic improvements in global living standards.

Notwithstanding the recent contraction in trade resulting rom the present

economic downturn, the world economy is expected to continue to grow

and shipping will need to respond to the demand or its services (unless

existing patterns o global trade were to be undamentally transormed).

Shipping is an inherently international industry which depends on a global

regulatory ramework to operate efciently. I a ship trades rom Brisbane

to Buenos Aires, the same rules need to apply (or example: concerning

construction, navigation or atmospheric emissions) at both ends o the

voyage. Otherwise there would be chaos and serious inefciency.

For over 50 years this global regulatory ramework has been very

successully provided by the United Nations International Maritime

Organization (IMO).

2

UNFCCC Must Agree

a Mandate or IMOThe international shipping industry

is frmly committed to reducing

its CO2 emissions by 20% by 2020,

with signifcant urther reductions

thereater. However, the next

United Nations Climate ChangeConerence (COP 17) needs to

give the International Maritime

Organization (IMO) a clear mandate to

continue its vital work to help deliver

meaningul CO2 emission reductions

by international shipping, including

Market Based Measures.

The global shipping industry,

represented by the International

Chamber o Shipping (ICS), very

much hopes that governments at

COP 17 will respond positively to thesignifcant IMO agreement, in July

2011, to adopt a package o technical

measures to reduce shippings CO2

emissions (see green box). This is the

frst ever international agreement

containing binding and mandatory

measures to reduce CO2 emissions

that has so ar been agreed or an

entire industrial sector.

Most importantly - and without

prejudice to what governments

might agree at UNFCCC the shippingindustry believes that IMO is now

very well placed to continue the

real progress it is making on Market

Based Measures to help deliver

urther emissions reductions. This

includes a possible shipping industry

environmental compensation und

with possible linkages to any Green

Fund agreed by UNFCCC. This could

address the Kyoto Protocol principle

o Common But Dierentiated

Responsibility (CBDR) by directing the

lions share o any unds raised rom

international shipping to environment

related projects in developing

countries.

It is vital or all governments to

understand that in the absence o

a global ramework agreed by IMO

there is a serious risk o regional or

unilateral measures regulating CO2

emissions or shipping. This would

have a seriously distorting eect on

international shipping markets, butmost importantly would be much less

eective in delivering meaningul

reductions in CO2 emissions by the

global shipping sector as a whole.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


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Reducing Shippings CO2

The international shipping industry is frmly committed to

playing its part in reducing emissions o CO2 and other Green

House Gases.

International shipping is already, by ar, the most carbon efcient

mode o commercial transport. But it is ully recognised that

CO2 emissions rom the industry as a whole (some 2.7% o global

emissions) are comparable to those o a major national economy.

The shipping industry thereore accepts that the CO2 emission

reduction which ships must aim to achieve should be at least as

ambitious as the CO2 emissions reduction agreed under any new

United Nations Climate Change Convention.

However, shipping is the servant o world trade. The total

emissions o shipping, as a sector, will thereore be determined,

to a signifcant extent, by the expected long term growth o the

world economy (and population) between now and 2050.

CO2

Reduction Measures for

Shipping Should be Led by IMO

As already acknowledged by the Kyoto Protocol, emissions rom

international shipping cannot be attributed to any particular

national economy. Multilateral collaborative action will be the

most appropriate means to address emissions rom the maritime

transport sector.

Multilateral collaborative action will be best achieved by

governments at the specialist United Nations agency the IMO -

which has a successul track record in the development o global

regulations governing the shipping industrys environmental

perormance. For example, the International Convention on the

Prevention o Pollution by Ships (MARPOL), which now contains

technical regulations or the reduction o CO2, has been ratifed

and enorced globally through a combination o ag state and

port state control by IMO Member States.

The delivery o signifcant emission reductions by the maritime

sector will require that any mandatory measures adopted are

applied on a uniorm and global basis to avoid carbon leakage.

Most shipping companies have the reedom to decide to

register their ships with the ag state o their choice including

those which, under the current Kyoto Protocol, are not Annex I

nations. Measures to deliver meaningul emission reductions are

thus much more likely to be achieved by instruments developed

by governments at IMO.

In 2011, only about 35% of the world merchanteet is registered in UNFCCC Annex I countries.

Taking Account of CBDRThe UNFCCC principle o Common But Dierentiated

Responsibility (CBDR) cannot be practically applied directly

to individual ships without the danger o signifcant carbon

leakage. The ag state1 with which a ship is registered, or

indeed the nationality o the entity operating the ship, canchange requently, especially when ships are bought and sold.

The direct application o the CBDR concept would also cause

gross distortion o shipping markets, reducing the efciency o

maritime transport and thus the smooth ow o world trade.

IMO Agreement on CO2

Technical Rules

In July 2012, governments at IMO agreed a

comprehensive package o technical regulations or

reducing shippings CO2 emissions which will enter

into orce in January 2013. The amendments to theMARPOL Convention (Annex VI) include:

A system o energy efciency design indexing or

new ships (similar in concept to the ratings applied to

cars and electrical appliances). The IMO EEDI will lead

to approximately 25-30% emission reductions by 2030

compared to business as usual.

A template or a Ship Energy Efciency Management

Plan (SEEMP) or use by all ships. The SEEMP allows

companies and ships to monitor and improve

perormance with regard to various actors that may

contribute to CO2 emissions. These include, inter

alia: improved voyage planning; speed management;

weather routeing; optimising engine power, use o

rudders and propellers; hull maintenance and use o

dierent uel types.

Recognition o CBDR

The July 2011 agreement demonstrates that IMO is

eminently capable o delivering a global solution or

shipping which can be reconciled with the principle

o CBDR - without prejudice to what UNFCCC might

decide with respect to other industries. To address

CBDR, the IMO agreement includes a regulation or

the promotion o technical co-operation and the

transer o technology relating to the improvement

o energy efciency o ships, and requires maritime

administrations - in co-operation with IMO - to provide

support directly to developing states that request

technical assistance.

However, the IMO principle o no more avourable treatment

ensures that standards adopted or shipping are applied equally

throughout the world, delivering maximum environmental

protection and improvement.

The international shipping industry thereore believes that

the achievement o meaningul reductions in CO2 emissions

will be best achieved i nations agree that the development o

detailed measures or the international merchant eet should

be directed by governments at IMO - while ully respecting

the UNFCCC CBDR principle. CBDR can be reconciled with the

need or uniorm rules through a Market Based Measure, such

as an IMO compensation und, whereby the majority o unds

collected would be used or climate change mitigation and

adaptation projects in developing nations.

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Failure to deliver a global and uniform CO2reduction regime for international shippingwill greatly reduce the ability of the shippingsector as a whole to reduce its emissions.


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International shipping does notlend itsel to inclusion in nationalemission targets.

A ship may be registered in one country while the

benefcial owner o the ship may be located in

another. The cargo carried by the ship will be o

economic beneft to a variety o dierent importing

and exporting nations.

Most ships do not ollow fxed routes and they will

collect and deliver varying amounts o cargo in a

large number o dierent nations throughout thecourse o a voyage. Moreover, the nationality o the

entities exporting and importing the cargo carried

will vary considerably rom voyage to voyage.

IMOs Track Record on

Environmental Regulation

The level o ratifcation and enorcement o IMO Conventions is

very high in comparison to international regulations governing

many land based industries2.

The impressive track record o IMO is demonstrated by the

success o the MARPOL Convention (which also now includesregulations to reduce ships CO2) in contributing to the

substantial reduction o oil pollution since it entered into orce.

MARPOL 73/78 has helped ensure a dramaticreduction in oil spilled by shipping

In addition to the ground breaking agreement to reduce CO2, the

ability o governments at IMO to respond to political pressure

and to deliver global environmental regulations involving complex

issues has also been demonstrated by the agreement3 to reduce

pollutant atmospheric emissions (such as sulphur) rom ships

dramatically.

4

30

25

20

15

10

5

0

Average number o major oil spills per year (over 700 tonnes)Source: ITOPF

1970s 1980s 1990s 2000s

25.2 9.3 7.8 3.1

IMO is also Developing

Market Based Measures

The IMO agreement on technical measures

demonstrates that there is widespread

understanding amongst governments worldwide

that the most eective means o reducing CO2emissions rom ships will be or COP 17 to give

IMO a clear mandate, so that it can fnalise the

Market Based Measures (MBMs) that IMO has also

developed. I governments so decide, this could

also involve a linkage to any Green Fund that is

established by UNFCCC.

Governments have already made various detailed

proposals or a shipping MBM. These have been

assessed by an international panel o experts and

will be taken orward by IMO Member States during

early 2012. However, this task will be made easier

i COP 17 can confrm IMOs mandate to regulate

shippings CO2, and provide additional clarity on

how IMO might reconcile CBDR with the shipping

industrys need or an MBM that applies to ships on

a uniorm basis regardless o ag.

An MBM Linked to Fuel Consumption

With respect to a climate change unding

mechanism, the clear preerence o the majority

o the shipping industry is or an international

compensation und linked to uel consumption,rather than a system based on emissions trading.

Most shipping companies, perhaps 90%, are small

to medium sized enterprises that have a sound

dislike o unnecessary complication. An IMO

compensation und linked to uel consumption

is the option which most shipping companies

can probably accept and support, i agreed by

governments.

1Under the United Nations Convention on the Law o Sea (UNCLOS), the ag

state is the administration or government o the state whose ag the ship isentitled to y.

2MARPOL Annexes I and II (governing prevention o oil and chemical pollution)

have been ratifed by 150 nations covering over 99% o the world merchant

eet. Recent amendments to MARPOL Annex VI (which now address CO2)

already cover over 90% o the world eet.

3The 2008 amendments to MARPOL Annex VI will, inter alia, reduce the

sulphur content in uel to just 0.1% in Emission Control Areas in 2015.

IMO agreement to reduce atmosphericpollution rom ships

Year 2005 2010 2015

1.5%

1.0%

0.1%

Sulphur content o uelpermitted in EmissionControl Areas


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Regulations

enter into

orce or over

90% o world

eet

Ship Energy

Efciency

Management

Plan (SEEMP):

mandatory

implementation

or all ships

EEDI requires

new ships to

meet agreed

efciency

targets

New ships

must improve

efciency 10%

20% CO2

reduction per

tonne/km

(industry goal)

50% CO2

reduction per

tonne/km

(industry goal)

New ships

must improve

efciency

up to 20%

New ships

must improve

efciency 30%

250

225

200

175

150

Comparison o CO2 emissions between dierent modes o transportSource: NTM, Sweden

IMO agreement on technical regulations will reduce ships CO2MARPOL Annex VI, Chapter 4 adopted July 2011

Improvements to energyefciency o ship engines oil

consumption (gram/kw/hour)Source: Danish Shipowners Association

Grams per tonne-km

0 100 200 300 400 500 600

2013 2015 2020 2025 2030 2050

Cargo vessel 2,000-8,000 dwt 21

Air reight 747-400 1,200 km ight 540

Cargo vessel over 8,000 dwt 15

Heavy truck with trailer50

Decade

1970s

Decade

2000s

IMO in session in London

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Alternative Fuel SourcesThe various parts o the shipping industry - shipowners, shipbuilders and

classifcation societies (the depositories o technical expertise in the industry) -

are actively examining a number o ways to reduce CO2 emissions, both or new

and existing ships, which are primarily linked to reducing uel consumption. In

the longer term, however, the shipping industry is also exploring a number o

alternative uel sources to help reduce CO2 emissions.

Renewable energysources, such as wind and solar power, may have a place in

helping to meet some ancillary requirements, such as lighting on board ships.

However, they are not practical or providing sufcient power to operate ships

main engines (the huge physical size o ships should not be underestimated).

Fuel cells may be a possibility or new ships in the very long term, although

they are currently too limited in range to oer a viable solution. Even nuclear

propulsion or merchant ships is technically possible, although saety and

security implications and support inrastructure costs would require serious

consideration.

The current assumption, thereore, remains that ships will continue to burn

ossil uels or the oreseeable uture, and that the most signifcant means o

reducing CO2 emissions will be achieved by urther improvements in efciency

across the entire transport chain.

Liquid Natural Gas (LNG) produces lower emissions, and could be a solution

or some short sea trades i supply inrastructure can be developed. Thirdgeneration biofuels might conceivably provide a possible alternative although

there is, o course, considerable public debate about the net environmental

costs (and social eects) o the wider use o such uels.

The International Chamber o

Shipping (ICS) is the principal

international trade association or

merchant shipowners, representing

the global shipping industry at IMO

and other inter-governmental ora

that impact on the industry. ICS

membership comprises national

shipowners associations rom 36

nations representing all sectors and

trades and over 80% o the world

merchant eet.

International Chamber o

Shipping

38 St Mary Axe

London EC3A 8BHTel + 44 20 7090 1460

[email protected]

www.ics-shipping.org

www.shippingacts.com

6

The consensus o opinion within the

global industry is that it will be possible

or shipping to reduce CO2 emitted

per tonne o cargo transported one

kilometre (tonne/km) by 20% between

2005 and 2020, through a combination

o technological and operational

developments, as well as the introduction

o new and bigger ships, designed to

the new IMO Energy Efciency Design

Index. This is a signifcant challenge given

that there have already been substantial

improvements in the efciency o ships

engines.

In the longer term, depending on

technological developments which at the

moment cannot be ully anticipated, the

industry believes it should be possible

to deliver even more dramatic emission

reductions (although or the oreseeable

uture shipping will remain dependent on

ossil uels).

Although the shipping industry is already very

energy efcient, additional improvements to

hull, engine and propeller design are expectedto produce urther reductions in uel

consumption. There may also be possibilities

or the better utilisation o waste heat.

The increasing size o many ships is also

expected to improve uel efciency. In

addition, operational measures (e.g. better

speed management throughout the course

o a voyage) are also expected to reduce uel

consumption and are addressed in detail by

the new Ship Energy Efciency Management

Plan that has been made mandatory by IMO.

Shipping companies have a very

strong incentive to reduce their

uel consumption and thus reduce

their CO2 emissions: bunker costs

represent an increasingly signifcant

proportion o ships operational

expenses, having increased by about

300% in the last 5 years.

There is every expectation that

marine bunker prices will remain high.

Furthermore, the cost o ships uel

is expected to increase by a urther

50% as a result o the increased use

o (low sulphur) distillate uel that

will ollow the implementation o the

new IMO rules (MARPOL Annex VI) that

will apply globally in Emission Control

Areas by 2015.

How is Shipping Reducing its CO2 Emissions?

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