Maritime GHG emissions: The Paris Agreement, an IMO MRV and ‘market-based measures’ – looking forward to MEPC 69

[...] On 18 April 2016, the Marine Environmental Protection Committee (MEPC) of the International Maritime Organisation (IMO) will convene in London for its 69th working session (MEPC 69).

A key topic during the four days of meetings will be the discussion of measures to reduce greenhouse gas (GHG) emissions from ships.

Specifically, MEPC 69 will debate a global ship GHG data collection scheme and GHG reduction target and so-called ‘market-based measures’ to achieve such a target (such as emissions trading and carbon off-setting, as distinct from technical or operational measures).

Tackling the sector’s GHG emissions is hardly a new subject for the shipping industry. Maritime GHG emissions have been a matter of intense debate and controversy for at least two decades (as explained further below). However, this MEPC meeting is likely to be somewhat different.

It follows swiftly on the heels of the break-through global climate change agreement concluded by 195 countries in Paris on 12 December 2015 (Paris Agreement).

Expectations are high and the pressure on the IMO to broker a global deal to tackle ship GHG emissions has never been greater.

This article will briefly explain the background that leads up to MEPC 69, the potential significance for owners, charterers, financiers and fuel suppliers of the issues to be debated there and the likely outcome. A follow-up article in April will analyse the outcome of the meeting in detail.

A growing issue While shipping GHG emissions make up only a relatively small proportion of global GHG emissions today, and shipping is arguably one of the most energy efficient modes of transport, it is widely acknowledged that the sector’s GHG emissions are growing fast, particularly as a result of economic growth in developing regions.

According to the third IMO GHG study (2014), maritime transport emits around one billion tonnes of CO2 annually and is responsible for about 2.5 per cent of global GHG emissions. Other estimates put this figure at 3 per cent globally, and 4 per cent in the EU, equivalent to more than the total annual emissions of Germany, the EU’s biggest emitter.

More importantly, shipping emissions are predicted to increase by between 50 per cent and 250 per cent by 2050, depending on future economic and energy developments.

This rate of growth is seen as incompatible with global targets to keep global warming to below 2oC (which requires global GHG emissions to be at least 50 per cent below 1990 levels by 2050), particularly in the wake of the Paris Agreement.

Exclusion of shipping from the Kyoto Protocol and EU ETS When the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) was adopted in Japan in 1997, the shipping sector (along with aviation) was treated differently from other (i.e. land-based) sources of GHG emissions.

The Kyoto Protocol specifically left it to the IMO in the case of shipping, and its equivalent in the aviation sector, the International Civil Aviation Organisation (ICAO), to pursue measures to reduce GHGs from those sectors.

When, therefore, the European Union enacted its ground-breaking European Union Emissions Trading Scheme (the EU ETS) in 2005, in order to meet the EU’s Kyoto Protocol commitments, the shipping and aviation sectors were excluded from its ambit.

The exclusion of both sectors from the EU ETS was controversial at the time and has remained so ever since.

There were, however, cogent practical reasons for treating them differently, and there are a number of parallels between the two sectors (albeit also important distinctions).

Both sectors are truly global and, unlike ground-based emitters such as power stations, both are self-evidently mobile sources of pollution, which gives rise to obvious difficulties of jurisdiction, measurement and enforcement, among other complexities.

These measures were regarded as justifying a global solution, most likely to be found under the auspices of the relevant global associations.

Perhaps inevitably, however, a global solution has so far proved elusive in both cases.

Some readers will be aware that in the case of the aviation sector, the EU ran out of patience in 2009 and enacted an EU Aviation ETS that, controversially, had extra-territorial effect (covering all of the emissions of international flights landing in or taking off from anywhere in the EU, regardless of their non-EU destination/origin).

This provoked a furious legal and political battle, ultimately culminating in the EU climbing down and suspending the non-EU aspects of the aviation ETS until at least the end of 2016 (depending on the outcome of parallel talks taking place within ICAO this year). [...]



REEDSMITH

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