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Key challenges for shipping emissions regulations in 2018

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Julien Dufour, CEO, Verifavia Shipping, talked to GREEN4SEA about the major industry developments and challenges ahead with respect to the emissions regulatory framework. Enforcement of sulphur regulations, in combination with the coming into force of two emission monitoring systems, the EU MRV and the IMO DCS, are expected as the major challenges for shipping companies in 2018, according to Mr. Dufour.

GREEN4SEA: Focusing on your area of expertise, what were the most important industry developments within 2017?

Julien Dufour: The 31st August 2017 marked the first regulatory deadline for the European Unions’ (EU) Monitoring, Reporting, Verification (MRV) regulation. By the end of August last year, ship owners and operators of vessels exceeding 5,000 GT and operating in the EU had to prepare and submit their ship-specific monitoring plans to monitor and report carbon emissions, fuel consumption, and associated transport work.

MRV regulation will see the EU collect and make publicly available data for over 12,000 vessels calling at EU ports on or after 1st January 2018 to load or unload cargo, or embark or disembark passengers for commercial purposes. Regardless of Flag or nationality, every vessel must monitor and record its fuel consumption and CO2 emissions. The associated transport work must also be recorded, which is the commercial cargo transported, multiplied by the distance sailed. Ballast voyages must also be considered in the same way as laden voyages. Only certain vessels, such as warships, naval auxiliaries, and a number of very specialised ships are exempt.

MRV was a first-of-a-kind regulation. It represents the first time shipping companies have had to deal with independent verifiers. I think circa 80%-90% of shipping companies worldwide have fulfilled their obligations to date by submitting monitoring plans.

G4S: Focusing on your area of expertise, what do you think that will be the biggest challenge(s) for the industry in 2018?

J.D.: The International Maritime Organisation (IMO) also has a roadmap through to 2023 focused on developing a comprehensive strategy for the reduction of GHG emissions from ships. In April 2015, The Marine Environment Protection Committee (MEPC) of the IMO agreed mandatory requirements for ships to record and report data on their fuel consumption. At the 70th meeting in October 2016, it was decided to adopt those requirements as modifications to MARPOL Annex VI. Although there are some similarities between the two systems, the more recently outlined IMO approach to monitoring, reporting and verifying carbon emissions (CO2) has some significant differences to the EU MRV legislation and shipowners will need to turn their attention to this during 2018. Independent accredited verifiers, such as Verifavia Shipping, will perform the related assessment and verification tasks and are therefore well placed to support shipowners and Flag States in meeting requirements.

The IMO DCS is very similar to EU MRV – it is also a data collection system to collect fuel, distance, and hours travelled for ships exceeding 5,000 GT on all voyages worldwide. However, the main difference between MRV and DCS is that MRV is a regional scheme that affects only ships that call at EU ports, while DCS covers all ships worldwide. The two systems are being implemented with an one-year gap. MRV came into force in 2015, the first monitoring period will be in 2018 and the first verification season will be in 2019. The first monitoring period for DCS will be 2019 and the first verification season will be in 2020.

In 2017, shipping companies had to prepare MRV monitoring plans and have them assessed by an independently accredited verifier. For the DCS, in 2018, shipping companies will have to prepare a data collection plan that will be integrated into an updated Ship Energy Efficiency Management Plan (SEEMP) that will also need to be assessed before the end of 2018 just before the start of the first monitoring period on 1 January 2019.

The other key difference is that the data from the MRV will be made available on a public database, so anyone – journalists, stakeholders, shipping companies, charterers – will be able to type in an IMO number and retrieve the relevant data. With the DCS, the data will be made publicly available but anonymously. It will only be used for statistical purposes. Nobody will be able to identify the IMO number of a ship.

We expect the two systems to run in parallel over the next few years but we also expect that one day, the two will be aligned and a global system will take over the regional system. The ultimate objective of any MRV system is not just to collect the data, but to use this data to design and implement a market-based measure to tackle emissions from the sector. There are measures which can be an offsetting scheme, emissions trading scheme, or an environmental tax.

G4S:What would be the 2018 resolutions for your company/ organisation?

J.D.: Given the strong commonalities between the EU and IMO monitoring schemes, independent EU MRV accredited verifiers such as Verifavia have the knowledge, expertise, and understanding to provide support in navigating the requirements and challenges relating to both EU MRV and IMO DCS regulations. Verifavia will therefore continue supporting shipowners in navigating the requirements of both regulations.

In relation to MRV we have verified circa 1,545 ships, which is around 10%-12% of the global market and around 60%-70% of the independent market (accredited verifiers other than classification societies). We were the first globally accredited verifier to receive dual accreditation under the ISO 14065 standard and Regulation 757/2015, and the first independent accredited verifier to sign an agreement with a flag state administration.

Verifavia has been authorised by the Liberian Registry for the IMO DCS and are currently in discussions with several other flag states; indeed, we hope to announce new authorisations in the coming weeks. Our aim is to be authorised by most, if not all, major flag states in the world. Through cooperations between independent accredited verifiers and flag states, shipowners that are required to comply with EU MRV benefit from obtaining a verification service from a single point of contact and a single verification audit based on the same primary data and procedures. This consolidated approach will ensure a cost effective and streamlined reporting verification process.

G4S: What is your overall forecast for shipping industry in 2018 and what would you like to share and/or wish and/or ask other industry stakeholders?

J.D.: Enforcement of sulphur regulations is a hot topic and presents a significant challenge to the industry. The data gathered by verifiers through the MRV process could help Port States in their efforts to determine whether or not a vessel is in compliance with the sulphur emissions control area (SECA) requirements. To enforce the SECA regulation, the Port States need to ensure that, when entering the SECA, the ship switches to a low-sulphur fuel at the right time and that they continue to burn low-sulphur fuel. They need to ensure that the low-sulphur fuel is the right type and does not exceed the required SOx levels.

There are two ways to approach checking sulphur levels; to examine onboard procedures and ensure the ship has switched over to a compliant fuel at the right time; or to measure the percentage of SOx in the exhaust gas. As verifiers, the first approach is something we have the potential to support as we are in discussion with the vessel, know the type of fuel they use and how much they burn. We also know which emissions source is actually burning a specific type of fuel. By tweaking the process, it may be possible for us to check that the ship is complying with the SECA regulation. As we have information about the voyages, using AIS data we could estimate when a vessel was supposed to enter the SECA area and check the ship’s log book to ensure the changeover was correct. We may also have access to the bunker delivery note, which includes the sulphur content and the outcome of the laboratory analysis, which also references sulphur content.


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