Updates > Lloyds Article on Emissions

20 March 2009

The following article appeared in Lloyds List on Tuesday 17th MarchPlease find SEAaT coverage in Lloyd’s List today (and attached).

------

One solution too many for cutting CO2

Tuesday 17 March 2009

THERE is a problem. There is a solution. In fact, there are two solutions. The problem then becomes which one to take.

But to go back to the original problem: the shipping industry burns around 400m tonnes of bunker fuel annually. Multiply that number by three and you arrive at a figure for the amount of carbon dioxide produced: 1.2bn tonnes.

Like sulphur, CO2 is a greenhouse gas which, it might be argued, is the more damaging of the two. Shipping accounts for 2.7% of global CO2 emissions, making it a significant player in CO2 field.

Just as sulphur emissions from bunker fuel have come under the cosh, so, too, will CO2. Just not yet. Which is where the shipping industry and, by implication, the bunker industry, find themselves. How will the CO2 output from shipping be cut?

There are two approaches to the problem and both will be present at the big post-Kyoto meeting in Copenhagen.

One approach suggests imposing a tax on fuel oil consumed by ships. That tax would then be used to fund environmentally friendly projects in developing countries. This principle, enshrined in the Kyoto Protocol, is referred to as Common but Differentiated Responsibilities (CDR). The tax would make fuel more expensive, but it would also encourage shipping companies to conserve its use. Fewer tonnes consumed means less tax paid.

Equally, as trade and shipping movements grow, so does the tax take, which would see more funds going out under the CDR scheme to offset the greater volume of CO2 released.

“The scheme is not without its merits,” says John Aitken, general secretary of Shipping Emission Abatement and Trading. Its main disadvantage, according to Mr Aitken, is that it cannot deliver “a guaranteed outcome”.

SEAaT’s preferred solution is to cap and trade, in other words, an emissions trading scheme. A tonne of CO2is given a value, a carbon credit, which can be traded. A shipping company would have so many credits. If it went above its limit, it would have to buy more in; keeping below the limit leaves excess credits to sell.

Both methods incentivise companies to act. Mr Aitken says the system raises suspicion since it is market-based and holds out the prospect of private gain. “Under the levy approach, a company will always be paying something,” argues Mr Aitken. Under a market-based system, a company could make money.

The 59th meeting of the Maritime Environmental Protection Committee (MEPC), to be held in July, is to discuss the viability of market-based instruments. What are the prospects for acceptance?

“People are not hopeful,” says the general secretary. The International Maritime Organization comes under the United Nations, but its CDR principle distinguishes between two groups of nations — developed and developing. If rules on CO2 pollution are applied to one group, ships would simply move where they didn’t apply. Like switching flag, for example.

For the time being, though, more work needs to be done as market-based instruments are not widely understood by the industry. To this end, SEAaT is hosting a seminar next month which takes place, appropriately, at the IMO’s headquarters in London.