With a long-term climate goal in place, the international shipping sector now needs to decide on a comprehensive policy framework to get there.
Shipping’s climate impact
The global shipping industry underpins world trade with roughly 90% of all traded goods being moved by sea. However, the sector is responsible for around 2.6% of global greenhouse gas (GHG) emissions (one Gigaton per annum), and this proportion could grow significantly if no action is taken.
The International Maritime Organization (IMO), the UN agency that sets standards for the shipping industry, agreed in April 2018 an interim strategy with a goal of cutting shipping’s total emissions by at least 50% by 2050 from 2008 levels. Yet no overarching concrete policies have been decided.
A clear legal framework that combines ambition with flexibility can build trust and, importantly, increase investor confidence.
Environmental Defense Fund is advocating for a comprehensive policy framework to enable shipping to meet and exceed its long-term target, including interim targets or budgets; the creation of an independent scientific and technical body; and the introduction of carbon pricing and targeted recycling of revenues.
The IMO’s long-term emissions target for shipping is welcome. However, a series of consecutive multi-year carbon budgets could provide the sector with temporal flexibility on a pathway toward the target.
A well-designed budget allows for “banking” (saving of surplus reductions) and “borrowing” (in case emissions in any given year exceed the budgeted average) across the years covered by each multi-year emissions budget. These flexibilities help underpin ambition. But they need to be matched with requirements for regular and transparent public reporting of emissions compared to budgets, and requirements that both the budgets and the reporting be implemented and enforced.
To help ensure that interim targets and carbon budgets are set at an appropriate level, an independent technical body could be established to advise the IMO. The body would provide independent expert advice on the pathway for achieving the low carbon transition in shipping. It would also have the potential to frame the debate in terms of what is in the shipping industry’s best long-term interests. The IMO could take account of the advice of this body, and provide a public explanation for any decision that deviates from that advice.
The permanent technical body must be seen to be independent, and should be made up of individual experts from the fields of science, policy, engineering and economics. The IMO would appoint the members, but they would not represent any IMO delegation. To maintain public confidence, the body would need to operate with transparency and its members be subject to requirements to avoid even the appearance of a conflict of interest. Both international and national law provide examples of the value of an independent entity that provides expert advice and guidance. The Technical Economic Assessment Panel (TEAP) to the Montreal Protocol, for instance, has been invaluable in providing independent advice.
Solutions to address greenhouse gases from shipping already exist. However, these solutions are more expensive to deploy than traditional, more polluting technologies used by the sector. A carbon price would create incentives to develop and deploy these emerging solutions.
One way to price carbon from shipping is to place a levy on bunker fuel. The revenue from this levy could then be used to re-distribute funds raised within the sector. If matched with enforceable emissions budgets, this could drive investor confidence, leading to reduced costs as lessons are learned and economies of scale unlocked. The independent scientific and technical panel could provide advice on the carbon price level and other emerging issues, including how to account for alternative fuels. This would help ensure that the multi-year carbon budgets are met.
The IMO already has a common financial mechanism under the International Oil Pollution Contribution Fund. Common financial mechanisms have assisted emissions reduction elsewhere, with the Norwegian NOx Fund reducing nitrogen oxide emissions from shipping by 16,000 tons between 2011- 2017. The IMO could administer a financial mechanism using the monies generated from a carbon price. This would aim to support technology deployment in the shipping sector, assisting low-carbon technology deployment for countries with particular need for support.
Conducting Analysis on the Legal Bases for IMO Climate Measures: Our legal analysis examines the legal feasibility to adopt a climate economic measure under an existing IMO treaty. This would allow a measure to be adopted at the speed required to tackle the urgency of climate change.