Since the formulation of the UN’s Kyoto Protocol in 1997, efforts towards the global reduction of carbon dioxide (CO2) has received widespread public attention. In light of the tighter regulation of SOx and NOx emissions, we look at plans within the European Union seeking to address this important greenhouse gas in shipping.

MARPOL Annex VI and vessel efficiency

Currently, the international regulation of CO2 in shipping is governed by the IMO’s Energy Efficient Design Index (EEDI) and Ship Energy Efficient Management Plan (SEEMP), introduced within the framework of MARPOL Annex VI. Since 2013, the EEDI has required that all newbuilds are more efficient than a reference line, calculated on the basis of industry averages for particular types of vessel, which will be reduced every five years. SEEMP, also introduced from the beginning of 2013, requires all vessels (existing and newbuild) to have an energy efficiency plan on-board, though it does not require shipowners to take active steps to improve efficiency.

In recent years there have been increasing calls for shipping to do more to reduce its CO2 emissions, which are thought to make up 3-4% of the global carbon footprint. The IMO’s ultimate intention is for a global system to monitor ships’ CO2 emissions, which would then be used as the basis for a “market-based-measure” (MBM). The MBM would likely be along the lines of the carbon trading schemes already operating in industries such as energy and aviation, under which operators are allocated “emissions allowances” which can be traded.

However, concerns about the cost of CO2 regulation on the shipping industry, as well as uncertainty as to implementation methods, has slowed progress at the IMO level.

European Union – Monitor, Report, Verify

In the meantime, the European Union is forging ahead with its own CO2 monitoring policy.

From 1 January 2018, all ships over 5,000 GT, calling at EU ports, will have to comply with the Monitor, Report, Verify program (MRV), regardless of the ship’s flag. Owners will have to monitor emissions using one of four approved methods, the first three of which involve calculating the emissions from amount of fuel used (measured by using bunker delivery notes, fuel tank levels or fuel flow meters) and the distance sailed. The fourth method is to measure the amount of CO2 emitted directly from the ship’s funnel.

MRV will also require each vessel to have an emissions monitoring plan, which will have to be checked by an approved third party verifier.

Some protection will be afforded to protect data which is exceptionally commercially sensitive, which will either be aggregated or otherwise not published.

There is, as yet, no plan for how the information collected by MRV will be used. However, the intention is that it will allow for the introduction of an MBM or alternatively a mandatory efficiency standard, which could be used to penalise the least efficient vessels.

Reaction

The fact that the EU has pressed on with MRV and not waited for the IMO to implement a global scheme has been controversial, drawing criticism from the International Chamber of Shipping as failing to respect ‘the primacy of IMO as the regulator of international shipping’1. This stance echoes previous comments directed at France for its decision to unilaterally implement CO2 emissions monitoring plans for the transport sector.

In light of these concerns the EU has stated that MRV will be reviewed if and when the IMO introduces global regulation, and may be aligned with the IMO’s regulation, though this is not guaranteed.

Although future developments are uncertain, the coming years are likely to see significant new regulatory requirements for shipowners relating to CO2. The introduction of MRV is likely to mark the beginning. The possibility of a similar IMO measure, and eventually an emissions trading scheme, would likely have a significant impact on the industry.