In a series of brief bulletins, Justin Turner and I have been highlighting selected news updates which illustrate the steps being taken by the shipping industry in response to growing concern about rising levels of air pollution. A recently published bulletin focussed on draft new amendments to MARPOL Annex VI which seek to further amend the existing MARPOL convention and require a reduction in ships’ carbon intensity, with the aim of reducing the carbon intensity of international shipping by 40% by 2030 (compared with 2008 levels).
One important shipping sector which faces being disadvantaged by proposed new regulations, is the ferry industry. Many within the ferry industry feel these new measures do not accommodate crucial ferry-specific issues.
(i) EU Emissions Trading System (“EU ETS”)
The EU ETS is a key feature of the EU’s policy to tackle climate change and its primary tool for reducing greenhouse gas (“GHG”) emissions cost-effectively. MEPs noted earlier this year that the International Maritime Organisation (“IMO”) has made insufficient progress in reaching an ambitious global agreement on GHG emissions and asked the Commission to examine the overall environmental integrity of the measures decided by the IMO, including the targets under the Paris Agreement.
In a recent amendment to the “Emissions Trading System (ETS) Directive”, the EU emphasised the need to act on shipping emissions as well as all other sectors of the economy and MEPs voted to include shipping in the scheme as of 2023, if there is no comparable system operating in the IMO in 2021.
The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. Theoretically, this scheme should incentivise ship operators to invest in new technology to improve their operational practices and, in turn, reduce ship emissions.
(ii) MARPOL Annex VI
The MARPOL Convention is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. MARPOL Annex VI (in force since May 2005) limits the main air pollutants contained in ships exhaust gas, including sulphur oxides and nitrous oxides, and prohibits deliberate emissions of ozone depleting substances. The revised Annex VI (in force since 1 July 2010) sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts as well as particulate matter and prohibits deliberate emissions of ozone depleting substances.
Highlight: Response from the ferry industry
There has been increasing concern within the ferry industry that this unilateral scheme proposed by the EU would “significantly undermine” the IMO as the leading organisation regulating commercial shipping.
For many years the ferry industry, along with other maritime sectors, has worked with the IMO to develop technical requirements that build on the historic performance of vessels, the main result being the Energy Efficiency Design Index (“EEDI”), introduced for new ships in 2015. However, it soon became clear that EEDI measures would require a huge overhaul from the ferry business to ensure compliance.
Recent draft amendments to MARPOL Annex VI agreed by a working group of the IMO build on these measures and seek to regulate the technical requirement to reduce carbon intensity, based on a new “Energy Efficiency Existing Ship Index” (“EEXI”); and the operational carbon intensity reduction requirements based on a new operational “Carbon Intensity Indicator” (“CII”).
However, these proposed regulations, based on a complex EEXI formula, point to some ferries risking losing their international certificates to operate being pulled in 2023 despite the adverse impacts of the EEXI formula being significantly reduced for ferries, as compared to other shipping sectors.
Interferry has advised that, due to the diverse nature of ferry services, ro-ro passenger and cargo vessels stand to be penalised by the suggested EEXI. In a sample review of 125 ro-ro cargo ships and 110 ro-pax vessels in the existing European fleet, Interferry found that 55% of each type would not conform to the proposed EEXI standards.
The ferry industry will be lobbying for further modification to the EEXI calculation before it is given final approval.
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