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Shipping, World Tradeand the Reduction o
United Nations Framework Convention on Climate Change
International Maritime OrganizationMarine Environment Protection Committee
International Chamber o ShippingRepresenting the Global Shipping Industry CO
P17
DURB
AN
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35000
30000
25000
20000
15000
Growth in world seaborne trade (billion tonne-miles)Source: Fearnleys
International Shipping -
Servant o World Trade
The international shipping industry is responsible or the carriage o about
90% o world trade and is vital to the unctioning o the global economy.
Intercontinental trade, the bulk transport o raw materials and the
import/export o aordable ood and goods would simply not be possible
without shipping.
It is the availability, low cost and efciency o maritime transport that has
made possible the major shit towards industrial production in Asia and other
emerging economies, which has in large part been responsible, in recent
years, or dramatic improvements in global living standards.
Notwithstanding the recent contraction in trade resulting rom the present
economic downturn, the world economy is expected to continue to grow
and shipping will need to respond to the demand or its services (unless
existing patterns o global trade were to be undamentally transormed).
Shipping is an inherently international industry which depends on a global
regulatory ramework to operate efciently. I a ship trades rom Brisbane
to Buenos Aires, the same rules need to apply (or example: concerning
construction, navigation or atmospheric emissions) at both ends o the
voyage. Otherwise there would be chaos and serious inefciency.
For over 50 years this global regulatory ramework has been very
successully provided by the United Nations International Maritime
Organization (IMO).
2
UNFCCC Must Agree
a Mandate or IMOThe international shipping industry
is frmly committed to reducing
its CO2 emissions by 20% by 2020,
with signifcant urther reductions
thereater. However, the next
United Nations Climate ChangeConerence (COP 17) needs to
give the International Maritime
Organization (IMO) a clear mandate to
continue its vital work to help deliver
meaningul CO2 emission reductions
by international shipping, including
Market Based Measures.
The global shipping industry,
represented by the International
Chamber o Shipping (ICS), very
much hopes that governments at
COP 17 will respond positively to thesignifcant IMO agreement, in July
2011, to adopt a package o technical
measures to reduce shippings CO2
emissions (see green box). This is the
frst ever international agreement
containing binding and mandatory
measures to reduce CO2 emissions
that has so ar been agreed or an
entire industrial sector.
Most importantly - and without
prejudice to what governments
might agree at UNFCCC the shippingindustry believes that IMO is now
very well placed to continue the
real progress it is making on Market
Based Measures to help deliver
urther emissions reductions. This
includes a possible shipping industry
environmental compensation und
with possible linkages to any Green
Fund agreed by UNFCCC. This could
address the Kyoto Protocol principle
o Common But Dierentiated
Responsibility (CBDR) by directing the
lions share o any unds raised rom
international shipping to environment
related projects in developing
countries.
It is vital or all governments to
understand that in the absence o
a global ramework agreed by IMO
there is a serious risk o regional or
unilateral measures regulating CO2
emissions or shipping. This would
have a seriously distorting eect on
international shipping markets, butmost importantly would be much less
eective in delivering meaningul
reductions in CO2 emissions by the
global shipping sector as a whole.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Reducing Shippings CO2
The international shipping industry is frmly committed to
playing its part in reducing emissions o CO2 and other Green
House Gases.
International shipping is already, by ar, the most carbon efcient
mode o commercial transport. But it is ully recognised that
CO2 emissions rom the industry as a whole (some 2.7% o global
emissions) are comparable to those o a major national economy.
The shipping industry thereore accepts that the CO2 emission
reduction which ships must aim to achieve should be at least as
ambitious as the CO2 emissions reduction agreed under any new
United Nations Climate Change Convention.
However, shipping is the servant o world trade. The total
emissions o shipping, as a sector, will thereore be determined,
to a signifcant extent, by the expected long term growth o the
world economy (and population) between now and 2050.
CO2
Reduction Measures for
Shipping Should be Led by IMO
As already acknowledged by the Kyoto Protocol, emissions rom
international shipping cannot be attributed to any particular
national economy. Multilateral collaborative action will be the
most appropriate means to address emissions rom the maritime
transport sector.
Multilateral collaborative action will be best achieved by
governments at the specialist United Nations agency the IMO -
which has a successul track record in the development o global
regulations governing the shipping industrys environmental
perormance. For example, the International Convention on the
Prevention o Pollution by Ships (MARPOL), which now contains
technical regulations or the reduction o CO2, has been ratifed
and enorced globally through a combination o ag state and
port state control by IMO Member States.
The delivery o signifcant emission reductions by the maritime
sector will require that any mandatory measures adopted are
applied on a uniorm and global basis to avoid carbon leakage.
Most shipping companies have the reedom to decide to
register their ships with the ag state o their choice including
those which, under the current Kyoto Protocol, are not Annex I
nations. Measures to deliver meaningul emission reductions are
thus much more likely to be achieved by instruments developed
by governments at IMO.
In 2011, only about 35% of the world merchanteet is registered in UNFCCC Annex I countries.
Taking Account of CBDRThe UNFCCC principle o Common But Dierentiated
Responsibility (CBDR) cannot be practically applied directly
to individual ships without the danger o signifcant carbon
leakage. The ag state1 with which a ship is registered, or
indeed the nationality o the entity operating the ship, canchange requently, especially when ships are bought and sold.
The direct application o the CBDR concept would also cause
gross distortion o shipping markets, reducing the efciency o
maritime transport and thus the smooth ow o world trade.
IMO Agreement on CO2
Technical Rules
In July 2012, governments at IMO agreed a
comprehensive package o technical regulations or
reducing shippings CO2 emissions which will enter
into orce in January 2013. The amendments to theMARPOL Convention (Annex VI) include:
A system o energy efciency design indexing or
new ships (similar in concept to the ratings applied to
cars and electrical appliances). The IMO EEDI will lead
to approximately 25-30% emission reductions by 2030
compared to business as usual.
A template or a Ship Energy Efciency Management
Plan (SEEMP) or use by all ships. The SEEMP allows
companies and ships to monitor and improve
perormance with regard to various actors that may
contribute to CO2 emissions. These include, inter
alia: improved voyage planning; speed management;
weather routeing; optimising engine power, use o
rudders and propellers; hull maintenance and use o
dierent uel types.
Recognition o CBDR
The July 2011 agreement demonstrates that IMO is
eminently capable o delivering a global solution or
shipping which can be reconciled with the principle
o CBDR - without prejudice to what UNFCCC might
decide with respect to other industries. To address
CBDR, the IMO agreement includes a regulation or
the promotion o technical co-operation and the
transer o technology relating to the improvement
o energy efciency o ships, and requires maritime
administrations - in co-operation with IMO - to provide
support directly to developing states that request
technical assistance.
However, the IMO principle o no more avourable treatment
ensures that standards adopted or shipping are applied equally
throughout the world, delivering maximum environmental
protection and improvement.
The international shipping industry thereore believes that
the achievement o meaningul reductions in CO2 emissions
will be best achieved i nations agree that the development o
detailed measures or the international merchant eet should
be directed by governments at IMO - while ully respecting
the UNFCCC CBDR principle. CBDR can be reconciled with the
need or uniorm rules through a Market Based Measure, such
as an IMO compensation und, whereby the majority o unds
collected would be used or climate change mitigation and
adaptation projects in developing nations.
3
Failure to deliver a global and uniform CO2reduction regime for international shippingwill greatly reduce the ability of the shippingsector as a whole to reduce its emissions.
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International shipping does notlend itsel to inclusion in nationalemission targets.
A ship may be registered in one country while the
benefcial owner o the ship may be located in
another. The cargo carried by the ship will be o
economic beneft to a variety o dierent importing
and exporting nations.
Most ships do not ollow fxed routes and they will
collect and deliver varying amounts o cargo in a
large number o dierent nations throughout thecourse o a voyage. Moreover, the nationality o the
entities exporting and importing the cargo carried
will vary considerably rom voyage to voyage.
IMOs Track Record on
Environmental Regulation
The level o ratifcation and enorcement o IMO Conventions is
very high in comparison to international regulations governing
many land based industries2.
The impressive track record o IMO is demonstrated by the
success o the MARPOL Convention (which also now includesregulations to reduce ships CO2) in contributing to the
substantial reduction o oil pollution since it entered into orce.
MARPOL 73/78 has helped ensure a dramaticreduction in oil spilled by shipping
In addition to the ground breaking agreement to reduce CO2, the
ability o governments at IMO to respond to political pressure
and to deliver global environmental regulations involving complex
issues has also been demonstrated by the agreement3 to reduce
pollutant atmospheric emissions (such as sulphur) rom ships
dramatically.
4
30
25
20
15
10
5
0
Average number o major oil spills per year (over 700 tonnes)Source: ITOPF
1970s 1980s 1990s 2000s
25.2 9.3 7.8 3.1
IMO is also Developing
Market Based Measures
The IMO agreement on technical measures
demonstrates that there is widespread
understanding amongst governments worldwide
that the most eective means o reducing CO2emissions rom ships will be or COP 17 to give
IMO a clear mandate, so that it can fnalise the
Market Based Measures (MBMs) that IMO has also
developed. I governments so decide, this could
also involve a linkage to any Green Fund that is
established by UNFCCC.
Governments have already made various detailed
proposals or a shipping MBM. These have been
assessed by an international panel o experts and
will be taken orward by IMO Member States during
early 2012. However, this task will be made easier
i COP 17 can confrm IMOs mandate to regulate
shippings CO2, and provide additional clarity on
how IMO might reconcile CBDR with the shipping
industrys need or an MBM that applies to ships on
a uniorm basis regardless o ag.
An MBM Linked to Fuel Consumption
With respect to a climate change unding
mechanism, the clear preerence o the majority
o the shipping industry is or an international
compensation und linked to uel consumption,rather than a system based on emissions trading.
Most shipping companies, perhaps 90%, are small
to medium sized enterprises that have a sound
dislike o unnecessary complication. An IMO
compensation und linked to uel consumption
is the option which most shipping companies
can probably accept and support, i agreed by
governments.
1Under the United Nations Convention on the Law o Sea (UNCLOS), the ag
state is the administration or government o the state whose ag the ship isentitled to y.
2MARPOL Annexes I and II (governing prevention o oil and chemical pollution)
have been ratifed by 150 nations covering over 99% o the world merchant
eet. Recent amendments to MARPOL Annex VI (which now address CO2)
already cover over 90% o the world eet.
3The 2008 amendments to MARPOL Annex VI will, inter alia, reduce the
sulphur content in uel to just 0.1% in Emission Control Areas in 2015.
IMO agreement to reduce atmosphericpollution rom ships
Year 2005 2010 2015
1.5%
1.0%
0.1%
Sulphur content o uelpermitted in EmissionControl Areas
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Regulations
enter into
orce or over
90% o world
eet
Ship Energy
Efciency
Management
Plan (SEEMP):
mandatory
implementation
or all ships
EEDI requires
new ships to
meet agreed
efciency
targets
New ships
must improve
efciency 10%
20% CO2
reduction per
tonne/km
(industry goal)
50% CO2
reduction per
tonne/km
(industry goal)
New ships
must improve
efciency
up to 20%
New ships
must improve
efciency 30%
250
225
200
175
150
Comparison o CO2 emissions between dierent modes o transportSource: NTM, Sweden
IMO agreement on technical regulations will reduce ships CO2MARPOL Annex VI, Chapter 4 adopted July 2011
Improvements to energyefciency o ship engines oil
consumption (gram/kw/hour)Source: Danish Shipowners Association
Grams per tonne-km
0 100 200 300 400 500 600
2013 2015 2020 2025 2030 2050
Cargo vessel 2,000-8,000 dwt 21
Air reight 747-400 1,200 km ight 540
Cargo vessel over 8,000 dwt 15
Heavy truck with trailer50
Decade
1970s
Decade
2000s
IMO in session in London
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Alternative Fuel SourcesThe various parts o the shipping industry - shipowners, shipbuilders and
classifcation societies (the depositories o technical expertise in the industry) -
are actively examining a number o ways to reduce CO2 emissions, both or new
and existing ships, which are primarily linked to reducing uel consumption. In
the longer term, however, the shipping industry is also exploring a number o
alternative uel sources to help reduce CO2 emissions.
Renewable energysources, such as wind and solar power, may have a place in
helping to meet some ancillary requirements, such as lighting on board ships.
However, they are not practical or providing sufcient power to operate ships
main engines (the huge physical size o ships should not be underestimated).
Fuel cells may be a possibility or new ships in the very long term, although
they are currently too limited in range to oer a viable solution. Even nuclear
propulsion or merchant ships is technically possible, although saety and
security implications and support inrastructure costs would require serious
consideration.
The current assumption, thereore, remains that ships will continue to burn
ossil uels or the oreseeable uture, and that the most signifcant means o
reducing CO2 emissions will be achieved by urther improvements in efciency
across the entire transport chain.
Liquid Natural Gas (LNG) produces lower emissions, and could be a solution
or some short sea trades i supply inrastructure can be developed. Thirdgeneration biofuels might conceivably provide a possible alternative although
there is, o course, considerable public debate about the net environmental
costs (and social eects) o the wider use o such uels.
The International Chamber o
Shipping (ICS) is the principal
international trade association or
merchant shipowners, representing
the global shipping industry at IMO
and other inter-governmental ora
that impact on the industry. ICS
membership comprises national
shipowners associations rom 36
nations representing all sectors and
trades and over 80% o the world
merchant eet.
International Chamber o
Shipping
38 St Mary Axe
London EC3A 8BHTel + 44 20 7090 1460
www.ics-shipping.org
www.shippingacts.com
6
The consensus o opinion within the
global industry is that it will be possible
or shipping to reduce CO2 emitted
per tonne o cargo transported one
kilometre (tonne/km) by 20% between
2005 and 2020, through a combination
o technological and operational
developments, as well as the introduction
o new and bigger ships, designed to
the new IMO Energy Efciency Design
Index. This is a signifcant challenge given
that there have already been substantial
improvements in the efciency o ships
engines.
In the longer term, depending on
technological developments which at the
moment cannot be ully anticipated, the
industry believes it should be possible
to deliver even more dramatic emission
reductions (although or the oreseeable
uture shipping will remain dependent on
ossil uels).
Although the shipping industry is already very
energy efcient, additional improvements to
hull, engine and propeller design are expectedto produce urther reductions in uel
consumption. There may also be possibilities
or the better utilisation o waste heat.
The increasing size o many ships is also
expected to improve uel efciency. In
addition, operational measures (e.g. better
speed management throughout the course
o a voyage) are also expected to reduce uel
consumption and are addressed in detail by
the new Ship Energy Efciency Management
Plan that has been made mandatory by IMO.
Shipping companies have a very
strong incentive to reduce their
uel consumption and thus reduce
their CO2 emissions: bunker costs
represent an increasingly signifcant
proportion o ships operational
expenses, having increased by about
300% in the last 5 years.
There is every expectation that
marine bunker prices will remain high.
Furthermore, the cost o ships uel
is expected to increase by a urther
50% as a result o the increased use
o (low sulphur) distillate uel that
will ollow the implementation o the
new IMO rules (MARPOL Annex VI) that
will apply globally in Emission Control
Areas by 2015.
How is Shipping Reducing its CO2 Emissions?