Memorandum submitted by The Chamber of Shipping (EFS02)

The Chamber of Shipping is the trade association for the UK shipping industry, working to promote and protect the interests of its members both nationally and internationally. With 140 members and associate members, the Chamber represents over 860 ships of about 23 million gross tonnes and is recognised as the voice of the UK shipping industry.

 

Summary

1. In the climate change debate shipping should be regarded as the best available solution to the global need for transportation. Shipping is the most energy-efficient mode of transport and the backbone of global trade. Seen in light of the enormous volume of goods carried by ships, the CO2 emissions from shipping is small. The reason for this is that shipping for many decades (even without regulation) has had a strong market-driven incentive to focus on reduction of fuel consumption. However, the Chamber of Shipping fully acknowledges the need for further reduction of air emissions from shipping and believes the way to achieve environmental protection must be found in a holistic manner. To be successful, such an approach should take into consideration the availability of technology to reduce emissions, the need to encourage innovation and the economics of world trade.

 

2. The recent revision of Annex VI of the International Maritime Organization's International Convention for the Prevention of Pollution from Ships (MARPOL), delivers an exceptionally ambitious programme for the reduction of emissions to air, of what may be termed 'classical pollutants'. It must be remembered that agreements to reduce pollutants such as sulphur oxide (SOx) and nitrogen oxide (NOx) may have a negative effect on the simultaneous efforts to reduce CO2 emissions. This may arise either from technical 'trade-offs' in engine efficiency, or from the significant additional costs of cleaner fuels, which may lead to a modal shift to other less carbon-friendly transport modes. Net environmental benefit for the long term must therefore be the objective of any future government policy.

How significant is global shipping's contribution to climate change? How is this projected to change in the future?

3. Precise figures concerning the contribution of international shipping to global carbon emissions are hard to come by. A variety of studies put the figure at anywhere between 1.5 and 5%. The IMO and most scientific commentators agree that a figure in the range 2-4% is realistic. While a precise figure would be helpful for measurement purposes, it is not necessary to wait for this before taking policy decisions. This is for two reasons; firstly, even at the higher end of the estimates of shipping's contribution to carbon emissions, when seen in the context of the enormous amount of work performed, shipping remains by far the most efficient way to move bulk cargoes of goods and this position is unlikely to be usurped in the medium term. Secondly, despite its excellent carbon performance, the shipping industry is absolutely committed to reducing its carbon footprint, in line with society's expectations.


4. Looking at future trends, it is likely that, in absolute terms, emissions from shipping will grow steadily for the foreseeable future despite efforts to improve the carbon performance of individual ships. This is because shipping is a service industry, which responds directly to growth in world trade (without which expansion in the world economy could not occur) and that growth is likely to be greater than the achievable carbon reductions. It is worthy of note that no serious politician or government body has ever called for shipping's carbon emissions to be reduced at the expense of slowing down the world economy. Any reductions in ships' carbon emissions must therefore be achieved in a way that permits growth in the volume of goods shipped by sea.

 

 

How should the UK's share of international maritime emissions be measured and included in UK carbon budgets? How fast could this be done?

5. Measuring the UK's share of international maritime emissions is extremely difficult, with almost all of the options failing to provide an accurate representation. Do we, for instance, wish to measure the relative contribution of the UK shipping industry (however defined) to that of the global shipping industry? Or do we wish to measure the amount of carbon generated by shipping in order to provide the UK with the goods and services required? Or should the UK accept responsibility for all carbon emitted by ships within its territorial waters? When considering the most appropriate methodology for allocating the share of global shipping emissions to the UK's Carbon Budgets, it should be remembered that shipping is the only truly international industry. Not only will ships make multiple calls in any one voyage, but they will often carry cargo destined for onward transport to a number of other countries. This makes allocating emissions extremely difficult and carries with it the distinct possibility of introducing error into the UK's overall Carbon Budgets.

 

6. When considering questions of measurement, the other side of the coin, enforcement, must also be borne in mind. The UK Climate Change Bill, the Kyoto agreement and the EU Emissions Trading Scheme have all excluded shipping for the same reason; it is virtually impossible to legislate for such a mobile and international industry, except at the global level. For any country to impose unilateral legislation on a global marketplace is to deliberately impose additional costs on its own stakeholders, which will not be shared by their competitors.

 

7. It is unclear to the Chamber what mechanisms for the enforcement of any national measures will not be capable of being easily and legitimately avoided by operators. This means that the total emissions reductions will, in practice, be less and may paradoxically be even higher; if legitimate avoidance measures result in longer voyages. For instance, if the UK were to impose a carbon charge on a ship's final voyage into the UK, a ship coming from China may decide to make an otherwise unnecessary call in France or Ireland in order to minimise the technical 'final voyage' into the UK.

 

8. If the Government were clear that it only wished to measure the UK's contribution; a position that the Chamber of Shipping could support; to international shipping emissions, this could be done as soon as an agreed methodology was decided upon. A 'bottom-up' approach (i.e. obtaining data from individual ships) would yield more accurate data than a 'top-down' (e.g. averages of bunker fuel sales etc) approach, but it should be recognised that this would place a considerable burden on both shipowners and administrations.

 

What are the prospects of international agreements to control and reduce carbon emissions from global shipping, or to bring it within wider emissions trading schemes? How well is the UK Government playing a role in developing such agreements?

9. Measurement and control mechanisms for carbon are being actively discussed within the International Maritime Organization (IMO). Its Secretary General has announced his wish for the body to have agreed upon a concrete package of proposals in readiness for the UNFCCC Conference of the Parties (COP15) meeting in Copenhagen in 2009. Meanwhile the EU have indicated that, should IMO not deliver a satisfactory package of measures by that date, they will then look to include international shipping within the EU ETS by 2012. It is therefore clear that shipping will be included within some form of international / regional regime within a very few years.

 

10. The UK Government has played an active and constructive role in the negotiations at IMO and its policy position reflects well the realities of dealing with this particular sector. The Chamber of Shipping is keen that the UK Government should remain committed to an international solution delivered through the IMO. While we accept that measures delivered either regionally or unilaterally will always be an option open to governments, we would stress that these, especially the latter, should be seen as options of last resort, both in terms of effectiveness and ease of administering. To that end we would consider the inclusion of international shipping in the UK Climate Change Bill (while negotiations are building to a climax in the international arena) to be a retrograde step, and one likely to hinder rather than help the broader discussions.

 

11. Emissions trading and market-based instruments (MBIs) are politically very sensitive topics within the IMO. A significant number of developing, non-annex 1 countries are of the opinion that they are not duty bound to seek carbon emission reduction measures through the IMO. While they are not unwilling to discuss measures to improve operational and technical efficiency, they are extremely unwilling to contemplate the introduction of MBIs. The Chamber of Shipping recognises that MBIs must play a part in efforts to reduce the sector's carbon footprint. it is actively working with its international parent body; the International Chamber of Shipping (ICS); and sister associations throughout the world, to develop an approach that takes account of these concerns, while maintaining the necessary level playing field, ensuring that any solution does not discriminate between national shipping registers.

 

What are the prospects for developing new engine technologies and fuels, as well as more fuel-efficient operations? What more could the Government do to assist these developments?

12. Shipping is a mature technology and the scope for improvement by full application of existing technologies is limited. Ships engines have improved steadily since their inception, while hull and propeller designs are almost fully optimized. New hull coatings may provide significant savings in the order of 5% - 10%. While there is always room for improvement (and much is dependent on what constitutes an 'existing' ship), it is thought that a modern, well-maintained vessel may be able to improve its performance by about 5%, if cost/benefit is considered immaterial. Given that fuel costs account for 30-50% of total voyage costs, it should be recognised that shipowners have long had every possible commercial incentive to optimise fuel efficiency.

 

13. New technologies will certainly come on stream in time. But they are not available now, and, no matter how many prototypes or concepts are developed, owners cannot be expected to invest in anything other than robust, proven technologies that are commercially available. However, owners are keen to see new technologies emerge and are willing to offer ships to assist in trials and development processes. Again it should be stressed that, given the direct link between fuel efficiency and carbon emissions, shipowners also have a direct commercial interest in the development of fuel saving technologies.

 

14. Alternative fuel sources may also have a role to play and bio-fuels can be used in ships engines. However, given the volume of fuel used by the shipping industry and the current uncertainty surrounding the net benefit of bio-fuels, the industry would consider it prudent for legislators to better assess the impact of a substantial take-up of bio-fuels by such a large consumer as international shipping before reaching any decisions.

 

15. Fuel cells, solar-power, wind kites etc are all theoretically possible alternative technologies, but they are best viewed as supplementary power sources rather than alternatives to the main propulsion systems on board. Nuclear power is technically feasible for ships and there are examples of nuclear-powered merchant as well as military ships. Issues of security and acceptability are, of course, dominant in that particular debate.

 

16. Reducing the speeds at which ships travel is often seen as a 'quick win' in terms of reducing carbon emissions from ships. While it is true that reducing ships' speed has a dramatic effect on fuel consumption, the full range of underlying factors which have hitherto determined the speed at which ships generally travel remain relevant. It should be noted that shipowners / operators have relatively little say over the speed of their vessels as this is invariably determined by the charterer. Any reduction in ships' speed would therefore require the consent of major customers, as they would in general have to wait longer to receive their goods. Shippers seek to maintain supply continuity and time of delivery is an essential competitive parameter. To maintain an acceptable service at slower speeds would mean an increase in the number of ships required; negating much of the fuel savings otherwise expected. Furthermore, very little can be achieved on traditional slow-steaming bulk carriers. For ferries, travelling time for the passenger is a key issue in the extensive competition with other (less carbon efficient) transport modes; they should also be considered as a bridge between areas forming essential and reliable infrastructure. Any policy decision requiring vessels to slow down would need to be underpinned by a robust and detailed analysis of all the implications of such a measure.

 

What are the effects of shipping on UK air quality and public health? How well is the Government tackling this, and what more could it do?

17. The need to improve the emissions or air pollutants from ships has long been recognised. Indeed, no sooner had the IMO's MARPOL Convention Annex VI entered into force than efforts were made to revise it. The revised Annex VI is an ambitious and far-reaching set of proposals which represent a major stretch target for both the shipping and refining industries.

 

18. The revision process is almost complete with the IMO's Marine Environment Protection Committee (MEPC) 58th session set to agree a draft text at its meeting next month. This draft text, already universally accepted at MEPC 57, is almost certain to be adopted unchanged and will enter into force by spring 2010. It is considered to be virtually impossible for either the shipping or refining industries to meet more exacting standards. The UK Government played a key role in reaching this agreement and, as a signatory to MARPOL Annex VI, will be bound by the changes. In the Chamber's opinion, further efforts by the UK government to address the issue of air pollution from ships should now be focused on ensuring that the review of the EU Sulphur Content of Liquid Fuels Directive mirrors the text of the Annex VI in terms of reduction levels, implementation dates and areas of application.

 

19. As noted at the top of this paper, care must be taken to ensure a holistic approach. An unwelcome consequence of the provisions of Annex VI for shipping in northern Europe will be an effective doubling of bunker fuel prices from 2015. It is our concern that this will lead to 'modal back-shift', ie a decrease in the amount of intra-European sea-transport and a corresponding rise in the use of road transport. Should this occur it will clearly have a detrimental impact on overall carbon emissions. We would therefore urge the UK Government to work with its European colleagues to develop a policy that implements the revised MARPOL Annex VI, but seeks to minimise any subsequent modal shift caused by the introduction of those provisions.

 

Additional Industry Comments

20. The shipping industry has been working through the IMO, EU and national governments on how best to reduce carbon emissions for some time. As a result, it may be helpful for the Committee to note the broad principles which we feel will deliver a mechanism that delivers its environmental objectives, while maintaining the competitiveness of the industry.

 

21. Firstly, and perhaps obviously, industry is only interested in delivering a solution that is effective in contributing to the reduction of total global greenhouse gas emissions.

 

22. In order to achieve this and avoid evasion, such a system must be binding and equally applicable to all Flag States.

 

23. Across all maritime legislation, the shipping industry consistently argues for a goal-based (as opposed to a prescriptive) approach, as being better suited to such a diverse industry and also allowing ship owners the flexibility to meet their environmental responsibilities in the most cost-effective manner.

 

24. Linked to cost-effectiveness are considerations that seek to limit or at least minimise competitive distortion, and that, within the parameters of sustainable development, do not penalise trade and growth nationally or globally.

 

25. It has been suggested that shipping suffers from the lack of a Formula 1 to lead and drive technological improvements. Whereas the aviation industry has benefited from the civilian application of military technologies and also from the space-race, shipping has had no such high-end sector motivated by a completely independent set of cost considerations. We would therefore suggest that any control measures for shipping should actively support and encourage the promotion and facilitation of technical innovation and R&D in the entire shipping sector.

 

26. In addition, it is clear that any regulatory mechanisms adopted must be flexible in order to accommodate likely future technologies in the field of energy efficiency.

 

27. Finally in our checklist, the industry would look to ensure that the 'back-office' side of any regulation is given due thought. For any system to be workable, and for true environmental benefit to be gained, it is clear that the approach must be practical, transparent, fraud-free and easy to administer.

 

Domestic Shipping

28. We note that the subject of this inquiry is the possible inclusion of international shipping emissions within the UK Carbon Budgets. However, the Chamber has concerns that emissions from domestic shipping (which can take place as part of an international voyage) should be properly attributed. We are unclear how this will be done. For example, it is not clear how foreign-owned competitors, which have had the opportunity to refuel abroad before making UK domestic voyages, will be treated? We would ask the Committee to satisfy itself that the methodology for including domestic shipping (and its definition) within the Climate Change Bill are likely to achieve the stated objectives.

15 September 2008