More climate protection in the shipping sector

International shipping has not been included in emissions trading up to now. Although shipping emissions are steadily increasing, there is no system – either on EU or global level – that regulates the level of its greenhouse gas (GHG) emissions.

Without policy measures to counter them, it is to be expected that the GHG emissions of the EU from shipping will more than double by 2050 compared to 2010. The reason for this is the expected increase in international fuel sales. Up to now the steadily increasing fuel prices have not led to vessel owners making sufficiently investments in more efficient technologies although the fuels significantly influence the amount of overall operating costs and the fuel savings counterbalance the necessary investment costs.

The EU is now planning a first step in the regulation of GHG emissions from shipping: The GHG emissions of bunker fuels – i.e. fuels for large diesel engines that are produced from the residue of petroleum refining – are to be reduced to 40 per cent by 2050 compared to 2005. Therefore from 2018 onwards all large vessels arriving at harbours in the EU have to record and report their CO2 emissions.

Effective protection: a trading scheme for emission rights

Oeko-Institut has been analysing climate protection measures in the shipping sector for many years. The researchers at the institute appealed to the United Framework Climate Change Conference in Copenhagen in 2009 to incorporate shipping in international agreements. To this end, they presented a report which shows that efficiency improvements could reduce the emissions of the shipping sector by 25 per cent and save costs at the same time.

Oeko-Institut has also been involved in the design of further steps currently planned on EU level. On behalf of the German Federal Environment Agency and in cooperation with CE Delft and Tim Bäuerle, researchers at the institute conducted the research project “Analysis and further development of climate protection measures in shipping taking into account the current developments on international and European level” (FKZ 3711 45 104), analysing diverse related questions therein.

One of the results of this research project is a discussion paper in which different economic instruments – two different compensation funds, an emission trading scheme and various tax measures – are evaluated in terms of efficiency and effectiveness. From the viewpoint of the researchers, a carefully designed emission trading scheme is considered the best option for increasing climate protection in the shipping sector. This scheme would set an upper limit (cap) for CO2 emissions of the shipping sector and a corresponding number of emission allowances would be sold. The revenues from the sale of emission allowances could then be invested in climate protection measures.

In ongoing projects Oeko-Institut is also providing the German government with expert advice on climate protection in the shipping sector.

Goal: a global scheme for reducing CO2 emissions

Stricter measures for regulating GHG emissions on EU level – as the European Commission wants to introduce in the medium term – could substantially reduce shipping emissions since a fifth of all trips by ships worldwide leave or travel to harbors in the EU. However, an EU-wide solution of this kind constitutes, in Oeko-Institut‘s view, only an intermediate step and must be a driver towards a global regulation.

The EU is also striving for an expansion of efforts on international level under the aegis of the competent organisation – the International Maritime Organization (IMO) of the United Nations. Its task is, among other things, to reduce the environmental pollution caused by shipping vessels. In 2011 it introduced binding energy efficiency standards for new vessels (Energy Efficiency Design Index – EEDI), on which basis fuel consumption should be decreased and fuel efficiency increased. But to really achieve improvements, existing vessels also have to be incorporated in energy efficiency measures. In addition, further steps are needed that are internationally effective in reducing the emissions of all operating vessels.

Further information: Discussion papers on shipping

• Greenhouse gas emission reduction targets for international shipping – DISCUSSION PAPER (19 March 2015): The latest report of the Intergovernmental Panel on Climate Change suggests that in 2050 global greenhouse gas emissions need to be 40 to 70% below their 2010 levels in order to prevent a global temperature increase of more than 2°C compared to pre-industrial levels. However, the third greenhouse gas study of the International Maritime Organization projects shipping emissions to increase by 50 to 250% by 2050. This would result in an increase in the share in global emissions from the current level of 2 to 10% if the rest of the world is on a path towards the 2°C target. Taking into account that reducing emissions globally is more cost-effective when all sectors contribute and that shipping has significant technical and operational potential to reduce emissions, we analyse potential greenhouse gas mitigation targets for the shipping sector and the extent to which these targets can be achieved by efficiency improvements only. Download Discussion paper

• Further technical and operational measures for enhancing the energy efficiency of international shipping – Environmental Aspects – DISCUSSION PAPER (7 July 2014): Four measures to enhance energy efficiency and to reduce fuel consumption of ships are currently under discussion in the International Maritime Organization (IMO): the US proposal, the Annual Energy Efficiency Operational Index (EEOI) proposal, the Individual Ship Performance Indicator (ISPI) and the Fuel Oil Reduction Strategy (FORS). This paper describes the four measures and analyses them, focusing on their expected environmental impact in terms of CO2 emission reduction as well as their interaction with potential future market-based measures. To illustrate the differences between the four measures, quantitative examples for three virtual ships are presented. Download Discussion Paper

• Monitoring, Reporting and Verification of CO2 emissions from ships. Design options, their feasibility and implications – DISCUSSION PAPER (26 September 2013): The European Commission plans to introduce a monitoring, reporting and verification system for marine vessels as an initial step towards global or regional policies that would limit greenhouse gas emissions from maritime shipping. The discussion paper analyses the relationship between monitoring options and the possible policy measures. Additionally, different aspects of the monitoring, verification and reporting procedures are discussed in detail. The paper presents the advantages and disadvantages of monitoring options in particular with regard to the future development of policy instruments. Download Discussion Paper

• Comparison of GHG contribution for a climate fund and an Emissions Trading Scheme in the shipping sector – DISCUSSION PAPER (26 September 2013): Several options for market-based mechanisms were proposed to reduce emissions from international shipping. Two of them are presented and compared in this paper: an Emissions Trading Scheme (ETS) and a GHG fund generated by a GHG contribution on bunker fuels. The authors find that both proposals are similar in many aspects, such as coverage, equal treatment of all ships, eligibility to receive funding from the revenues generated only to Parties of the scheme, administrative efforts and the need to define quality requirements for offset credits. A major difference, though, is the amount of revenues generated and their envisaged uses. The amount of revenues generated by the GHG contribution is substantially lower than the revenues generated by the ETS. As long as the funding of offset projects is the predominant use of the GHG fund, the principle of “common but differentiated responsibilities” (CBDR) cannot be addressed. Furthermore the incentives to reduce emissions in the international shipping sector itself are higher in the ETS case. Download Discussion Paper

• The GHG fund and the ETS: finding common ground – DISCUSSION PAPER (29 August 2013): Two market based mechanisms have been proposed by EU countries to address the climate impacts and reflect the principle of common but differentiated responsibilities: a GHG Fund and an Emissions Trading Scheme (ETS).This discussion paper concludes that the differences between the two are primarily due to differences in design, and not to differences in principle. Both systems can be designed to have similar costs to industry, including administrative costs, similar environmental effectiveness, and yield a similar amount of revenue for other purposes than offsetting shipping emissions. Differences remain in short term price volatility. Download Discussion Paper

• EU policies to address maritime GHG emissions – Analysis of the impacts on GHG emissions – DISCUSSION PAPER (July 2012): The EU Commission committed itself to include emissions from shipping into the existing EU reduction commitment if no international agreement was achieved on a global level. To this aim the EU Commission is currently considering different regional policy options in an impact assessment. In this paper the impact of these policy options on GHG emissions has been analysed. We conclude that a carefully designed emissions trading scheme (ETS) is the best option from an environmental point of view, mainly because of an overall emission cap. Download Discussion Paper (on Website of the Umweltbundesamt)