Shipping and Climate Change

As somebody who flew a lot for work prior to Tuck (and will continue to do so afterwards), I was really looking forward to learning about issues surrounding air travel and climate change. Unfortunately, the session I was interested in, which was going to be hosted by ICAO (UN agency regulating global civil aviation), morphed into one hosted solely by IMO (UN agency regulating global maritime shipping). Somewhat of a let down, but I decided to attend to see what I could learn.

The session featured representatives from the IMO, Maersk (a large global shipping conglomerate), ICS (International Chamber of Shipping, a trade group representing ship owners) and a representative from the government of Cyprus (which, along with countries like Panama and the Bahamas, tends to register ships in disproportionate numbers to their size or population).

So, what was the one slide that every single one of them had on their presentation? As you can see below, the shipping industry is practically shouting from the rooftops that they are very carbon efficient on a grams per tonne-km basis.

Transportation Co2

The panelists argue that the shipping industry should only be penalized to the extent of its contribution to global GHG emissions, but fear that shipping might nevertheless be treated as a cash cow in the event of global carbon tax. Perhaps, they are justified, as shipping only accounts for 3% of global GHG emissions, in spite of being responsible for carrying more than 90% of world trade.

The goal of the industry is a 50% CO2 reduction in terms of grams per tonne/km by 2050. They are going to achieve this via a three-pronged approach –

  1. Technical Measures (impacting new ship design, with measures such as Energy Efficiency Design Index (EEDI))
  2. Operational Measures (impacting operations of new and existing ships, with standards such as Ship Energy Efficiency Management Plan (SEEMP))
  3. Market Based Mechanisms (MBM), which place a price on GHG emissions using various approaches such as offsets, Emissions Trading System (ETS), a compensation fund linked to fuel consumption etc.

EEDI and SEEMP are going to become mandatory by 2013, and will be globally applied, regardless of whether ships are registered in the developed or developing world. MBMs are the most controversial, with ship owners preferring a compensation fund vs. ETS and generally preferring that the funds be routed back into the shipping industry for R&D rather than being siphoned off by governments.

All in all, a very interesting session…

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