Supply chain decarbonisation deliberations polarising debate

Discussions on the decarbonisation of shipping, in particular, and the supply chain, in general, have intensified since the International Maritime Organization (IMO) adopted the latest maritime transition rules in November.

Cypriot maritime stakeholders came together in an intense debate, that is being replicated across the shipping community, with the Cypriot Maritime minister Vassilios Demetriades hosting a discussion on the inclusion of the maritime sector into the European Union (EU) Emissions Trading System (ETS), that included a Member of European Parliament (MEP), the deputy director general of DG CLIMA, three ship owners and two environmental NGO’s.

Discussions in the Cypriot debate addressed a number of issues, including whether the EU ETS was an effective tool for reducing carbon from the maritime sector; what would be the geographical scope of the ETS; preventing the so-called carbon leakage phenomena and, finally, the principle that the polluter pays.

Demetriades introduced the Cyprus Government seminar with the assertion that the emissions debate centres around the development of new technology and the will to adapt to new innovations.

He added that “For Cyprus, it is vital that stakeholders from across the maritime industry engage collaboratively with regulators and NGOs alike. This is why we want to facilitate dialogue which provides a collective response to the European Commission’s public consultation regarding its proposed ETS, rather than simply submitting our own views.”

Regulators opened the discussions with MEP Magdalena Adamowicz arguing that there are “Diverse views of what is possible and what is necessary.”

The MEP argued that the EU ETS would sit alongside the IMO’s regulations when they come, she pointed out that the ETS is “not a silver bullet”, but that the EU “must encourage a wide range of new technology, which will need a lot of investment in infrastructure.”

Clara de la Torre, the deputy director general of DG CLIMA, argued that the ETS will “boost demand for sustainable fuels.” De la Torre went on to say that the ETS is a useful tool for reducing emissions and that there had been “a 30% fall in emissions since 2005” as a result of the ETS.

Both the regulatory representatives understood and acknowledged the failure of the introduction of the aviation sector into the ETS, which had raised tensions with trading partners and within the industry, ultimately forcing the EU to include only intra-EU emissions from Aviation in its ETS.

Shipowner Andreas Hadjiyannis, from Cyprus Sea Lines, argued that while the ETS can incentivise change, some 200 years after the industrial revolution there is no pollution reduction culture. For Hadjiyannis the technology of tomorrow, such as ammonia as a fuel, will not help the ships operating today.

“We need to be pragmatic,” he implored, adding that it is far more difficult to decarbonise shipping than land-based industries.

Captain Alfred Hartmann, the owner of a 120-ship fleet that trades only 6% of the time within EU waters; argued that shipping is different from other industries, it has the lowest carbon emissions by tonne mile and has reduced vessel emissions by 30% compared to 2008 through international regulations introduced by the IMO.

In Hartmann’s opinion, the only way to decarbonise shipping is through innovation and that means research funded by a US$5 billion shipping fund, proposed by the industry, which would collect the money through the sales of bunker fuel.

“There is nothing to be gained by including shipping in the ETS, it will only increase the income of European countries,” argued Hartmann, who concluded that the regulators were “punishing the [maritime] sector for not using zero carbon fuels that are not available yet.”

Ship owners were adamant that the wider society, represented by the EU, was punishing shipping rather than tackling a climate change emergency.

A charge that both regulators at the virtual meeting emphatically denied arguing that climate change was a global problem that would be solved only through partnerships between regulators and industry.

Philippos Philis, MD at Lemissoler Navigation was concerned about ‘carbon leakage’. Where companies based within the EU seek refuge from the ETS outside of the union to avoid the costs of compliance. He said argued, “Any [carbon trading] system must be scaleable and aligned with IMO carbon measures.”

However, shipowners also sought to shift the focus from the vessel operator to the charterers and ultimately the consumer, intimating that the EU was aiming its ETS at the wrong targets.

Moreover, Philis added that at the moment ships of 5,000gt and over were included in the ETS and that this missed the large number of smaller vessels that could be added to the system, suggesting that all vessels above 100gt are included in the ETS.

In addition, “Monies collected through the ETS should be returned to the industry to prepare a research & development fund that would finance the transition to low carbon fuels and as an incentive to early movers.”

Faig Abbasov, shipping director at environmental NGO Transport & Environment (T&E), tackled the question of who bears the responsibility for maritime pollution. According to Abbasov, “The system needs to be designed so that it passes the costs on to the consumer, through ship operator, charterer, shippers to consumers, who will then push for cleaner ships.”

On the question of regulatory scope, T&E believes that all intra-European cargo should be included and one of either all inbound cargo or all out bound cargo.

In conclusion, the environmental NGO’s wanted to see a system that saw a more rapid transition to a low or zero carbon industry, while the regulators are also of this mind their focus is on the EU’s Green Deal and meeting the requirements for the Paris accord.

Shipowners felt attacked and were keen to undermine the ETS either by pointing to the past failures in aviation, or to point out that the regulators had targeted the wrong group. They said owners should not be held responsible for the pollution, but it is the charterers who should demand better ships and the consumers should pay.

It was informative that Hadjiyannis felt that methane was not a significant problem for the industry, believing that the high-pressure LNG would cut all methane slip from engines and reduce carbon emissions. A position that has been questioned by a number of technicians.

No doubt, LNG will increasingly enter into this debate as the transition progresses. It is a debate that will run for a while longer, but it is hard to imagine in the present climate how ship owners can persist with the view that they have part to play in the decarbonisation of the industry. It is not a position held by many of the large container operators, who are among the worst polluters, according to the IMO’s Fourth Greenhouse Gas Study, released earlier this year.

Source: Container News