After farming, soldiering and prostitution, there aren’t many industries that have spanned almost all of human history. From the Phoenicians through to Pax Britannica, shipping is the lumbering giant which keeps things — yes, even globalisation — going. Whilst shipping is, quite frankly, indispensable to our way of life, its cargoes do contribute unashamedly to the ire of 21st-century environmental issues. Currently, the industry accounts for 2.2% of global emissions. This encapsulates both the havoc reeked by air pollution and the reigning, heavyweight, polemic: climate change.

“Strategic disaster is carbon dioxide emissions”

Fuel For The Fires

The maritime world is one of the less well-known and most exciting industries. Whether on a desk at a vibrant City shipbrokers, navigating the Persian Gulf, or anchoring in an entrepot, shipping is fast-paced, ferocious and pivotal. And so it comes as little surprise that with the vast sums of capital swashing around, 2007 figures for the liner industry, (operations and shipbuilding) put the figure at US$436.3 billion. And when capital costs are this big (US$20–50 million for a new build, across a range of sizes (at 2015 prices)) so are the liabilities.

The problem with shipping is that at its beating heart is true capitalism. It is this which causes most of the conflict between shippings main actors: owners and charterers.

Owners are the party that owns the vessel(s) and lease them for periods, as time charters, to Charterers. Charterers hire the vessel but don’t own it. However, because they take possession of the vessel, or a fleet of vessels, for varying lengths of time there is a natural obdurance to actually improving the vessel’s performance. Nevertheless, charterers benefit from having fuel efficient engines because they burn less of those dirty bunker fuels which save them cash. Consequently, they argue and rightly so that it is the responsibility of the owner to upgrade the vessel’s hardware. However, owners, like their landlocked brethren: landlords, want the maximum return for the minimum investment.

It is against this choppy relationship that maritime environmental policy is set. If owners don’t receive any benefits from efficiency, why should they spend any of their cash? This sets the scene for what can only be described as mayhem.

We Can Get Great Deals

The annual Conference of The Parties (COPs) are the main fixture on the United Nations Framework Convention on Climate Change (UNFCCC) calendar to get policy wonks, analysts, development practitioners, and climate scientists together and develop this multilateral regime into something that the international community can be proud of. Being based on the success of the Montreal Protocol (MP), which is the benchmark for multilateral environmental governance, the international community uses the same guiding principles enshrined in the MP’s architecture for the global economy. And it is this intransigence which has resulted in the UNFCCC producing nearly three decades of negotiation deadlock.

The Outlook

Two years after the creation of the Intergovernmental Panel on Climate Change (IPCC), world maritime trade stood at a whopping 4,410 million tonnes, in 1990. 13 years later, that same metric had increased to 9,932 million tonnes. An incredible 140% increase in the volume of goods (dry cargo and finished products) carried by ships. At the regional level, world trade has only gone one way: up!

One-third of the way through 2017, what has the global order achieved vis-a-vis to shipping? The FCCC has still to push through multilateral proposals to regulate the emissions of aviation and shipping, this is despite the International Chamber of Shipping stating that the Durban Platform for Enhanced Action (ADP), at COP-17, was to result in a reduction of 20% of shipping’s emissions by 2020. There was even speculation of an environmental compensation fund, partially linked to the Green Climate Fund. That is a bit of a head-scratch. How can industries gain access to climate finance? Surely this is anathema to market determinism? However, the main shipping institutions (the ICS and the IMO) both hint at a clear preference for market-based mechanisms, such as those enshrined in the Marine Environmental Protection Committee (MEPC).

Durban, however, was six year’s ago. What has happened since? Like most living fossil institutions, the IMO is serious about reducing emissions of NOx, SOx, and particulate matter (PM), and these were tacked on to the end of Annex VI to MARPOL (International Convention for the Prevention of Pollution from Ships, adopted in 1997).

More recently, ship builders and designers have taken hold of the standard. These ‘good guys’ have done what car designers, excluding VW, have done for fuel emissions standards, and applied the same logic to ships. Now, we’re seeing the Energy Efficiency Design Index standards (EEDI) drawn up by the IMO. The EEDI aims to increase fuel efficiency by 30% which is quite an achievement when you consider just how ‘dirty’ these fuels are, there is also talk of ‘speed reduction’ to help address the emissions issue.

Shipping has a long way to go. At current greenhouse gas inventory levels, this sector alone accounts for 1.5% of planetary emissions (~35 gigatons). Yet, taking the period 2000–2007, we can see that shipping moved 80% of the growth in global trade during this period. All said and done, some of the key players are noticing that they have to climate-proof their operations, to an extent, or at least embrace an element of sustainability. Maersk is one such operator. Having launched the Triple-E class, whose name is synonymous with “economies of scale, energy efficiency, and environment improved”, it is the largest box-ship currently navigating the world’s trade lanes. Consequently, the Triple-E class currently consumes 37% less fuel and has achieved an emissions reduction of 50%, per container.

Yet, when looking at the industry’s landscape, what we really see is an institution, the IMO, protecting its members’ interests. Should we really expect to see grand emissions gestures? No. Having spent the best part of a decade deciding how to reduce sulphur emissions (one of the key ingredients in the formulation of acid rain), the IMO stepped up to the plate and did something. Today, the Baltic, North Sea, US East and West Coast (including Hawaii) are protected but there is the talk of extending the idea to Mexico’s coast, The Bahamas, Mediterranean, Japan, the strait of Malacca, and along Norway’s coast to the Arctic.

Technological Breakthroughs

Cleaning up shipping’s image is vitally important to the future of the planet. What’s interesting is ecological modernisation may turn out to be the industry’s saviour. Robert Falkner comments on this.

“…greater economies of scale, as evidenced by international shipping have benefited the industry. Overall, the trend has been: emission reduction and energy saving policies that have been put in place, gradual technological improvements and market innovation have pushed down the costs of low-carbon technology.”

Moving Forward

This post was meant to coincide with COP-22, at Marrakech, unfortunately, things didn’t quite work out. In the run-up to COP-22 the Paris Agreement, the outcome of the Parisian round of negotiations still left unaddressed the thorny issue of international shipping emissions. As I have demonstrated in this article, shipping faces a multiplicity of problems from institutions that lag way behind the shipping 11-year cycle, to innovations in key air quality areas (sulphur and nitrous oxide reduction). Tackling the issue of bunker fuel quality will take time. Heavy Fuel Oil, Marine Diesel Oil, and others like them, will one day be replaced, and with the world’s attention pivoting towards “clean gas” the likelihood of LNG fuelling world trade is a distinct possibility.

Bibliography

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http://marketrealist.com/2015/08/newbuild-vessel-prices-remained-steady-july/