SAFETY4SEA: There is currently a debate on speed optimization vs speed reduction. Could you explain us how the confusion between those two terms arose?
Harilaos Psaraftis: Just prior to MEPC 72, the meeting in which the Initial IMO Strategy was adopted (April 2018), Chile and Peru objected to the use of the term “speed reduction” as a possible greenhouse gas (GHG) emissions reduction measure, on the ground that this may constitute a barrier to their exports to Asia (and particularly to those that involve perishable products such as agricultural products and others). They suggested the use of “speed optimization” instead.
In a compromise solution, both wordings were included in the IMO decision text. However, what is meant by either “speed optimization” or “speed reduction” in that text is far from clear and hence is subject to different interpretations.
S4S: You have recently conducted a study explaining the key differences between these two terms. What are the key findings of the study?
H.P.: Yes, this was a paper about the speed limit debate, presented at the IAME 2019 conference in Athens in June. In it, I explained that speed reduction can be the outcome of several very different policies:
(a) it can be caused by a mandatory speed limit,
(b) it can be the voluntary choice of ship operators as a result of depressed market conditions and/or high fuel prices,
(c) it can be the outcome of other, non-prescriptive policies, such as for instance imposing a bunker levy.
Confusion on which of these cases pertains not only may prevent one to examine the pros and cons of the various options, but it may also shift regulatory focus. Focusing on speed reduction as an outcome (for instance by imposing speed limits) and not on the factors that can induce, it makes a rational policy decision on the subject more difficult to achieve.
S4S: In your view, what needs to be further studied/examined in future with regards to slow steaming? Is it an effective measure for all type of vessels?
H.P : There is no question that speed reduction can lead to GHG emissions reductions. However, if speed reduction is implemented via speed limits, it will create many distortions in the market and more importantly it will hardly incentivize the development of the energy-efficient technologies and low carbon fuels that are necessary so as to meet the IMO GHG emissions reduction targets. As you know the targets are very ambitious: at least 50% reduction of GHG emissions by 2050 and at least 40% reduction of carbon intensity by 2030, both with respect to 2008.
S4S: The study examines whether reducing speed by imposing a speed limit is better than doing the same by imposing a bunker levy. So, what are your suggestions to ship operators?
H.P.: First I note that a bunker levy belongs to the class of Market Based Measures (MBMs). MBMs are not yet on the table at the IMO. They are potentially included in the set of medium-term measures, i.e. agreed to and implemented from 2023 to 2030. “Potentially” means that MBMs may or may not be examined. This of course does not prevent us from looking at this option. My paper compared the speed limit option with the option of imposing a bunker levy. A levy would implement the “polluter pays” principle and would have both short-term and long term impacts. The short-term impact will be GHG emissions reductions via slow steaming and the long-term impact will be the development of energy saving technologies and low carbon fuels that are currently non-viable. With speed limits, you will get no similar long-term impact, whereas the short-term GHG emissions reductions that will be achieved will be accompanied by significant problems.
S4S: What did IMO discuss about speed measures at the last MEPC and what is considering for the next Committees for enhanced energy efficiency?
H.P.: The speed limit option was discussed at latest IMO meeting, MEPC 74 (May 2019), among other measures. There was a big buildup for that meeting and there were even demonstrators in front of the IMO building that called for speed limits. To the disappointment of its advocates, the measure was not endorsed, as many IMO stakeholders objected to it. But MEPC 74 did not reject it either, so the measure is still alive, at least theoretically.
I think the IMO should soon decide what to do on speed limits. MEPC 74 also discussed other short-term measures, including strengthening SEEMP and moving faster with the implementation of EEDI. In my opinion EEDI was an ill-designed index to start with and you will not see significant GHG emissions reductions because of EEDI. Strengthening SEEMP looks more interesting but further work is needed in my opinion.
S4S: More than 100 shipping companies supported mandatory speed limits for shipping at MEPC74. What is your view on that development? Do you think that this measure will help industry significantly to succeed in its efforts toward decarbonization?
H.P.: Note first of all that the International Chamber of Shipping (ICS), the main shipping industry association at the IMO, is not an advocate of speed limits. In my opinion the main reason that some shipping companies are for speed limits is that freight rates will increase as a result of the contraction of the shipping supply curve. This will surely bring some short-term benefits, but the distortions it will create are significant.
For instance, if a common and uniform speed limit is imposed, the limit may be superfluous for some ship types and sizes and binding for some others, depending on the state of the market, the price of fuel, and a host of other parameters. In depressed market periods the speed limit may be superfluous, and in boom market periods the limit would force some ships (likely at the large end of the scale) to slow down whereas others do not. A speed limit may also be superfluous in one route direction and binding in the other direction. If, on the other hand, speed limits are ship size-specific (or maybe even ship type-specific, route-specific or even direction-specific), this would make the whole exercise an administrative nightmare. Also, the freight rate increase is likely to be short-lived.
In the long run, the expanded fleet that will have to be built to sustain trade throughput under a speed limit regime would be larger than a fleet without speed limits. This would ultimately result in fleet overcapacity and a subsequent drop in freight rates. A speed limit regime would exhibit reduced flexibility to further slowdown whenever the market becomes depressed, and this may result in more ships laid up. Building more ships under a speed limit regime would also increase emissions due to shipbuilding and recycling (lifecycle emissions) and may have adverse implications on ship safety.
S4S: Apart from speed measures, what are your suggestions to industry stakeholders for reducing emissions from shipping? What could be the most effective short term and long term measures?
H.P.: My view on this subject is perhaps hawkish. I believe that MBMs and specifically a significant bunker levy are the only solution. If society does not like fossil fuels and cannot outright ban them, it should put a price on their use. So long as fossil fuels are cheap, people will use them. All these alternative low carbon or zero carbon fuels and other energy saving technologies that are being discussed will not happen by themselves. They need economic incentives to be developed.
Of course, designing an appropriate MBM needs some analysis, and at DTU we are just starting such a project, called MBM-SUSHI (sushi being an acronym for sustainable shipping). I realize that at the IMO interest in MBMs is currently very slim, mainly for political reasons, and I can only hope that at some point the situation is reversed.
S4S: What is your wish list for the industry and/or regulators and all parties involved towards environmental protection?
H.P.: My main wish is that politics be put aside, even though I think this is difficult to impossible. To give you one example, the main argument of developing countries such as Brazil, India, Saudi Arabia and others on GHGs is based on the so-called CBDR principle. China was in that group before, but they have now moved closer to the center.
CBDR means Common But Differentiated Responsibilities and you can trace it back to the Kyoto protocol. CBDR essentially allows these countries to argue that their responsibility to reduce GHGs is lower than that of developed countries. CBDR is one of the guiding principles of the Initial IMO Strategy and is in direct conflict with the principle of non-favorable treatment (ie that all ships be treated equally), which is another guiding principle. So long as CBDR is not circumvented, you will not be able to do much on GHGs.
A related wish that I have is that things at the IMO move a bit faster. I find the current process way too slow (maybe “regulatory slow steaming” is a good term).
There is no question that speed reduction can lead to GHG emissions reductions. However, if speed reduction is implemented via speed limits, it will create many distortions in the market.
MBMs and specifically a significant bunker levy are the only solution for reducing ship emissions.
The views presented hereabove are only those of the author and not necessarily those of SAFETY4SEA and are for information sharing and discussion purposes only.
Harilaos N. Psaraftis, Professor, Department of Technology, Management and Economics, Management Science Division, Technical University of Denmark (DTU). He has a diploma from the National Technical University of Athens (NTUA) (1974), and two M.Sc. degrees (1977) and a Ph.D. (1979) from MIT, USA. He has been Assistant and Associate Professor at MIT from 1979 to 1989 and Professor at NTUA from 1989 to 2013. He has participated in 20 or so EU projects, and has coordinated 3 of them, including project SuperGreen on European green corridors (2010-2013). He has been a member and chairman of various groups at the IMO, and has also served as CEO of the Piraeus Port Authority (1996 -2002). He has published extensively and has received several academic and industry awards. His latest book is entitled “Green Transportation Logistics: The Quest for Win-Win Solutions” (Springer International Series in Operations Research and Management Science, 2016).