Another hectic year for shipping comes to and end. Approaching towards the last days of 2022, we take a look back at the most important issues regarding shipping decarbonization. Perhaps the most pressing one, the inclusion of shipping in the EU ETS, has troubled the sector. In the meantime, green shipping corridors establish routes that aim to reduce greenhouse gas emissions through alternative fuels and technologies.
EU ETS Maritime: Taxing of shipping emissions from 2024
The two institutions agreed on a gradual introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026.
Most large vessels will be included in the scope of the EU ETS maritime from the start. Big offshore vessels of over 5000 gross tonnage and above will be included in the ‘MRV regulation’ on the monitoring, reporting and verification of CO2 emissions from maritime transport regulation from 2025 and in the EU ETS from 2027.
General cargo vessels and off-shore vessels between 400-5 000 gross tonnage will be included in the MRV regulation from 2025 and their inclusion in EU ETS maritime will be reviewed in 2026.
The Council and the Parliament also strengthened the Innovation Fund. In comparison to the current size of the fund, an extra 20 million allowances coming from the extension of the scope of EU ETS maritime to additional large vessels and inclusion of methane and nitroxides was added. There will be dedicated calls related to shipping’s decarbonization the maritime sector under the Innovation Fund.
Commenting on the upcoming regulation, the Greek shipowners welcomed European Parliament’s Report’s recognition of the commercial operators’ structural role in shipping’s decarbonisation and the need for a sector dedicated Fund.
It is essential that charterers, as commercial operators of the vessels, assume responsibility in line with the “polluter pays” principle
EU MRV & IMO DCS milestones
Some important milestones for the EU MRV and IMO DCS came during the first half of 2022.
The most important milestones are:
- EU MRV: The verified EU MRV annual emission reports for 2021 was to be submitted to the EU Commission by 30 April 2022, and the related documents of compliance should have been on board by 30 June 2022.
- IMO DCS: The 2021 year-end reports for IMO DCS should have been submitted to the verifier by 31 March 2022, and the Statements of Compliance (SoCs) should have been on board by 31 May 2022.
Furthermore, by 31 May, the Statement of Compliance (SoC) on the fuel oil consumption report (FOCR) must have been placed on board.
|DoC on board
|Verified ER submitted to EU Commission by 30 April
|Year-end FOCR submitted to verifier (DNV) by 31 March
MEPC 78-79: Progress made on GHG matters
MEPC 78 was held remotely from 6 to 10 June 2022, and provided many highlights, which included the finalization of technical guidelines for the upcoming EEXI, CII and SEEMP regulations; and further discussions on the revision of the IMO GHG Strategy scheduled for 2023.
Key highlights of MEPC 78:
- Finalization of guidelines for the EEXI, CII and SEEMP.
- Consideration of revisions to the IMO GHG Strategy and future technical and market-based measures.
- Approval of a new sulphur emission control area (SECA) expected to take effect from 1 July 2025, subject to final adoption at MEPC 79 in December 2022.
- Adoption of amendments to MARPOL Annex I and the IBC Code on watertight doors.
- Adoption of amendments to MARPOL Annex II on the Hazard Evaluation Procedure for chemical tanker products.
- Extension of the ballast water experience building phase.
The next meeting, MEPC 79, took place from December 12 to 16, 2022. The most important outcome of the meeting was the designation of the Mediterranean Sea as an Emission Control Area for Sulphur Oxide.
Key highlights of MEPC 79
- Revision of the IMO Strategy for GHG Reduction.
- Candidate GHG Reduction Measures.
- Development of Marine Fuel Life Cycle Guidelines.
- Discussion on Carbon Capture Technologies.
- Revised Guidelines on the Energy Efficiency Design Index (EEDI).
- Discussion on Risks of EGCS Discharge Water.
- Proposal to Designate the North-Western Mediterranean Sea as a Particularly Sensitive Sea Area.
Mediterranean Sea to become Emission Control Area from 2025
During MEPC 79, IMO decided to designate the Mediterranean as a Sulphur Emission Control Area (SECA), marking a significant step forward towards cleaner air in the whole region.
In such an Emission Control Area, the limit for sulphur in fuel oil used on board ships is 0.10% mass by mass (m/m), while outside these areas the limit is 0.50% m/m.
The amendment is expected to enter into force on 1 May 2024, with the new limit taking effect from 1 May 2025.
Commenting on this decision, NABU welcomed “a shift to cleaner fuels and improved air quality for almost 150 million people around the Mediterranean.”
This decision is a huge step forward towards cleaner shipping. The rising fuel quality requirements not only serve to clean up the air substantially but likewise encourage energy efficiency and climate measures in shipping
MEPC 75 MARPOL Annex VI Amendments enter into force
The 75th session of the IMO’s Marine Environment Protection Committee (MEPC 75) took place remotely from 16 to 20 November 2020, and some of the amendments entered into force on 1 April 2022.
#1 Strengthening of the Energy Efficiency Design Index (EEDI) “phase 3” requirements: This amendment brought forward the entry into effect date of phase 3 from 2025 to 1 April 2022 for several ship types including gas carriers, general cargo ships and LNG carriers.
As such, ships built (with their keels laid) on or after 1 April 2022, must be significantly more energy efficient than the baseline.
#2 New provisions for fuel oil sampling, testing and verification: Amendments to Regulation 14, ‘Sulphur oxides (SOX) and particulate matter’, to require one or more sampling points to be fitted or designated for the purpose of taking representative samples of fuel oil in use, were approved.
Ships built (with their keels laid) on or after 1 April 2022 must have fitted or designated sampling points for taking samples of fuel oil in use.
COP27: Slow progress for shipping decarbonization
The 27th UN Climate Change Conference (COP 27) wrapped up on November 18 with a historic decision to establish a loss and damage fund for vulnerable countries hit hard by climate disasters.
"Last week I attended the #COP27 @UN climate conference in Egypt. There can be no doubt that tackling climate change is one of the greatest challenges of our time," said IMO SG during the Saudi International Maritime Forum. Full speech here: https://t.co/2dTy9mGPxP #SIM2022 pic.twitter.com/is6H5A6BNA
— IMO (@IMOHQ) November 18, 2022
And while the high-level meeting was expected to set a more ambitious timeline for shipping’s decarbonization, the progress on climate ambition was generally perceived as weak.
For shipping, this year’s COP was important as it was the last COP before the IMO meets in MEPC 80 in spring 2023 to decide its final GHG strategy for decarbonizing the industry. This means that the general sentiment on the world’s decarbonization during COP27 showcased to shipping policymakers that the shift to a greener industry is possible.
Shipping’s green corridors are making waves
A very important aspect of shipping’s decarbonization that “blew up” during 2022, was the creation of green shipping corridors. Such corridors, showcase zero-emission fuels and technologies along maritime trade routes between two (or more) ports, aiming to help accelerate adoption of alternatives to petroleum-based fuels in the maritime industry, which in turn can reduce greenhouse gas emissions.
Green shipping corridors examples
- The Northwest Seaport Alliance, Busan Port create green corridor: NWSA announced its partnership with the Republic of Korea, the Busan Port Authority, and the United States to study the feasibility of creating a green cargo shipping corridor between the NWSA and the Busan Port Authority’s cargo gateways.
- Canada announces green corridors: Canada announced the creation of a Canadian Green Shipping Corridors Framework, in addition to the country’s entry into the Zero-Emission Shipping Mission.
- UK, US, Norway, Netherlands to be connected with green corridors: The UK made a major pledge alongside the US, Norway, and the Netherlands to roll out green maritime links between countries at this year’s COP27 conference in Sharm el Sheikh, Egypt.
- Singapore, Ports of LA and Long Beach establish green and digital shipping corridor: MPA Singapore, Port of Los Angeles, Port of Long Beach and C40 Cities have begun discussions to establish a green and digital shipping corridor between Singapore and the San Pedro Bay port complex.
Poseidon Principles enter into force
The Poseidon Principles for Marine Insurance announced that they are now entering into force, after the number of its Signatories surpassed the threshold of eight. The Poseidon Principles are now estimated to cover over 50% of the global ship finance portfolio.
Poseidon Principles are a framework for measuring and reporting the alignment of insurers’ shipping portfolios with climate goals. Recognizing insurers’ role in promoting responsible environmental stewardship throughout the maritime value chain, the Poseidon Principles for Marine Insurance provide them with tools to foster collaboration with clients, gain insight to enhance strategic decision-making, and address the impacts of climate change.
Launch of “Clean Energy Marine Hubs Initiative”
The International Chamber of Shipping (ICS) and International Association of Ports and Harbors (IAPH), along with the CEO-led Clean Energy Maritime Taskforce, unveiled the ‘Clean Energy Marine Hubs Initiative’ at the Clean Energy Ministerial (CEM) in Pittsburgh.
The Initiative will be a convening platform for public and private senior-level stakeholders from the ports, shipping, finance, and energy sectors across the energy-maritime value chain.
ICS and IAPH will start activity with governments represented at the CEM, with the objective of advancing the production, export and import of low-carbon fuels.
The governments of Canada and the United Arab Emirates (UAE) confirmed during the CEM meeting in Pittsburgh that they will be among the first countries to back this key initiative, to help accelerate the worlds transition to green fuels and technologies.
Fuel quality problems around the world
2022 was also characterized by fuel contamination issues globally. It all started in Singapore, when on 14 March 2022, MPA Singapore was notified that a number of ships had been supplied with High Sulphur Fuel Oil (HSFO) containing high concentration levels of Chlorinated Organic Compounds (COC) in the Port of Singapore.
On 5 May, MPA updated that the source of the affected HSFO fuel containing high concentration levels of COC, supplied by Glencore and PetroChina, was traced to fuel loaded on a tanker at the Port of Khor Fakkan, United Arab Emirates.
MPA found no evidence that Glencore or PetroChina had intentionally contaminated the HSFO. However, Glencore continued to supply bunkers blended with the fuel purchased that was contaminated with high levels of COC to vessels in the Port of Singapore from 22 March 2022 to 1 April 2022. As a result, MPA decided to suspend Glencore’s Bunkering Licence (Bunker Supplier) for two months with effect from 18 August 2022.
A few months later, BIMCO, together with the other industry organisations, acquired data on all commercial fuel samples tested by Veritas Petroleum Services (VPS) during 2020. The results showed that Europe and the US seem to have the poorest performance. This is both in relation to sulphur compliance which may lead to increased air pollution, and ISO 8217 quality parameters, which may impact the safety of ships.
The data clearly shows that there are significant problems with the sulphur content of VLSFO in Europe and the US. More than 5.5% of the samples are categorised as only being ‘maybe compliant’, while roughly 1.5% of the samples in Europe and the US are non-compliant. In total, around 7% of the samples had sulphur content which could potentially be non-compliant.
Activity around environmental, social and governance (ESG) and sustainability issues is increasing as governments and citizens exert pressure on businesses to change their ways for the greater good. Shipping is no exception, with many companies and organizations, already making progress in ESG matters, such as the following:
- BIMCO announces collaboration to remove single-use plastic bottles from ships: BIMCO announced a collaboration with Ocean Bottle, in order to support its campaign to remove single-use plastic bottles from ships.
- NYK focuses on ESG management: Speaking on NYK’s 137th anniversary, President Hitoshi Nagasawa stated that in the new medium-term plan the company wants to advance its ESG management.
- MSC reroutes vessels to protect Sri Lanka’s blue whales: MSC decided to adjust course around Sri Lanka to keep away its vessels from endangered blue whales in the area.