Looking for clues as to industry’s regulatory future
Many in shipping have been looking for clues as to industry’s regulatory future in the election this week of a new chief of International Maritime Organization (IMO), Japan’s Koji Sekimizu, currently director of the IMO’s maritime safety division.
On the thorny issue of greenhouse-gas (GHG) regulation, the IMO is currently exploring market-based measures (MBMs) to cut emissions and mulling a decision to make energy efficiency standards in ship design and operation mandatory. It appears any big decisions on market measures for international shipping will be made under the Sekimizu reign between 2012 and 2015.
It is hard to gauge how his appointment will affect the direction of such regulation. Certainly, he can’t be seen to be using his position to push Japan’s MBM proposal for a bunker levy scheme designed to reward energy efficiency in ships. As to Semikizu’s ability to oversee resolution in shipping’s GHG emissions challenge, which has eluded his predecessors up to now, opinions differ.
Lloyds List comments: “As a long-time insider Mr Semikizu might not be the Richard Branson-style candidate to shake up the organisation, as many people appeared to favour in a Lloyd’s List’s poll. But he is highly respected within the IMO and that might be in his favour when it comes to making difficult decisions as the organisation seeks to deal with the diverse range of challenges it faces in the next few years that he will be secretary-general.”
The European Union, meanwhile, continues its consultation programme over a plan to implement regional regulation to reduce shipping GHG emissions. EU Transport Commissioner Siim Kallas and Climate Commissioner Connie Hedegaard met with shipping industry and government officials this week to discuss options.
Hedegaard kept up the pressure on the UN maritime agency to act quickly if it wanted to ward off regional action, saying in a statement “it is high time for an agreement in the IMO”. “Much as we prefer a global solution, the member states and the European Parliament have asked the Commission to present a possible proposal to reduce shipping emissions for 2012 in the case that the IMO fails to find a solution,” Hedegaard said.
Many see that including shipping in the EU emissions trading scheme (ETS) is the obvious path for Brussels. Emissions trading has been the strongly preferred option in Europe. The EU-ETS is by far the world’s largest GHG regulatory system, covering land-based emitting industries since 2005 and about to extend to the aviation sector next year.
But there is some speculation that the EU might be ready to consider a bunker levy. For one, it would be easier to get industry on board. Much of the shipping industry appears to be of the view that if regulation is inevitable, then a bunker levy is preferable to an emissions trading scheme, for simplicity’s sake. The European Community Shipowners’ Association and BIMCO have echoed this view in past last week.
Secondly, there are questions being asked of Brussels’ continued commitment to the EU-ETS as the cornerstone of its climate change action. Analysts say a new energy efficiency directive announced last week could have such an impact on lowering GHG emissions that it would undermine the carbon market. Despite assurances that the directive’s impact on the EU ETS would be “monitored” and the scheme “recalibrated” if carbon prices fall too low, the market does not appear convinced. The directive has already been one factor in sharply falling EU carbon prices in recent weeks.
While a bunker levy may offer simplicity and price certainty, supporters should understand that it doesn’t necessarily mean a lower price, warns Per Kågeson, professor in Environment System Analysis at the Royal Institute of Technology Stockholm. “I think they expect, even though they don’t say so, a lower cost to the industry than in the case with the ETS,” Kågeson told the Wall Street Journal. With world trade expanding and GHG targets tightening over time, the bunker levy rate may have to keep rising, he said.
Proponents of emissions trading on the other hand argue that an ETS offers greater flexibility and with that the potential for a lower carbon price – instead of all being locked in to the one set tax rate, emitters are free to chase the lowest cost emissions reductions where ever they occur – with technology delivering more and cheaper options as time goes on.
Source: Reuters, Wall St Journal, Dow Jones Newswires
