GHG Legislation Challenges

Technical Measures, Operational Measures and Market Based Measures

It is well known that IMO is working extensively on the Greenhouse Gases (GHG) legislation issue and so far the work in produced may be divided in three areas:

1. Technical Measures: Energy Efficiency Design Index (EEDI, applicable to NEW buildings, due on 1/1/2013, although every country may waive implementation for a period up to four years)
2. Operational Measures: Ship Energy Efficiency Management Plan (SEEMP) and Energy Efficiency Operational Indicator (EEOI) which is known also as CO2 Index, due for all vessels by 1/1/2013
3. Market based Measures: Currently, IMO is considering ten key proposals within MEPC work, out of which the two predominant – producing extreme buzz- are the Bunker Levy and the Emissions Trading Scheme

Unfortunately, the market has to act under UNFCCC and EU threat to enforce Emissions Trading, an issue that will create chaos in the market.

It is well known that the road to hell is full of good intentions and in the Energy Efficiency case several gray areas exist, including challenges in key areas regarding:

Design Index for new buildings which:

1. Is not considered a fair measure by many industry stakeholders. Despite rocket science formula and guidelines a lot of work needs to be done to also incorporate big size vessel segments and non conventional fuel types etc.
2. Essentially, imposes a speed limit for every vessel/vessel type. Why no stetting a speed limit for ALL vessel types at the beginning?
3. May lead shipyards to build underpowered vessels (IMO guidelines re minimum installed power/speed for every vessel type are still pending) or to light weight / MIN Lightweight constructions (MIN EEDI = MAX DWT = Min Lightship) and in no case into the development and implementation of optimal/Best energy practices.
4. The EEDI waiver as an extremely controversial issue, will eventually cause every vessel’s competitive advantage to deteriorate, thus all the Round table associations recommend that this is to be avoided
5. Industry Players (Class, Rightship) have developed an increasing appetite to calculate EEDI for existing vessels, which does NOT make any sense and will distorts competition in the long run in favor of newbuildings
6. EEDI final formula is on the way (pending calculation details and coefficients) and there are still pending guidelines on sea trials for EEDI verification (MEPC 63 made progress towards that goal)

Ship Energy Efficiency Management Plan (SEEMP) which:

1. Should detail vessel specific measures and incorporate Best Practices for each vessel without minimum prerequisites, on a voluntary base re content
2. Is an Energy Management Tool ; will it be used this way? We have seen the implementation of many tools in the market over the last 15 years, would this be an exemption ?
3. Needs no approval as per IMO guidelines; will flag states and class respect this as we approach implementation deadline ?

Energy Efficiency Operational Indicator (EEOI) which:

1. It is included on the SEEMP with non mandatory monitoring, recording and reporting; will this remain intact or will it be used as a rate by the market?
2. Will it be used as a means of imposing sanctions to those emitting above a market base line for every vessel type?
3. In case of mandatory monitoring and recording, who will verify the fuel consumed and the voyage mileage? Without verification everyone may claim figures out of the blue !

Market based Measures which:

1. IMO has made MINIMAL progress so far. All participating parties agree that they disagree. Many industry insiders believe that it will NEVER be a final decision on an IMO Level.
2. Which one will prevail, on what terms and timeframe, under which party’s pressure ?
3. Many industry insiders believe that the only measure that will NOT distort competition, being fully compatible with the nature of the market is the Bunker Levy. How may this implemented since there is no authority that could verify that certain oil quantities have been consumed, the tax is paid and the money have been paid to the appropriate authorities?
4. If a sort of Emissions trading Scheme is enforced what will be the reaction of the market ?

It is clear from above that we are steaming on fog. The challenges are many for all the industry stakeholders (regulators, yards, class, operators, etc.) and numerous debates are on the way.

As stated above most stakeholders agree that they disagree. Would this be the final act on the GHG legislation front ? Not sure at all, actually someone should be confident enough for the exactly opposite !

Apostolos Belokas

Principal Consultant & CEO, IBS Marine Consulting Group

Managing Editor, Safety4Sea