Current Policy Projections
Emissions projections and impact of COVID-19
International shipping accounts for about 2% - 3% of global GHG emissions and represents the lion’s share of total shipping emissions (Hoen et al., 2017; ICCT, 2017). Due to the COVID-19 crisis, global container trade volumes declined by close to 9% in February 2020 compared to February 2019 and world merchandise trade is expected to fall between 13-32% in 2020 compared to 2019 (WTO, 2020).
As a response to falling demand, carriers have reduced supply capacity by scrapping older vessels, cancelling orders for new ships and lowering ship speeds, to avoid freights rates reduction, which has happened in past crisis (International Transport Forum, 2020; Watson, 2020).
The idling of ships in quarantine and the bans of ship operations by ports throughout the world have had a short term impact on international shipping, while the drop in demand and trade are likely to have a longer term impact (Le Quéré et al., 2020). With the exception of the tanker segment, most shipping industry actors expect a decline in turnover in 2020 from 2019, with the worst hit sectors being car carriers, offshore service vessels, general cargo and containers. Most of these sectors indicate a more than 60% decrease in turnover in March 2020 from March 2019 (ECSA, 2020).
Maritime tourism has also been severely impacted by the COVID-19 crisis. Ports have reported a decline of 75% in passenger vessels calls between mid-April to mid-May 2020, and many governments have banned operations from cruise ships in their national waters, such as the USA until 24 July , Canada until October 2020, Australia until September 2020 and the Seychelles until 2022 (Australian Border Force, 2020; Government of Canada, 2020; Notteboom & Pallis, 2020; Seychelles Nation, 2020; US Federal Register, 2020).
The UN World Tourism Organization (UNWTO) expects an overall fall in 2020 international tourist arrivals of 60-80% (UNWTO, 2020). Some major industry players have voluntarily suspended embarkations from their planned cruises until Q4 2020 (Carnival Corporation, 2020; Norwegian Cruise Line Holdings Ltd., 2020). However, they are reporting bookings within historical ranges for 2021 and continued demand for cruise vacations, forecasting a scenario of resuming to pre-COVID-19 activity levels by 2021-2022 (Norwegian Cruise Line Holdings, 2020; Royal Caribbean Cruises Ltd., 2020).
There are high uncertainties on the impact of COVID-19 on shipping emissions depending on how and when consumers will react in a post-COVID-19 society impacting trade and maritime tourism. To assess the impact on emissions on the longer term, we have defined two potential scenarios based on the extent of emission reductions in 2020 and the speed of recovery.
For maritime trade, we use the WTO projections for a reduction in trade volumes in 2020 and 2021 as proxies for emission reductions.
The high emissions scenario is based on the WTO’s optimistic scenario projecting a reduction of -13% in 2020, with a rebound of 21% in 2021, stabilizing to pre-COVID-19 trajectory from 2022 onwards.
The low emissions scenario is based on the WTO’s pessimistic scenario, projecting a reduction of -32% in 2020, while growth rebounds in 2021, it is still below 2019 levels.
For maritime tourism, we use for both scenarios the UN World Tourism Organization’s estimate for a reduction an international arrival as a proxy for emission reductions in 2019 based on a September reopening. We assume the maritime tourism rebounds to 2019 levels in 2021 under a fast recovery and 2022 under a slow recovery.
Considering projected impacts on trade and tourist arrivals, we estimate that emissions in 2020 could drop by around 18-35% compared to 2019, under respectively the high and low emissions scenarios. Depending on the speed of the recovery, by 2030, emissions growth may have returned to its pre-COVID levels or experienced a reduction of around 13% compared to pre-COVID projections, which equates to about 2019 levels.
Overview of current policies
The IMO has so far introduced very few policy instruments to reduce emissions from ships, mainly focusing on energy efficiency measures, which lack of ambition in terms of targets, scope and timeline for implementation. The IMO initial strategy which has been published in 2018 is only set to be reviewed in 2023. It lists potential measures to be implemented which were set to be assessed – based on member states’ concrete proposals – in April 2020, in a meeting now postponed due to the COVID-19 crisis.
While it mentions technological measures related to low carbon emissions fuels, only one mandatory measure has been implemented so far on energy efficiency . The recent ban of HFO fuel in the Arctic region aimed at entry into force in 2023 is likely to be postponed by five years for Arctic nations and the fourth GHG study is aimed to be published in 2020 when last emissions inventory was published in 2014. Under the urgency of reducing global emissions, the IMO would need to develop and implement mitigation measures at a faster pace.
The IMO is a UN special agency composed of 174 Member States, and is responsible for regulating the sector, established by the Kyoto Protocol passing the responsibility from countries to regulate shipping emissions to the IMO (IMO, 2019a). The policy landscape to reduce GHG emissions from the international shipping sector is limited. The IMO consists of an Assembly, a Council - the executive body - and five committees, including the Marine Environment Protection Committee (MEPC).
The MEPC is a decision-making body concerned with the control and prevention of air pollution of ships. The MEPC adopts resolutions on these issues and establishes working groups such as the Working Group on Reduction of GHG Emissions from Ships which reports to the plenary of the Committee. Member States can submit proposals to the MEPC, which is open to NGOs and industry observers on a consultative status. MEPC decisions are taking by voting by simple majority, only Member States vote (Hayer, 2016; IMO, 2019f).
The IMO has established only a few instruments to mitigate GHG emissions from shipping, which consist of the following:
- MARPOL governs ship pollution from operational or accidental measures. Annex VI to the MARPOL Convention regulates air pollution and was adopted in 2005 (IMO, 2018; MARPOL Training Institute, 2005).
- In 2011, two energy efficiency measures were made mandatory – the only regulations to date requiring improvement from ships: the Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. The EEDI requires a minimum energy efficiency level per activity to be tightened up in phases every five years, currently being in phase two. Each phase defines a reduction factor for the EEDI to comply with, increasing at each phase, the last phase being phase three (IMO, 2017; MARPOL ANNEX VI, 2013).
- In March 2018, the IMO Data Collection System (DCS) on fuel consumption for ships entered into force. One month later, the MEPC adopted the “Initial IMO Strategy” to reduce GHG emissions from ships (Resolution MEPC.304(72)). It outlines three main goals (see target section) and also includes a list of “candidate” measures to be considered to reach these targets and a timeline for the implementation of these measures which need to be made mandatory under an IMO convention before they become legally binding.
- In May 2019, the MEPC approved draft amendments to MARPOL Annex VI for more stringent energy efficiency existing requirements by increasing the energy efficiency reduction rate (transition to phase 3 the EEDI) and bringing forward the deadline for compliance from 2025 to 2022 (IMO, 2019b; UNCTAD, 2019). Within the same session, the MEPC adopted a resolution to encourage voluntary cooperation between ports and shipping sectors to contribute to the reduction of GHG emissions from shipping (IMO, 2019c) .
The amendments related to energy efficiency requirements were expected to be adopted at the 75th session of the MEPC in April 2020, but this meeting was postponed due to COVID-19 and, as of June 2020, had not been rescheduled. The 76th session is scheduled for October 2020 (IMO, 2020c). There is an informal virtual meeting scheduled for 9 July 2020.
The fourth IMO GHG Study is expected to be published in the fourth quarter of 2020, and the IMO is currently in the process of updating its initial strategy in reducing GHG emissions announced to be revised and adopted only in 2023 (IMO, 2020b). However, this process has been slowed down by the COVID-19 crisis due to the postponement of the MEPA 75th session. It was supposed to assess proposals from member states of concrete short and medium term measures to reduce GHG emissions in line with the strategy and to adopt a draft resolution urging Member States to develop and update voluntary National Action Plans contributing to reducing GHG emissions from international shipping (IMO, 2019g, 2020b, 2020a).
CO2 emissions from international shipping accounted for 91% of all emissions from the sector in 2015 on a 100 years’ time-scale GWP (ICCT, 2017). Black carbon is the second largest contributor and accounted for 21% of CO2-eq emissions from 2013-2015 on a 20 years’ time-scale GWP, while corresponding to 7% on a 100 years’ time-scale GWP (ICCT, 2017).
The shipping sector is also a major emitter of non-carbon emissions, and emitted 13% of global nitrogen oxides (NOx) and 12% of global sulphur oxides (SOx) from 2007 to 2012. These emissions have a significant impact on air quality (Ahn et al., 2019; DieselNet Technology Guide, 2004).
Assessing historic emissions or future projections is hampered by limited data availability and a plurality of methods to assess GHG emissions. A key issue to address within the shipping sector is the monitoring and reporting of emissions (ICCT, 2017; Miola et al., 2010; SEI, 2019). To address this issue, the IMO has developed a data collection system for ships above a certain size, following the approach adopted by the EU. The ship classes that fall within the purview of the IMO’s system were required to start reporting on their fuel consumption as of 1 January 2019 (DNV GL, 2018).