E.U. Decision Seen as Caving in to Regionalism

The European Parliament’s Environment Committee’s decision to call for the inclusion of maritime transport into the E.U. Emissions Trading Scheme (ETS) has been criticized by key shipping industry associations. 

The vote to include shipping went against the advice of the European Parliament’s Industry Committee, which voted to keep shipping out, only a month ago. 

The Environment Committee agreed that shipping should be included in the E.U. Emissions Trading Scheme (ETS) by 2023, should no global agreement operate under the IMO already from 2021.

Set up in 2005, the ETS works by putting a limit on overall emissions from covered installations, which is reduced each year. Within this limit, companies can buy and sell emission allowances. ETS has since its inception suffered heavy criticism and the E.U. therefore launched in 2015 a legislative proposal to enhance cost-effective emission reductions and low-carbon investments. 

Part of the revenues generated from ETS will be channeled through a Maritime Climate Fund to improve energy efficiency and invest in innovative technologies for ports and short sea shipping.
 
Because shipping is by nature a global and highly mobile industry, the European Commission decided that it would not include shipping in ETS. This was recently mirrored at international level in the IMO, where a mandatory data collection system and a clear deadline for a maritime CO2 strategy were adopted in October 2016. The IMO roadmap foresees the adoption of an initial strategy in 2018 to be followed by a final agreement on targets and measures, including an implementation plan, in 2023, which it says is fully consistent with the Paris Agreement.

The Danish Shipowners’ Association regrets that MEPs chose regionalism over global progress. “By calling for an ETS for shipping in case no international system operates by 2021, my colleagues have unfortunately chosen to cave in to regionalism and ignore the long-term impact for European growth and the environment,” said Bendt Bendtsen (EPP, DK), Member of the Industry Committee. “With only a small part of global shipping touching E.U. ports, ETS will miss the intended climate target and runs the risk of derailing the IMO process.

“I can only say that the Industry Committee stands firmly behind its call for shipping to be addressed internationally, otherwise it may well lead to cargo being transshipped outside of Europe with direct impacts on European employment,” he added.
  
The European Parliament’s call for inclusion in ETS comes at a pivotal time where Danish shipowners have agreed to reduce emissions in pace with the rest of the world to reach the goals of the Paris Agreement. This will mean that shipping – as the rest of the economy – needs to become CO2 neutral by the second half of this century.
 
“The vote would have been a perfect opportunity for MEPs to show support for the international progress and hold IMO accountable to its timeline. Instead we end up in a confrontation with the international negotiations in IMO, which neither serves the climate nor the sector. Danish Shipowners will nonetheless maintain an ambitious climate policy and work for continued progress in IMO,” says Simon C. Bergulf, Director E.U. Affairs for the Danish Shipowners’ Association.

The International Chamber of Shipping (ICS) says the decision will polarize and impede current discussions on additional CO2 reduction measures at the IMO.

“Non-EU nations will be disappointed and very concerned by yesterday's vote in the European Parliament Environment Committee following IMO's adoption just a few weeks ago of a comprehensive road map for action,” said ICS Director of Policy and External Relations, Simon Bennett.

“But we hope that EU governments and the European Commission will see sense and recognize that threats to their trading partners will not serve the development of the global solution which both they and the shipping industry want and need.”

Bennett continued: “ICS is confident that IMO Member States, most of which are developing nations, will adopt a CO2 reduction strategy in 2018 that will include ambitious CO2 reduction goals and the development of a mechanism for delivery. But threats of E.U. unilateral action will do nothing to help this complex process.”
 
ICS says that emissions trading, which has been developed primarily for industries such as power generation and cement and steel production, is completely inappropriate for international shipping which mostly comprises SMEs typically operating less than 10 ships.

“The EU ETS has been an abject failure. Its unilateral application to global shipping would create market distortion while generating trade disputes with China and other Asian nations, as happened when the E.U. tried unsuccessfully to impose its ETS on international aviation,” said Bennett.

The position of ICS is that if IMO Member States should decide to apply a market based measure for CO2 reduction to international shipping, the preference of the industry would be for a global fuel levy.

ICS is working closely with the European Community Shipowners’ Associations (ECSA) to persuade the plenary of the European Parliament, as well as E.U. Member States and the European Commission, to reject the European Parliament Environment Committee's report which is expected to be voted on in early 2017.  

“The report ignores and undermines the roadmap that was agreed at IMO end of October”, said ECSA Secretary General Patrick Verhoeven, “We find this very disappointing, but it does not change our resolve to make the IMO roadmap a success.”

Verhoeven said the E.U. should engage in the global dialogue, not undermine it.

The European Sea Ports Organisation (ESPO) has also voiced its disappointment: ESPO believes that a six-year period gives to IMO enough time to put forward an emissions reduction target and measures to implement it. 2023 must therefore be seen as a milestone. In case this deadline is not met, E.U. measures will have to be introduced. It should however be clear that in case of an international agreement by 2023, the E.U. measures are to be repealed.

“The IMO is the right place to address shipping emissions,” says ESPO’s Secretary General, Isabelle Ryckbost. “There is already a coalition of the willing in IMO and Europe should increase the pressure on the IMO to step up its efforts and make progress. It is becoming clear that if the IMO will not deliver an emissions reduction target and measures to implement it by 2023, an E.U. approach seems unavoidable. We therefore hope that the IMO will demonstrate the same level of ambition when addressing climate change as it did on the global air pollution cap agreed last October.”