by Harilaos N. Psaraftis, DTU
24 April 2020
Disclaimer: This is NOT a scientific paper, and does not even remotely resemble one. It is only a blogger’s perspective to what the COVID-19 pandemic may mean to the quest to decarbonize shipping. A blogger’s perspective means that what is mentioned here is to the best of my (incomplete) knowledge, and may range from undocumented to completely wrong. It is only a reflection of some random thoughts on the subject with no guarantee of any academic rigor, correctness or clairvoyance. Needless to say, any opinions expressed herein are only my own. So please go ahead and read the rest of this document at your own risk, and if you quote me I will point to this disclaimer!
The so called “Initial IMO Strategy” to reduce green house gas (GHG) emissions from ships was adopted by the International Maritime Organization (IMO) in 2018 and is currently the most important policy development as regards what the shipping community plans to do on climate change (IMO, 2018). The strategy classifies potential measures to reduce GHG emissions into three classes: short-term measures, medium-term measures, and long-term measures. Respectively these measures are to be agreed upon and implemented between 2018 and 2023, between 2023 and 2030, and between 2030 and 2050. Emissions reduction targets basically fall into two categories: (a) to reduce CO2 emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008; and (b) to reduce total annual GHG emissions by at least 50% by 2050 compared to 2008.
As expected, much of the discussion after the adoption of the strategy in 2018 has focused on short-term measures, and specifically on how such measures can help achieve the 2030 target, reduce CO2 emissions per transport work, also known as “carbon intensity”, as an average across international shipping, by at least 40% by 2030, compared to 2008.
The COVID-19 pandemic has dealt a blow to the Initial IMO Strategy at several levels: At the regulatory level, the discussion on short-term measures, initially scheduled to take place in two back-to-back IMO meetings from March 23 to April 3, 2020 was cancelled. These were the 7th intersessional meeting of the working group on reduction of GHG emissions from ships (ISWG-GHG 7), and the 75th session of the Marine Environment Protection Committee (MEPC 75). The technical term was that both these meetings were postponed, however it is not clear when they will resume. It so happens that MEPC 76 is scheduled for October 2020, so a scenario is that these meetings will be shifted to the fall, assuming of course that COVID-19 will allow this to happen. It is also not immediately clear if this discussion (or part of it) can be done online. Having been to many such meetings in the past, my own sense is that this would be difficult but not necessarily impossible.
Obviously, any decisions on short-term measures that would conceivably take place in these two meetings were similarly postponed. I was scheduled to attend both meetings and in fact I was involved in an IMO submission that described the detailed impact assessment of the so-called “mandatory operational short-term goal based measure” that was proposed by Denmark, France and Germany (this is IMO doc ISWG-GHG 7/2/20 which I can send you if you ask me). It is interesting that China was to be included as a co-sponsor of this measure, however COVID-19 prevented China’s consent and inclusion, as their staff was impossible to participate in the late stages of the submission process due to the COVID-19 outbreak. Other IMO member states, such as Greece, Norway and Japan (together with other co-sponsors) have proposed an alternative short-term measure, also goal-based but with a technical focus (EEXI). The discussion at the IMO would have provided some indication on which of these two measures (or perhaps a combination thereof) would continue to go forward, or what would the next steps in the Initial IMO strategy look like. So the postponement of the IMO discussion leaves this discussion currently in limbo.
I open a parenthesis here. It is interesting to mention another parameter, which is the big elephant in the room, irrespective of COVID-19: this is the European Green Deal (EGD) (EU, 2019), and specifically its component according to which shipping will be included in the EU Emissions Trading System (ETS). Until when this was announced (December 2019), the position of the EU was to align itself with the IMO process, and essentially refrain from acting on a possible inclusion of shipping into the EU ETS before seeing what the IMO intends to do on GHGs, something that the European Parliament (EP) had decided, circa 2017. The European Commission (EC) has been closely monitoring the IMO process, starting from what was agreed on the Initial IMO Strategy in 2018 and all the way to 2023, when the strategy is expected to be finalized. Thus far it had refused to take the ETS option off the table or even to specify what would trigger action on its part. However, as of December 2019 this has changed, and the EGD clearly points to the ETS path. Any such development would have very important, yet not completely understood, ramifications as regards GHGs on a global basis, not just in Europe, and is one that shipping associations look at with a great deal of apprehension, mainly because of the perceived distortions it would cause (for a discussion of the issues see Psaraftis and Lagouvardou (2019)).
What is interesting here is that one would have a hard time finding a reference to the EGD in the documents submitted to the IMO for the two meetings that were cancelled, as if the elephant in the room was miniscule or simply invisible. Actually in the impact assessment IMO submission that I was involved in (see IMO doc above), we mentioned the EGD but only in an oblique way, as one of the exogenous factors that may influence the evolution of GHG emissions. The non-inclusion is probably due to bureaucratic inflexibility (only items specified in an agenda drafted months ago were submitted), however the intent of the new EC President to include shipping in the EU ETS was known since the summer of 2019, and the IMO Secretary General has vowed to talk to the EC/EP to avert possible action on EU ETS. End of the parenthesis.
Coming back to COVID-19, what is even less clear is the extent of the COVID-19 impact to the Initial IMO Strategy at the substantive level. The relevant question is, assuming that at some point (hopefully in the not so distant future) the IMO discussion will resume, how will the Initial IMO Strategy proceed? Will it do so as if nothing had happened, or will there be some serious repercussions? Already some articles (Lloyd’s List 2020a, 2020b) have cited industry circles arguing that the resumption of the GHG discussion at the IMO will be anything but normal and that a risk of that discussion being derailed clearly exists. Also when I started writing this blog I received the recent comprehensive study by Stopford (2020), presenting a variety of shipping decarbonization scenarios which are coupled with COVID-19, and which I found very interesting.
What is my own opinion on the subject? At this time I really cannot claim to have special knowledge on it. Having said that, below are some random issues that in my opinion connect COVID-19 with GHGs and the Initial IMO Strategy.
1. Some industry sectors may be hit particularly hard. For instance, who would like to take a cruise holiday in the near to medium term, packed together with several thousand other people? So one would expect cruise vessel GHG emissions to dip proportionally more than in other sectors, at least in the short to medium term.
2. It is clear that the global and regional reduction of production, consumption, trade and hence shipping and port activity as a result of COVID-19 is very real and will result in corresponding real reductions in GHG emissions simply as a result of shipping activity contraction. It is perhaps ironic that the very factor that prevented decision making at the IMO on short-term measures to reduce GHG emissions, will still lead to short-term GHG emissions reductions, and in fact just by itself and with no need for the IMO to decide. How much and for how long, it’s anybody’s guess.
3. At the same time, the unprecedented drop in fuel prices as a result of COVID-19 may act as a serious counterweight and may make carbon intensity reductions more difficult, and in fact at two levels. At the operational/logistics/short-term level, ships may be encouraged to sail faster than before due to fuel being so much cheaper, thus increasing CO2 emissions per transport work. Heard that a big container carrier is sending ships around Africa at higher speeds as this is cheaper than going through Suez. This may make sense from an economic perspective, but it is not good for the environment. The non-internalization of GHG external costs has always been an issue, and it is now more than ever.
4. Even more serious may be the situation at the strategic/technological/long-term level. Who will choose to invest in energy saving technologies or in alternative, low carbon fuels when fossil fuel prices are rock bottom? Even under normal (read, 2019) fuel prices many such technologies or fuels were still not viable, and hence the need to introduce Market Based Measures (MBMs) to incentivize their future development. But if the MBM discussion has not yet started at the IMO under normal circumstances (mainly for political reasons, see Psaraftis (2019) for details), will it start now under the COVID-19 or post COVID-19 turmoil? Note that we currently have two related projects at DTU that are looking at the MBM subject, so stay tuned for these. Also note that the “big elephant” EU ETS is an MBM. How all this will play out once we add COVID-19 on top of it, I do not yet know. Put in a simple way, if fossil fuels are cheap, people will use them, and COVID-19 does not make the switch to alternative fuels any easier.
5. Whenever the world economy exits the COVID-19 crisis (and this can only be once a vaccine is found), the question is how serious the global recession has been and how fast the recovery will be. No one knows the answers, so one can only look at some scenarios. In the face of tough times, it may be that the main priority of the shipping industry shifts to how to survive and regroup, rather than how to become greener. Some estimates have been made about the huge capital investments needed to achieve the IMO emissions reduction targets under normal circumstances (on the order of a trillion USD). What fraction of these investments would be possible in a post COVID-19 world, and how would such an investment happen? Even the EGD would be more challenging to achieve in the face of a seriously damaged EU economy.
6. At the same time, I think it is also plausible that the post COVID-19 world can provide the global shipping industry with an opportunity to start from a cleaner slate, and achieve solutions that are win-win, that is, are good both for the economics of the industry and for the environment. Doing this would however entail a high degree of courage and leadership from policy makers, to set aside the various political obstacles that exist and promote win-win solutions. But if win-win could not happen by itself under normal circumstances, it can not happen by itself under COVID-19. Serious GHG mitigation will occur only if the external costs of GHG emissions are internalized, and in shipping this can happen only if an appropriate MBM is instituted. If COVID-19 has taught us a lesson, it is that if one is to avert future catastrophes, serious advance planning is required.
So that was my 10 cents of an opinion on this topic, at least for the time being. I told you it would be a blogger’s perspective, and it will certainly not raise my h-index. Apologies for not being thorough enough. Stay safe and any comments are welcome.
PS
Pre-COVID-19 books on green logistics, win-win, and sustainable shipping:
References
Lloyds List (2020a), Coronavirus: Fallout may derail decarbonisation, Article by Anastasios Adamopoulos, Lloyds List, 31 March 2020.
Lloyds List (2020b), Could coronavirus derail shipping’s decarbonisation agenda? Article by Richard Meade, Lloyds List, 17 April 2020.
EU (2019), Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions “the European Green Deal” (Com/2019/640 Final)
IMO (2018), RESOLUTION MEPC.304(72) (adopted on 13 April 2018) INITIAL IMO STRATEGY ON REDUCTION OF GHG EMISSIONS FROM SHIPS, IMO doc. MEPC 72/17/Add.1, Annex 11.
Psaraftis, H.N. (2019), Decarbonization of maritime transport: to be or not to be? Maritime Economics and Logistics, 21, 353–371.
Psaraftis, H.N., Lagouvardou, S. (2019), Market Based Measures for the reduction of green house gas emissions from ships: a possible way forward, Samfundsøkonomen 4/19, 60-70.
Stopford, M. (2020), Coronavirus, Climate Change & Smart Shipping, THREE MARITIME SCENARIOS 2020 – 2050, A White Paper published by Seatrade Maritime, part of Informa Markets, 20 April 2020.
