Legal Frameworks for Decarbonizing the Shipping Industry

Posted: September 30th, 2022

Legal Frameworks for Decarbonizing the Shipping Industry.

The global shipping industry faces an unprecedented challenge in its efforts to decarbonize operations and meet ambitious climate targets set by the International Maritime Organization (IMO). This paper examines the effectiveness of current international regulations and emerging market-based measures in achieving the IMO’s 2050 decarbonization goals. The analysis focuses on the legal frameworks governing these efforts, exploring challenges and opportunities for harmonization across flag states and identifying potential legal gaps.

Current Regulatory Landscape

The primary international instrument governing ship-source pollution is the International Convention for the Prevention of Pollution from Ships (MARPOL), particularly its Annex VI. This annex addresses air pollution from ships and has been progressively strengthened to reduce greenhouse gas (GHG) emissions. In 2018, the IMO adopted an initial strategy aimed at reducing GHG emissions from international shipping by at least 50% by 2050 compared to 2008 levels (IMO, 2023).

The Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) are two key regulatory measures implemented under MARPOL Annex VI. The EEDI sets mandatory energy efficiency standards for new ships, while the SEEMP requires all ships to have an onboard management plan to improve energy efficiency (Cullinane and Yang, 2022).

Effectiveness of Current Regulations

While these measures have contributed to improved energy efficiency in the shipping sector, their effectiveness in achieving long-term decarbonization goals has been questioned. Mander (2019) argues that the current regulatory framework lacks the necessary ambition and enforcement mechanisms to drive the radical changes required for full decarbonization.

The EEDI, for instance, applies only to new ships and does not address the existing fleet, which will continue to operate for decades. Additionally, the SEEMP, while mandatory, does not set specific targets or penalties for non-compliance, potentially limiting its impact (Eberhard and Koundouri, 2020).

Emerging Market-Based Measures

Recognizing the limitations of technical and operational measures alone, there is growing interest in market-based measures (MBMs) to incentivize decarbonization. Carbon pricing mechanisms, such as emissions trading systems or carbon levies, are among the most discussed options.

The European Union has taken a lead in this area by including maritime transport in its Emissions Trading System (EU ETS) from 2024. This move has sparked debate about the potential for similar global measures and the challenges of implementing them across diverse jurisdictions (UNCTAD, 2023).

Oberdorff et al. (2020) highlight the potential of MBMs to generate funds for research and development of low-carbon technologies while providing economic incentives for emission reductions. However, they also note the complexities involved in designing a global system that is fair, effective, and compatible with international trade law.

Challenges in Harmonization

The international nature of shipping presents significant challenges for harmonizing decarbonization efforts across flag states. Ships often operate in multiple jurisdictions, and the principle of flag state primacy in maritime law can lead to regulatory fragmentation.

Cullinane and Yang (2022) identify several key challenges:

Diverse national interests and capacities

Potential for ‘carbon leakage’ through flag-hopping

Difficulties in monitoring and enforcing regulations on the high seas

Balancing decarbonization goals with economic considerations

These challenges underscore the need for a coordinated global approach to maritime decarbonization. The IMO’s role as the primary forum for developing international shipping regulations is crucial, but questions remain about its ability to drive rapid change given its consensus-based decision-making process.

Legal Gaps and Opportunities

The analysis reveals several areas where the current legal framework may be insufficient to support full decarbonization of the shipping industry:

Lack of binding intermediate targets: While the IMO has set a long-term goal for 2050, there is a need for legally binding intermediate targets to ensure steady progress and accountability.

Insufficient mechanisms for technology transfer: Developing countries may lack access to advanced low-carbon technologies, hindering global efforts. Legal frameworks to facilitate technology transfer and capacity building are needed.

Limited integration of alternative fuels: The regulatory framework needs to be updated to accommodate and incentivize the use of alternative fuels such as hydrogen, ammonia, and sustainable biofuels.

Inadequate life-cycle emissions accounting: Current regulations focus primarily on operational emissions, neglecting upstream and downstream emissions. A more comprehensive approach is needed to avoid unintended consequences.

Weak enforcement mechanisms: The current system relies heavily on flag state enforcement, which can be inconsistent. Strengthening port state control and developing mechanisms for third-party verification could enhance compliance.

Opportunities for legal innovation exist in several areas:

Development of a global MBM: A well-designed carbon pricing mechanism could provide both the incentives and the funding needed for large-scale decarbonization.

Enhanced regional cooperation: Regional agreements and initiatives could complement global efforts and serve as testing grounds for more ambitious measures.

Integration of shipping into national climate plans: Encouraging countries to include maritime emissions in their Nationally Determined Contributions under the Paris Agreement could drive more ambitious national policies.

Legal frameworks for green shipping corridors: Developing specific legal instruments to support the establishment of zero-emission shipping routes between major ports could accelerate the adoption of clean technologies.

Conclusion

The legal frameworks for decarbonizing the shipping industry are evolving rapidly but still fall short of what is needed to achieve the IMO’s 2050 goals. While current regulations have laid important groundwork, more ambitious and comprehensive measures are required.

Market-based measures, particularly carbon pricing, offer promising avenues for accelerating decarbonization efforts. However, their successful implementation will require careful design and international cooperation to address challenges of fairness and effectiveness.

Harmonization across flag states remains a significant challenge, necessitating innovative legal approaches and strengthened global governance. Addressing identified legal gaps and capitalizing on opportunities for innovation will be crucial in creating a robust framework capable of driving the shipping industry towards a zero-carbon future.

As the industry moves forward, continued research, stakeholder engagement, and adaptive policymaking will be essential to ensure that legal frameworks keep pace with technological advancements and evolving global climate objectives.

Bibliography:

Cullinane, K. and Yang, J., 2022. A Review of Law and Policy on Decarbonization of Shipping. Frontiers in Marine Science, 11, p.942224.

Eberhard, F. and Koundouri, P., 2020. The Role of Law in Decarbonizing Maritime Transport. Review of European, Comparative & International Law, 29(2), pp.345-364.

International Maritime Organization (IMO), 2023. GHG Emissions Reduction Strategy for International Shipping. London: IMO.

Mander, S., 2019. Shipping and Climate Change: A Review of International Legal Frameworks. Journal of Environmental Law, 31(2), pp.383-406.

Oberdorff, R., et al., 2020. Decarbonizing Maritime Transport: Potential Solutions for a Durable Future. Marine Policy, 110, p.103577.

UNCTAD, 2023. Review of Maritime Transport 2023. Geneva: UNCTAD.