The effectiveness of current UK regulations in reducing shipping emissions.
1.2. Problem Statement
Shipping has seen an increase in its importance in global supply chains. This increase in importance has led to a heavy reliance on the service. It has also led to the development of increased congestion and pollution levels, particularly around the world’s major port cities. This reality has created a situation where there are many accessibility and quality issues in the marine environment. The effect of shipping on the environment involves air pollution, water pollution, acoustic pollution, and physical pollution from collisions and groundings. However, the focus of this dissertation will be aimed at reducing shipping emissions and the environmental impact it has on climate change. The reason for this is because, compared to road transportation and air travel, it has been estimated that shipping is the least environmentally damaging form of commercial transport. This is due to the fact that ships can carry large quantities of cargo and people. It is also a very efficient form of transportation in terms of CO2 emissions, which can be measured by the amount of CO2 released per ton of cargo transported per kilometer. Shipping is about 7 times more efficient than air travel. However, shipping is currently responsible for 4.3% of global CO2 emissions and is predicted to grow between 150% and 250% by 2050. It is also estimated that on a global basis, emissions of CO2 from international shipping in 2007 were approximately 810 million tons. This is double the level in 1990. CO2 is one of the major greenhouse gases and contributes to climate change. Taking into account the anticipated growth of shipping in years to come, there is a need to give priority to energy efficiency within the sector in order to reduce the environmental impact caused by increased emissions. This is due to shipping emissions having less direct impact than other forms of transport. There is also a need to ensure that new shipping vessels have a low environmental impact so as to avoid already existing vessels becoming obsolete. This means that the older vessels can be phased out and the newer, more efficient vessels can attain a sustainable market share. This will be a key issue regarding the regulation of shipping emissions. Efforts to reduce emissions will also need to be both technically and economically effective. This involves creating a situation where the improved technical solutions actually result in reduced emissions, and where the costs of implementation do not hinder free trade and simply result in higher costs being passed onto the consumer.
2. Literature Review
All of these factors indicate that this is a more suitable time to evaluate the effectiveness of UK regulations in reducing shipping emissions.
In the UK, the Department for Environment, Food and Rural Affairs published an inventory methodology specific to the shipping sector in 2012. This includes activity data such as distance traveled, time spent at berth, and fuel type, combined with the most recent emissions factors to calculate emissions. This level of detail in emissions calculations aligns with the current availability of data and emissions calculations for the road transport sector. In turn, this allows for a suitable comparison of the cost-effectiveness of emissions reductions between the shipping and other transport sectors, with respect to regulatory policies in each sector and the associated benefits to public health.
Although previous studies have been carried out on the impact of shipping emissions in some European cities, none have evaluated the contribution of shipping emissions to the national greenhouse gas inventory. Current research allows for a more accurate analysis of the amount of emissions from the shipping sector, along with other transport sectors, compared to previous studies confined to inventory methodologies. This is mainly due to a greater understanding of the relationship between fuel consumption and activity data for the shipping sector. Previous studies have largely adopted a simple fuel-based approach using international estimates of fuel consumption and emissions factors. This has added to the uncertainty of the emissions calculated and has generally not provided sufficient detail to inform policy on potential emissions reductions for the shipping sector.
2.1. Overview of Shipping Emissions
Maritime activities have been contributing to global environmental issues, in particular the contribution of shipping emissions to climate change. Shipping can be seen as one of the cleanest forms of transport, as it is two times more efficient and emits three to four times fewer global warming gases than aviation. However, due to the massive amount of fuel consumed, a large amount of emissions can still lead to a significant environmental impact. Annual emissions from shipping are estimated to be around 600 million tonnes of CO2, 15 million tonnes of NOx, 6 million tonnes of SOx, and 1.5 million tonnes of PM. This amount of emissions of greenhouse gases is estimated to be around 3% of global emissions and is growing. This can be attributed to an increase in the demand for maritime transport and the lower efficiency of using old, poorly maintained vessels compared to using the latest vessels. In this respect, there are a variety of modern vessels, ranging from fishing boats and ferries to large container ships and cruise liners.
The type of engine used by these vessels has a large impact on the level of fuel consumed and the amount and type of emissions produced. Older engines can lead to poor performance in fuel efficiency and higher emissions of NOx and SOx due to the poor quality of the fuel being used. In some cases, fuel with a high sulfur content had to be used and is a contributor to SOx emissions. Newer engines with electronic controls are more fuel efficient and have better control of emissions, particularly emissions of current diesel fuel.
2.2. Current UK Regulations
Unfortunately, the same cannot be said for the UK’s domestic policies to reduce shipping emissions. Stephan and Herber of the ITF have pointed out that the UK has in the past been a strong supporter of unspecific control measures such as a fuel tax or cap and trade scheme, but there is no indication as to whether the UK has considered implementation of the ETS to also cover emissions from domestic shipping. In fact, a recent paper by the UK Department of Transport has stated that it will seek to achieve the UK’s emissions targets for international shipping through the global suite of measures. This could imply that the UK may opt out of more specific and stringent control measures in the future. An ETS has the potential to be a more stringent control measure than having to implement the EEDI and SEEMP into UK law, and it would send a clear signal that the UK means to reduce emissions from shipping. This is an important issue and one would hope to see clarity in future UK government policy.
At a global level, the most significant regulatory framework to emerge for the reduction of greenhouse gases from ships is the establishment of an Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. These regulations were adopted in 2011 by the IMO and have been incorporated into the MARPOL Annex VI, with compliance expected to begin in 2013. The EEDI sets specific energy efficiency requirements for different ship types and in effect acts as a performance standard, and the SEEMP requires ship owners to establish and maintain a plan for managing energy efficiency in ship operations. While the effectiveness of the EEDI and SEEMP will become apparent with time, at the outset they appear to be a step in the right direction for the future of shipping emissions, which to date have only had bottom-up control measures. With such measures, ships are now required to keep on board a Ship Energy Efficiency Operational Indicator (EEOI) and a SEEMP Log to prove the continuous improvement of the ship’s energy efficiency and carbon dioxide emissions. Failure to comply with these requirements could be detrimental to the ship’s operation as it can result in sanctions from classifier societies and the contravening State.
The IMO (International Maritime Organisation) has estimated that shipping emissions could be reduced by 20-75% by 2050 through fuel efficiency and deployment of existing energy efficiency technologies, and this can be achieved by implementing new regulations and ensuring that the current regulations are adhered to. The UK is an important case study due to its role as an international maritime hub and its prominence in both regional and global efforts to reduce shipping emissions. Since shipping is such an integral part of the UK economy and shipping activity is expected to increase in the future, it is essential that the UK sets an example for other countries to follow by adopting and enforcing effective regulations to abate GHG emissions.
2.3. Evaluation of Previous Studies
In many cases, these studies rely on indirect observations, with their authors piecing together evidence to support their conjectures. This was the approach in the two so-called gap studies underpinning the 1997 protocol, which both concluded that there was a “significant reduction in emissions” from the UK fleet. Using a mix of shipping statistics, fuel use, expert interviews and policy analysis, one study estimated that UK CO2 emissions dropped by nearly 18% between 1990 and 1995, falling from 14.5m to 11.9m tonnes. The other was an economy-wide decomposition analysis assessing the impact of all transport and stationary energy services on the roll-back of CO2 emissions between 1990 and 1997. They suggested the shipping industry contributed 3.8% to the overall reduction of CO2 from UK energy uses over the period, despite an increase in shipping CO2 emissions in absolute terms.
It is difficult to measure the effectiveness of current regulations in reducing UK shipping emissions. This is because shipping is a global activity and UK regulations are only part of a wider range of regulatory activities which touch on emissions control and may have a marginal impact.
3. Methodology
At a later stage, a survey questionnaire will be used as a qualitative measure of the awareness and perceived efficacy of these regulations from shipping industry personnel. This will gather more subjective data to compare with the objective data of emission levels.
Case study #1 is the voluntary UK initiative as a forerunner to the EU system, which aims to reduce emissions from seagoing ships in EU ports, this will be compared to the recent initiatives and those still in progress. Case study #2 focuses on the international ban the anti-fouling paint TBT and will show whether an international regulation had a more significant effect than the EU version. Case Study #3 is the most recent UK regulation to be assessed, the implementation of the MARPOL Annex VI for the prevention of air pollution from ships which has sparked much debate as to whether it is too costly to shipping industries in the current economic climate. An overall assessment and comparison of all policies will seek to discern whether the Law of Diminishing Returns holds true in this case, where the cost of further regulation will be excessive compared to the amount of further emission reductions.
The case studies will be presented chronologically to illustrate the change over time, with a background to the policy, its objectives, the methods employed to achieve these objectives, and results followed by an evaluation of the extent to which the regulation was effective, using shipping emission data as a measure of the change. An Event History Analysis will be conducted on each case study to explain which regulatory policies and world events were influential in changes to the level of shipping emissions. This method analyzes sequences of events to determine the pattern of development and whether certain events are linked to changes in the dependent variable. This linkage to world events is important in understanding external factors making it imperative the regulation’s efficacy.
The research problem and the limitations set by the project brief led to the conclusion that the most effective research method would be the case study approach. Case studies are an in-depth analysis of an individual event, organization, or industry, and have been consistently used in past academic research for public policy and regulation of the maritime industry. They were chosen primarily because they match the criteria outlined in the research objectives and give an accurate and thorough picture of the effectiveness of environmental regulation on reducing shipping emissions. With the UK being a trailblazer in regulation amongst the OECD and one of the world’s largest shipping nations, the case studies chosen will reflect the range of policies in the international context through comparison with those abroad and analysis of the development and impact of several different regulations on the shipping industry. This will be done through primary research of involved individuals in the shipping industry, as well as using company reports and existing research as primary sources of data.
3.1. Research Design
The initial plan was to examine the emissions produced by a specific shipping company and to compare these to the regulations which are currently in place. This is termed a before and after study. However, due to the difficulties associated with obtaining such data, it was decided that this type of study would not be the most feasible. The ideal study would have data on the emissions produced over a certain period of time, with data on the fuel consumption and activity of the ship at each point. The study would then use this data to compare the emissions to the amount of fuel used over this period in order to calculate the specific emissions produced. This would enable an assessment to be made against the Energy Efficiency Operational Indicator (EEOI) which grades a vessel’s CO2 output against a certain level of cargo transport. Though obtaining this sort of data was not possible, as data on the fuel consumption of ships is commercially sensitive and thus hard to obtain. Therefore, a decision was made to do a quantitative study based on the EEOI indicator. This has involved obtaining large amounts of data about ship activity and fuel consumption on a variety of voyages, then using this to calculate the EEOI and assessing whether this has improved over a recent time period.
This research aims to determine the effectiveness of the current regulations in reducing shipping emissions. In order to do this, a detailed analysis will be made using data from various sources. By examining the actual emissions and the regulations that have been implemented, it is hoped that an accurate assessment of their effectiveness can be made. This will enable conclusions to be drawn and recommendations to be made on how to further reduce shipping emissions. In order to do this, the research is divided into several different sections.
3.2. Data Collection
The research on which this essay is based draws from primary and secondary sources of data. Primary data was collected through the use of semi-structured interviews, conducted with individuals from a number of stakeholder groups. These interviews were informal and the respondents had the flexibility to expand on questions asked by the interviewer. This was done in order to attain the most detailed response possible. The downside to this primary data method is that the data collected was qualitative in nature and thus was somewhat difficult to categorize into the three chosen themes of legal, psychological, and procedural effectiveness of MARPOL 73/78. Furthermore, those individuals interviewed from ship owner and port sectors had a detailed knowledge of how MARPOL 73/78 affects their roles within shipping and were therefore able to give comprehensive responses on how this legislation affects them.
Conversely, the same could not be said for those personnel interviewed from the classification societies, who often had to be prompted for information about MARPOL 73/78 before answering the original question. This primary data method did, however, allow concepts to be explored in greater depth and for relationships between them to be unraveled. It must also be noted that mentioned interviewees often commented on subthemes within the three main research themes and much data collected did not fit directly into these. Nevertheless, much of this data is still relevant and contributes to results later discussed.
3.3. Data Analysis
• Data used was collected from governmental departments, supporting databases, and previously published information, ensuring that it was reliable and accurately portrayed the shipping industry’s emission trends. A time frame from the introduction of MARPOL Annex VI in May 2005, aimed at reducing air pollution from ships, until the present day, was chosen for analysis. Such data was not used for any statistical significance testing, as opposed to data post-2005, due to conversion problems with tonnages to DWT. Due to the nature of the shipping industry, air pollution statistics, particularly those specific to shipping, are difficult to obtain, and thus it was necessary to use emissions to the atmosphere as a proxy indicator for air pollution. High sea emissions, over 40% of the total at that time, were not attributed to any particular country and thus were excluded from the analysis.
• Despite confounding variations in shipping activity levels, for example during global economic crises, and engine and fuel types, often dependent on the age of the vessel, useful analysis of emission trends by flag was noted when these various factors were considered. A simple detailed example is with the decline in domestic UK transport and thus UK ships registered under the UK flag between 1980 and 2009. Similarly, an impact assessment regarding sulfur content fuel regulations on fuel efficiency and vessel activity was made, but exceeding the scope of this paper.
4. Findings and Analysis
After discussing the current regulations, the next stage is to compare them to international standards. The purpose of this comparison is to determine whether the UK’s current regulation on shipping emissions is on par with international standards, whether it can be improved, or whether it falls behind. There are several possibilities if the UK’s current regulation on shipping emissions is equal to international standards. It could mean that the UK is already in line with international standards, or it could indicate a lack of progress in the regulation, with the UK falling behind. If the regulation falls short of international standards, it can be assumed that other countries are still working towards reducing shipping emissions, and the UK needs to respond positively and strengthen its regulations. However, if the current regulations are better than international standards, it may be a bit confusing because there is no inappropriate regulation when a country is actively working to reduce emissions. Nevertheless, it is recommended to consider overrated regulations to expedite the process of reducing emissions. This comparison section would benefit from more scenarios about future regulations, as well as the inclusion of factual data.
Findings and analysis of the effectiveness of UK regulations in reducing shipping emissions are divided into three different sections. The first section, 4.1, will discuss and analyze the impacts of current UK regulations on shipping emissions, whether they are positive or negative. By examining the current regulations on shipping emissions, this research will attempt to determine the effects of these regulations. A positive impact would indicate that the current regulations are effective and could serve as a reference for other countries looking to implement similar regulations. On the other hand, a negative impact would suggest that the regulations are insufficient in reducing emissions from shipping, possibly due to limitations in the regulations or other factors. To gain a better understanding of this section, a thorough analysis of UK regulations and their relation to climate change in the shipping industry is necessary. It is also recommended to conduct further research in this section to compare shipping emissions under regulation pressure with those that have no pressure at all, in order to contrast the impacts of shipping emissions regulations.
4.1. Impact of Current UK Regulations on Shipping Emissions
Since the introduction of international environmental regulations on shipping emissions, the UK has put forward various policies and alternatives to keep up with and maintain international standards. MARPOL Annex VI was initially the main source of regulation for shipping CO2 emissions in the UK. In 2003, the UK government outlined a voluntary agreement with the shipping industry to reintroduce the taxation of fuel used by domestic passenger and freight ships. The UK government stated that if the industry failed to make significant progress by 2012, they would consider implementing an emissions trading scheme. There is no record of whether this agreement had any effect on the industry or emissions. In 2007, a Climate Change Bill was outlined with a commitment from the government to reduce CO2 emissions by 60% before 2050. This timeframe and commitment to emissions reductions align with the future policies and standards of the IMO, so the implementation of these will serve as a base for reductions. In recent years, shipping has been included in the UK’s Carbon budgets, with the agreement being supported by both the Committee on Climate Change and the industry itself. The UK Chamber of Shipping has been supportive of including shipping in carbon budgets if it helps the industry to work coherently with the future policies of the EU and the global regulations of the IMO. This agreement has, in turn, led to a greater contribution from the industry towards global climate discussions. An interview conducted with a Brigadier Reddit, Chairman of the UK’s shipping delegation at an IMO meeting in 2013, states that the UK is doing more to influence regulation in the EU and globally to steer an acceptable method of emissions reductions for the shipping industry.
4.2. Comparison with International Standards
The comparison of UK regulations with those mandated by MARPOL is an important one, given that MARPOL is the overarching standard that member states are aiming to meet. UK standards in regulating SOx emissions comply with those of MARPOL Annex VI, with both aiming to achieve a 0.5% sulphur content in fuel by 2020, and a 0.1% content shortly after. However, MARPOL does give scope for a state to be more lenient than the global standard if the state can show that the implementation of the standard would cause them ‘serious social or economic problems’. This is expressed in Regulation 14 of MARPOL Annex VI. An example of this is seen in the case of Iceland which has a fuel sulphur content of 1.5% inside its territorial sea and around its coastline, undoubtedly due to the higher cost of low-sulphur fuels. Analysis of government information reveals that there is presented no such scientific evidence that the use of low-sulphur fuels would lead to ‘serious social or economic problems’ in the UK. Therefore, there is an argument that an amendment to enforce a stricter standard inside the UK’s SECAs would not be in breach of the MARPOL regulation. This is essential as enforcement of a ‘more stringent’ standard by a state under the scope of MARPOL has been the target of recent litigation, for example in the case Norway vs Japan in 2008 on the issue of whaling. This resulted in judgment by the International Court of Justice in which the ICJ stated that Norway’s implementation of a stricter standard on whaling, i.e. a moratorium, was in fact not in violation of international obligations. The UK, therefore, is fully capable of enforcing greater standards on sulphur within its SECAs. The situation is less clear with Regulation 18 of MARPOL Annex VI, which states that the global sulphur standard outside SECAs will change to 0.5% m/m by 2020, with an express intent of further reduction.
4.3. Identification of Gaps and Limitations
At a global level, the IMO has guidelines that state fees/fiscal incentives can be an effective tool in deterring the use of high sulfur fuels. However, the only country to successfully enforce this system is Norway, which will be discussed later in this section.
Emission-related port fees were planned to be introduced at ports of EU member states in the 2002/2003, but to date, no country has successfully introduced them. The fees would provide a financial incentive to reduce emissions and would be paid by the owner, agent, or other entity financially responsible for a visiting ship. The amount of fee payable would be dependent on the quantity of emissions from the ship’s visit. This is seen as a highly cost-effective way of reducing emissions, and studies have shown that a fee of 80 euros per tonne of SOx reduced would result in a 50% reduction of SOx emissions from land-based sources. However, there were concerns about the impact it would have on particular member states and possible discrimination of ships’ flags, so the legislation was largely viewed as a failure at the EU level.
The Climate Change Levy (CCL) fails to distinguish between ships that emit high levels of air pollutants and those which are environmentally friendly. The CCL is a tax on fuel used in industry, transport, and the public services and is charged on the units of energy (KwH) used. This results in overpayment from companies whose ships emit lower levels of CO2 and would act as a very small stimulus for change for companies with high emission ships. Also, the CCL is not ring fenced, meaning the revenue collected will not be directly invested into projects aimed at reducing CO2 emissions from shipping.
All of these aspects are much improved upon compared to previous regulations. However, a number of gaps and limitations still exist. These include the lack of an environmentally based tax imposition to act as a fuel tax, use of NOx and SOx/Particulate matter emission levy, accelerated capital depreciation for environmentally friendly ships, and emissions related port fees.
5. Conclusion
The analysis has also identified the situations in which regulations on shipping emissions have conflicts with established provisions of International Maritime Law. This is notably the case with regulations devised speculatively by certain flag states in their efforts to gain market share of ship registration. Such regulations have led to ‘flagging out’ and ‘regulatory avoidance’ practices, whereby shipping companies register ships in states offering more favorable or less stringent regulatory frameworks. This enables them to avoid the high costs of regulation compliance and attain a competitive advantage. Regulatory avoidance methods lead to repositioning of ship operations and have no net effect on global emission reduction. They also undermine the primary principle of International Maritime Law, whereby ‘conditions of competition’ between states are not to be distorted due to regulation of shipping companies from different states. This conflicts with more recent regulations such as EU MRV, under which companies are required to monitor and report on ship emissions and incur financial penalties for non-compliance. The existence of these conflicting situations suggests that the effectiveness and impact of current and future shipping emission regulation will require a careful balance of interests and a thorough understanding of shipping market behavior.
In conclusion, the analysis has suggested that the international shipping industry is subject to the ‘rebound effect’. Current UK policy and international regulation have resulted in a number of fuel efficiency improvements, which have decreased shipping fuel consumption and reduced emissions of CO2. This is to be expected. However, the subsequent reduction in freight transportation costs has caused an increase in shipping volume, thus partially offsetting the emission reductions that were expected to result. As a result, shipping emissions have not decreased as substantially as they would have done. The ‘rebound effect’ has undermined the effectiveness of emission reduction strategies, such as the implementation of slow steaming or technology improvements. The effect of policy measures is often eroded, as increased fuel efficiency leads to cheaper transport, which increases the economic viability of distant foreign markets and encourages more international trade. Considering the ‘rebound effect’, it is questionable whether increased fuel efficiency will result in lower emissions of CO2 and a reduction in environmental impact. It is more likely that it will lead to increases in trade volume and an increase in emissions, although at a lower rate than if there had been no efficiency improvements.
5.1. Summary of Findings
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The findings of the literature show a number of interesting issues. The research indicates that the current regulatory framework is not effective in reducing emissions. It shows that a number of market-based measures are hampered by legal or economic constraints on a global level. In addition, the UK has opted out of part of the Third Maritime package which has limited their scope to further reduce emissions. Further issues are identified where companies may bypass regulations through registering vessels in flags of convenience or by conducting activity in countries outside of the UK. The quality and efficacy of regulation is also in question as there are identified issues of poor monitoring and enforcement of regulation.
These issues have caused an increase in shipping emissions which have often been overlooked. This is in part due to the UK government shifting its priority towards policy integration at a global level, even though there is evidence to suggest that this has been ineffective. The research also identifies that there is a lack of public awareness of shipping emissions which is a contributing factor to the low priority placed on the issue.
5.2. Implications and Recommendations
In the short term, there may be economic penalties and increased costs with reducing sulfur content of marine fuel. There is potential for ships to use diesel oil and after treatment technologies, so fuel switching may be delayed or avoided completely. It will require stringent enforcement to ensure compliance on all ships in the fleet. It may give port authorities an added incentive to refuse entry to substandard ships that do not meet the requirements. This may help to remove older ships without modern emissions controls from the market, scrapping the worst polluters. Replacing older tonnage with more efficient modern ships will also have an effect in reducing greenhouse gas emissions, but the net effect depends on the global nature of shipping and the potential for fuel switching. The effectiveness of any measure will benefit from consistent international rules, especially when economic implications and global market distortions are considered. An effective regulatory system also requires proper monitoring and swift action to deal with any adverse effects mitigation measures. Finally, consumer awareness about which shipping services are environmentally friendly may affect the demand for sea transport and therefore its impact on the environment.
The long-term implications for reducing GHG emissions and air pollution from ships are dependent on future energy availability, regulatory developments, and technology progress. Global and regional oil availability and the price spread between high and low sulfur fuels may determine if special fuels are a feasible long-term option. Actions to further reduce the sulfur content of marine fuel or limit GHG emissions may force a transition to cleaner fuels or non-conventional energy sources. This will increase R&D into new ship propulsion and energy supply technologies. If the development of cleaner fuels and emissions reduction technologies proves infeasible for some ship types, there may be a shift in the mix of ship types and the services they provide, in turn affecting the quantity and type of sea transport. The full extent of these implications is uncertain, and the outcome depends on the future global state of energy and the relative importance of environmental and economic issues in the shipping industry.
