Late last week a significant development came from an equally significant slice of the global shipping community – support for action to reduce CO2 emissions from international shipping in the form of a global cap-and-trade system. International marine and aviation bunkers were excluded from the Kyoto Protocol, but if there is one thing I can be sure of seeing from Copenhagen is that this exclusion will no longer be the case. Shipping emissions will almost certainly be included and the shipping community will either grasp the opportunity to shape its future in terms of policy or it will have its future shaped for it by national governments and the UNFCCC.
The announcement comes in the form of a discussion document released by the British, Australian, Belgian, Norwegian and Swedish ship owners associations. The document clearly outlines the issue and challenges, spells out the advantages of a trading approach and then outlines two different constructions for a possible system. At this stage the document doesn’t discuss the scale of reductions, but I don’t think that is important right at this moment. Rather, the industry is taking a major step into the policy arena with a view to charting its own course foward (pun intended, sorry).
What really differentiates the two models in the document is the flow of money. In the “sectoral” approach, the industry pretty much creates its own allowances (although they originally come from the UNFCCC in the form of AAUs), auctions them, manages the revenue from the auctions and establishes registries and compliance mechanisms. Revenue management is not discussed in great detail, but it is clear that some portion is directed towards technology development. By contrast, the “distibuted” approach sees national governments being issued additonal AAUs to cover international marine bunkers (but only those governments with national targets also underpinned by AAUs) and the shipping market buying either CERs from developing country projects or AAUs from government auctions. The industry maintains its important role in the compliance process but has little control over the money flow. That rests largely with governments.
The flow of money is bound to be a divisive issue, with many shippers, as with big emitters in land based systems, arguing that they should be in control of the auction revenue raised. It is difficult not to be sympathetic with this, but the reality of our world is that governments control the money flow, not sectors or industry associations or even banks. This is almost certainly a subject for further postings.
I will certainly write more about shipping in the weeks ahead, but in the meantime I would recommend reading this document. The shipping community that put it together deserves a round of applause for taking on a difficult subject at a pivotal moment for the industry.
David,
The issue came up in Bangkok yesterday on the back of a recent report suggesting that if nothing were done around emissions from bunkering and other areas reduced emissions in line with the 50% target by 2050, then bunkering would account for 2/3 of all emissions by mid-Century. Obviously these assumptions are extreme, but the point was to highlight the inactivity of the industry under the IMO.
There appears to be reluctance for the UNFCCC to take on responsibility for bunkering from the IMO, but there is a desire for imaginative and well thought through input such as this.
David,
In case you are planning a trip to Copenhagen in the near future, please set aside some time for a visit to A.P. Moller – Maersk. We would like to share with you some of the innovation and thinking that takes place within the shipping and carbon capture and storage side of our organisation.
[…] a cap-and-trade approach for sectors such as shipping and aviation. The approaches described in my previous posting both rely on a carbon currency exisiting in the international agreement. The units are used as the […]