CO2 emission indexing scheme
The International Maritime Organisation (IMO), a specialized UN agency, has adopted a strategy with regard to policies and measures, focusing mainly on further development of a CO2 emission indexing scheme for ships and further evaluation of technical, operational and market-based solutions.
The basic idea behind a CO2 emission index is that it describes the CO2 efficiency (i.e., the fuel efficiency) of a ship, i.e., the CO2 emission per tonne cargo per nautical mile. This index could, in the future, assess both the technical features (e.g., hull design) and operational features of the ship (e.g., speed).
In June 2005, at the 53rd session of the Marine Environment Protection Committee of IMO (IMO, 2005), interim guidelines for voluntary ship CO2 emission indexing for use in trials were approved. The Interim Guidelines should be used to establish a common approach for trials on voluntary CO2 emission indexing, which enable shipowners to evaluate the performance of their fleet with regard to CO2 emissions. The indexing scheme will also provide useful information on a ship’s performance with regard to fuel efficiency and may thus be used for benchmarking purposes. The interim guidelines will later be updated, taking into account experience from new trials as reported by industry, organisations and administrations.
A number of hurdles have to be overcome before such a system could become operational. The main bottleneck appears to be that there is major variation in the fuel efficiency of similar ships, which is not yet well understood (Wit et al., 2004). This is illustrated by research by the German delegation of IMO’s Working Group on GHG emission reduction (IMO, 2004), in which the specific energy efficiency (i.e., a CO2 emission index) was calculated for a range of container ships, taking into account engine design factors rather than operational data. The results of this study show that there is considerable scatter in the specific engine efficiency of the ships investigated, which could not be properly explained by the deadweight of the ships, year of build, ship speed and several other ship design characteristics. The paper therefore concludes that the design of any CO2 indexing scheme and its differentiation according to ship type and characteristics, requires in-depth investigation. Before such a system can be used in an incentive scheme, the reasons for the data scatter need to be understood. This is a prerequisite for reliable prediction of the economic, competitive and environmental effects of any incentive based on this method.
Voluntary use and reporting results of CO2 emission indexing may not directly result in GHG emission reductions, although it may well raise awareness and trigger certain initial moves towards ‘self regulation’. It might also be a first step in the process of designing and implementing some of the other policy options. Reporting of the results of CO2 emission indexing could thus generate a significant impetus to the further development and implementation of this index, since it would lead to widespread experience with the CO2 indexing methodology, including reporting procedure and monitoring, for shipping companies as well as for administrations of states.
In the longer term, in order to be more effective, governments may consider using CO2 indexing via the following paths:
1. The indexing of ship operational performance is introduced as a voluntary measure and over time developed and adopted as a standard;
2. Based on the experience with the standard, it will act as a new functional requirement when new buildings are ordered, hence over time the operational index will affect the requirements from ship owners related to the energy efficiency of new ships;
3. Differentiation of en route emission charges or existing port dues on the basis of a CO2 index performance;
4. To use the CO2 index of specific ship categories as a baseline in a (voluntary) baseline-and-credit programme.
Economic instruments for international shipping
There are currently only a few cases of countries or ports introducing economic instruments to create incentives to reduce shipping emissions. Examples include environmentally differentiated fairway dues in Sweden, the Green Award scheme in place in 35 ports around the world, the Green Shipping bonus in Hamburg and environmental differentiation of tonnage tax in Norway. None of these incentives are based on GHG emissions, but generally relate to fuel sulphur content, engine emissions (mainly NOx), ship safety features and management quality.
Harrison et al. (2004) explored the feasibility of a broad range of market-based approaches to regulate atmospheric emissions from seagoing ship in EU sea areas. The study focused primarily on policies to reduce the air pollutants SO2 and NOx, but the approaches adopted may to a certain extent also be applicable to other emissions, including CO2. According to a follow-up study by Harrison et al. (2005) the main obstacles to a programme of voluntary port dues differentiation are to provide an adequate level of incentive, alleviating ports’ competitive concerns and reconciling differentiation with specially negotiated charges. Swedish experience suggests that when combined with a centrally determined mandatory charging programme, these problems may be surmountable. However, in many cases a voluntary system would not likely be viable and other approaches to emissions reductions may therefore be required.
An alternative economic instrument, such as a fuel tax is vulnerable to evasion; that is ships may avoid the tax by taking fuel on board outside the taxed area. Offshore bunker supply is already common practice to avoid paying port fees or being constrained by loading limits in ports. Thus even a global fuel tax could be hard to implement to avoid evasion, as an authority at the port state level would have to collect the tax (ECON, 2003). A CO2-based route charge or a (global) sectoral emission trading scheme would overcome this problem if monitoring is based on the carbon content of actual fuel consumption on a single journey. As yet there is no international literature that analyzes the latter two policy options. Governments may therefore consider investigating the feasibility and effectiveness of emission charges and emission trading as policy instruments to reduce GHG emissions from international shipping.