Outlook 2018: Regulation
THE shipping industry will have to clean up its act in 2018 as it enters a new phase of transparency, augmented responsibilities and increased scrutiny by regulatory authorities.
Next year will mark the introductory stages of various obligations for shipowners, bringing home the fact that things are really changing in terms of environmental and data regulations. These are no longer conceptual discussions about changes happening in the future.
While regulators will have their work cut out for them in enforcement, compliance with emission reporting and controls will certainly be the dominant regulatory challenge for owners looking ahead.
The party is over for the polluters, so to speak.
The International Maritime Organization will adopt a five-year strategy on the industry's reduction of greenhouse gas emissions in April 2018 during its Marine Environment Protection Committee 72.
The strategy, which will be revised in 2023 in favour of a final version, will directly affect every part of the maritime sector.
This will include an ambition for GHG emission levels, which could translate into CO2 reduction rates, to be achieved by a given date - likely to be 2050. The exact meaning of the level of ambition is still up for debate, however, and the IMO will have to decide in April 2018.
A set of mitigation measures the industry will have to apply to meet this level of ambition will also be included in the strategy. With regulators also expected to agree on the timelines of short-, medium- and long-term measures, the shipping industry could be looking at the adoption of new short-term measures in 2018. That is, of course, if regulators manage to agree on both the strategy and new measures at the same time.
Emission controls will ultimately mean a monumental shift in daily vessel operations. It may not be all bad news for the industry; for example, slow steaming can reduce emissions and overcapacity at the same time.
Moreover, regulators could learn from some of the shortcomings of other recent environmental regulation.
In July, the application of the Ballast Water Management Convention on the existing fleet was pushed back for two years, with many of the arguments in favour of the delay claiming that the existing technology was insufficient.
In a similar vein, the IMO agreed on a 2020 sulphur cap, leaving owners and refineries wondering how to best deal with the restrictions amid limited alternative fuel availability and the high cost of investment in liquefied natural gas-powered engines.
A clear IMO target on decarbonisation rates and dates, taking into account how the industry is evolving, could instead signal to potential investors that shipping is committed to a zero carbon future, providing a better business environment for the relevant technologies to be developed.
Dual reporting of emission data
Early in November this year, the shipping industry learnt that European Union negotiators agreed to add shipping to the bloc's revised Emissions Trading System text, but that regional action will potentially only be taken from 2023 onwards while the European Commission keeps tabs on the IMO's progress.
The industry, though, is not completely off the hook. Under EU rules, as of January 2018, owners using EU ports will have to begin monitoring their vessels' emission levels and fuel consumption. They will begin submitting the data to the commission from April 30, 2019 onwards, on an annual basis.
European regulators are not the only ones turning the screws on vessel operations. Following the introduction of the EU Monitoring Reporting and Verification period, the IMO's emission Data Collection System comes into effect on March 1, 2018.
The IMO DCS is generally seen as less stringent than the EU MRV. Among the main differences, is that the commission requires emissions data per voyage, whereas the IMO records total fuel, time and distance covered.
Until the EU aligns its system to the IMO's, shipowners will have to report to two separate authorities and comply with two different set of demands.
Emerging big data rules
The massive growth of personal data and its use have yet to be addressed from a regulatory perspective. But that will soon change.
Beginning on May 25, 2018, shipping companies that are either based in Europe, with EU-flagged vessels, or employ EU crew, will have to abide by the EU's General Data Protection Regulation.
Under the GDPR, employees have control over data that companies have on them and how they use it. The regulation requires that employees give their consent before employers collect data that affects them, and can request to see how the data has been compiled.
This has immediate impacts on crewing managers and shipping agencies, and is not something that owners can afford to fiddle with; non-compliance could result in fines of up to 4% of annual global turnover or €20m ($23.6m), whichever is greater.
The continual transition to onboard digital systems will also continue in 2018.
Non-tanker cargoships between 10,000 gt and 20,000 gt constructed before July 1, 2013 must have an Electronic Chart Display and Information System by the first safety survey conducted on or after July 1, 2018.
The Ecdis expansion comes in place as the IMO launches a coping exercise, from 2018 to the mid-2020s, to potentially develop regulations for autonomous vessels.
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