ONE of the European Union’s most important environmental lawmakers has unveiled regulation that would force ships to operate under an emissions cap and trade system, increase their carbon intensity performance and contribute to a European maritime decarbonisation fund.

A draft regulatory proposal by the European Parliament’s maritime emissions rapporteur, Greens MEP Jutta Paulus, calls on the EU to make January 2021 the date from which it will put into effect rules relating to the issue and allocation of carbon emissions allowances to ships using EU ports.

The proposed rules would mark the first major legally binding greenhouse gas emissions restrictions on international shipping. This would affect almost 12,000 ships and could force owners from various jurisdictions to change their business operations to comply.

This proposal is part of the early stages of what could be a long process to amend the EU Monitoring, Reporting and Verification regime. The MRV requires vessels of 5,000 gt and above that use EU ports to provide the EU with annual data on their carbon emissions, fuel consumption and energy efficiency.

Ms Paulus’ amendments to a suggested text prepared by the European Commission calls on those vessels under the MRV to cut their carbon emissions per work of transport by 40% by 2030 compared with 2018. This point echoes the language used by the IMO in its initial greenhouse gas strategy, but the base year there is 2008,  widely considered as a year with one of the highest level of shipping emissions on record.

The EU’s 40% cut would be based on the average performance per category of ships of the same size and type included in the 2018 report of the EU MRV, the first of its kind.

The rapporteur proposes that the commission set by December 1, 2020 the total quantity of allowances for the maritime industry, in line with other sectors, the method of their allocation through auctioning, and the special provisions for the EU member states that will be administering them.

Companies in the EU currently operate under a carbon allowance system, known as the Emissions Trading System, which caps their permitted emissions. Companies can also buy more allowances from the EU or in some cases receive them without cost. They can then trade their allowances with other companies.

International shipping has been temporarily left out of the ETS, with the EU agreeing back in 2017 to hold off on action until 2023, by when the IMO should have adopted a global decarbonisation measure.

However, the status quo in the EU has changed considerably over the past few months, with the new European Commission being vocal about its intention to include shipping in the ETS, much to the dismay of the international industry, which has long opposed action from the EU in favour of global regulations.

The changes envisaged in the proposal would have significant consequences for the shipping industry.

The European Parliament’s environment committee has to agree to the proposal before the parliament plenary discusses it. When that text is approved, the Council of the EU, representing the EU governments, will make its own suggestions on the proposal. This will be followed by more deliberations from the parliament and again in the council, culminating in a compromise agreement.

With both the commission and the parliament firmly in support of shipping’s inclusion in the ETS, the shipping industry’s strongest chance of thwarting those plans will be lobbying national governments to block or soften the undesirable parts of the text.

Another maritime research fund and new GHG rules

At least 30% of the revenues generated from the auctioning of those allowances to shipping companies would be used to finance a maritime decarbonisation fund that would run from 2021-2030, according to the rapporteur’s proposal.

The fund’s goal would be to “improve the energy efficiency of ships and support investment in innovative technologies and infrastructure to decarbonise maritime transport, including in short sea shipping and ports, and the deployment of sustainable alternative fuels and zero-emission propulsion technologies”.

Shipping companies may also have to pay an annual membership contribution to the fund based on their ships’ emissions the previous year.

Shipping groups have already suggested the creation of a $5bn international maritime research fund based on a $2 levy for each tonne of fuel ships consume. But they want that to happen through the IMO, which will discuss the proposal during an environmental meeting in London in April.

More emissions obligations for shipping companies could come within the next decade. Ms Paulus wants the Commission to review the implementation of the MRV regulation, and to propose more requirements to reduce air pollutants from vessels.

The MRV is currently used to report carbon emissions from ships. But Ms Paulus wants companies to report all of their relevant greenhouse gas emissions, not just CO2. Her proposal asks the commission to specify by the end of 2021 how companies can report those.

Lingering questions for the MRV 

In 2019, the first year the emissions data of the MRV was published, the system faced significant controversy. The initial figures had been mistakenly inflated due to reporting errors, raising questions about who was taking responsibility over the database and whether it had any real credibility anyway. 

What is more, despite a deadline for all reports to be submitted by April 30, 2019, the database continues to be amended and updated, resulting in fluctuations. Ships using EU ports in 2018 emitted 134m tonnes of CO2, according to the data issued in July. The latest report, however, shows they emitted 140m tonnes of CO2 in 2018.

In an apparent attempt to address some of the concerns, Ms Paulus wants the EU to give the European Maritime Safety Agency the authority and resources to check the emissions reported by the accredited verifiers.