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Further Progress Made by MEPC 61 (September/October 2010) on Technical, Operational and Market-Based Measures

International maritime transport is the most energy efficient mode of mass transport, and made only a modest contribution to global CO2 emissions of 2.7% in 2007  (Figure 1) while carrying 90% of world trade.


Figure 1: Global emissions of CO2 in 2007 (Second IMO GHG Study 2009)

A global approach for further improvements in energy efficiency and emission reduction is needed as sea transport is predicted to continue growing significantly in line with world trade (Figure 2).
 Figure 2: World fleet fuel consumption (except naval vessels) from different activity-based estimates and statistics (Second IMO GHG Study 2009)

IMO’s work on enhanced energy efficiency and GHG emission control has three distinct building blocks and the Organization has over several years developed technical and operational reduction measures that will when fully implemented significantly improve the maritime sector’s carbon footprint. The third building block is the market-based mechanisms where IMO currently is working in accordance with a work plan culminating in 2011.

Technical and Operational Measures

The most important technical measure is the Energy Efficiency Design Index for new ships (EEDI) that will require a minimum energy efficiency level per capacity mile (e.g. tonne mile) for different ship type and size segments
(Figure 3 shows a range of typical CO2 efficiencies of surface cargo carriers). With the level being tightened incrementally every five years the EEDI will stimulate continued technical development of all the components influencing the fuel efficiency of a ship.
Figure 3: Typical ranges of CO2 efficiencies of surface cargo carriers
(Second IMO GHG Study 2009).
On the operational side, a mandatory management tool for energy efficient ship operation (SEEMP) has been developed to assist the shipping industry in achieving cost-effective efficiency improvements in their operations using the Energy Efficiency Operational Indicator (EEOI) as a monitoring tool and benchmark.
Having considered means by which technical and operational measures could be introduced in the Organization’s regulatory regime, the Marine Environment Protection Committee (MEPC), at its sixty-first session, noted the desire of some States party to MARPOL Annex VI – Regulations for the prevention of air pollution from ships to request the Secretary-General to circulate proposed amendments to that Annex, to make mandatory, for new ships, the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP)), both of which have been previously disseminated for voluntary use. The circulated draft amendments would then be considered by the Committee at MEPC 62 with a view to adoption under MARPOL Annex VI. MEPC 61 also noted, however, that some other States did not support the circulation of such amendments.
Although decisions as to how to proceed with the next step of IMO’s climate change strategy were not reached by consensus at MEPC 61, the Committee made noteworthy progress on all three elements of its GHG work, namely technical, operational (description of the package of technical and operational reduction measures for ships agreed by MEPC 59) and market-based measures, and it is expected that further substantial progress will continue to be made at its next meeting in July 2011.
The EEDI will establish a minimum energy efficiency requirement for new ships depending on ship type and size and is a robust step-wise mechanism to increase the energy efficiency of ships for many decades to come. The EEDI is a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry. As long as the required energy-efficiency level is attained, ship designers and builders would be free to use the most cost-efficient solutions for the ship to comply with the regulations. The reduction level in the first phase is set to 10% and will be tightened every five years to keep pace with technological developments of new efficiency and reduction measures. IMO has set reduction rates until the period 2025 to 2030 when a 30% reduction is mandated for most ship types calculated from a baseline representing the average efficiency for ships built between 1999 and 2009.The EEDI is developed for the larger and most energy intensive segments of the world merchant fleet and will embrace 72% of emissions from new ships covering the following ship types: oil and gas tankers, bulk carriers, general cargo and container ships. For ship types not covered by the current formula, suitable formulas will be developed in the future addressing the largest emitters first.
The SEEMP establishes a mechanism for a shipping company and/or a ship to improve the energy efficiency of ship operations. The SEEMP provides an approach for monitoring ship and fleet efficiency performance over time using the Energy Efficiency Operational Indicator (EEOI) as a monitoring tool and serves as a benchmark tool. The SEEMP urges the ship owner and operator at each stage of the plan to consider new technologies and practices when seeking to optimize the performance of a ship. The Second IMO GHG Study 2009 indicates that a 20% reduction on a tonne-mile basis by mainly operational measures is possible and would be cost-effective even with higher fuel prices than those currently experienced. The SEEMP will assist the shipping industry in achieving this potential.

Market-Based Measures

The package of the technical and operational measures is a very important step in ensuring that the shipping industry has the necessary mechanisms to reduce its GHG emissions. However, the Committee has at several sessions recognized that these measures would not be sufficient to satisfactorily reduce the amount of GHG emissions from international shipping in view of the growth projections of world trade. Therefore, market-based mechanisms have been considered by the Committee in line with Assembly resolution A963(23) and its GHG work plan. A market-based mechanism would serve two main purposes:
  1. off-setting in other sectors of growing ship emissions and providing an economic incentive for the maritime industry to invest in more fuel-efficient ships and technologies; and
  2. to operate ships in a more energy-efficient manner.
The MEPC 59 agreed by overwhelming majority that a market-based instrument was needed as part of a comprehensive package of measures for regulation of GHG emissions from international shipping. The MEPC 59 further agreed by consensus that any regulatory GHG regime applied to international shipping should be developed and enacted by IMO as the sole competent international organization with a global mandate to regulate all non-commercial aspects of international shipping.  As shipping is a global industry and ships are competing in a single global market, it must be regulated at the global level to be environmentally effective (avoid Carbon leakage) and to maintain a level playing field for all ships, irrespective of flag or ownership.
Following an in-depth discussion on market-based measures, the MEPC 59 agreed on a work plan culminating in 2011 for its further consideration of market-based measures.
The MBM proposals under review range from proposals for contribution schemes for all CO2 emissions from international shipping (to be collected by fuel oil suppliers and transferred to a global fund), or only emissions from ships not meeting the EEDI requirement, via emission trading systems, to schemes based on the actual ship’s efficiency both by design and operation. Among the measures are also proposals for rebate mechanisms and other ways to accommodate the difference in the socioeconomic capability between developing and developed states, as well as other suggestions on how the special needs and circumstances of developing countries can be accommodated. Some of the proposed schemes would reward efficient ships and ship operators by recycling parts of the financial contribution to the most efficient ones based on benchmarking. Other schemes would drive investments in more energy efficient technologies and improvements in operations by setting compulsory efficiency standards for all vessels (new and existing) and the trading of efficiency credits. Several of the proposed mechanisms, the contributions schemes (levy) inherently and the trading schemes through auctioning; would generate funds the greater part of which would be used for climate change purposes in developing countries. For a further description of the proposed measures, refer to the summary of the ten “Market-based Measures Proposals under consideration within the Expert Group on Feasibility Study and Impact Assessment of Possible Market Based Measures (MBM-EG)”.
The MEPC 59 noted that there was a general preference for the greater part of any funds generated by a market-based instrument under the auspices of IMO, to be used for climate change purposes in developing countries through existing or new funding mechanisms under the UNFCCC or other international organizations (such as IMO or organizations established under its auspices).
The MEPC 61 held an extensive debate on how to progress the development of suitable market-based measures (MBM) for international shipping, following the submission of a comprehensive report by an Expert Group which carried a feasibility study and impact assessment of several possible market-based measures submitted by governments and observer organizations. Links to the report of the work undertaken by the Expert Group on Feasibility Study and Impact Assessment of possible Market-based Measures, to the presentation given by the Expert Group at MEPC 61, to the study from Vivid Economics commissioned by the International Maritime Organization’s Marine Environment Protection Committee's Market-Based Mechanisms Expert Group (MBM-EG) on the “Assessment of the economic impact of the Market-based Measures” and to the presentation of Vivid Economics study can also be found on the top right side of this page.
The scope of the work of the Expert Group was to evaluate the various proposals on possible MBMs, with the aim of assessing the extent to which they could assist in reducing GHG emissions from international shipping, giving priority to the maritime sectors of developing countries, least developed countries (LDCs) and Small Island Developing States (SIDS). The MBM proposals under review ranged from a contribution or levy on all CO2 emissions from international shipping or only from those ships not meeting the EEDI requirement, via emission trading systems, to schemes based on a ship’s actual efficiency, both by design (EEDI) and operation (EEOI).
MEPC 61 agreed on the Terms of Reference for an intersessional meeting of the Working Group on GHG Emissions from Ships, to be held in March 2011, tasking the group with providing an opinion on the compelling need and purpose of MBMs as a possible mechanism to reduce GHG emissions from international shipping. The meeting is also tasked to further evaluate the proposed MBMs considered by the Expert Group, including the impact of the proposed MBMs on, among others, international trade, the maritime sector of developing countries, as well as the corresponding environmental benefits. A report from the intersessional group will be submitted to MEPC 62 in July 2011 enabling the Committee to make further progress in accordance with its work plan.