MRV Getting Set to Make its Mark

Malcolm Latarche
Malcolm Latarche

28 April 2017


For the shipping industry, regulatory deadlines come around with monotonous regularity and the readiness of the industry to meet them varies from well prepared to chaotic. Probably the most discussed deadline this year will be the 8 September coming into effect date for the ballast water convention but just days before that is another that will affect a large portion of the world fleet. By 31 August this year, almost every vessel in the world commercial fleet above 5,000gt registered in an EU or EEA flag state or registered elsewhere but planning to call to an EU or EEA port must have taken the first step in complying with the EU Monitoring, Reporting and Verification (MRV) regulations. Four months after that on 1 January 2018 the regulations developed by the EU come into full force. This will mean that affected ships have to monitor and report on CO2 emissions based on ship fuel consumption. Reporting is on both a per-voyage and an annual basis, and emissions monitoring plans and reports must be verified by an accredited verifier. The EU regulation is the near culmination of the organisation’s supposed desire to reduce greenhouse gas emissions by inclusion in the EU Emission Trading System (EU ETS). Established in 2005 the EU ETS was the first large greenhouse gas emissions trading scheme in the world, and remains the biggest it is a major pillar of EU climate policy. Its origins coincide with the coming into effect of the Kyoto protocol. Kyoto omitted shipping and aviation from any targets for national reductions preferring instead to leave such matters to the IMO and ICAO respectively. Believing that both organisations have been tardy in effecting and reductions, the EU has on several occasions made moves to include both industries in the EU ETS. Most shipping bodies recognise that shipping has an image problem as regards emissions although they can point to the various provisions of MARPOL Annex VI as evidence that serious and strenuous action is being taken to rectify that. NOx and SOx control measures have all but reached their end since the 2016 date for NOx Tier III has passed and all that remains is for new NOx control areas to be established and a 2020 date has been set for the 0.5% global cap on SOx outside of ECAs. IMO regulation on CO2 reduction began a little later than other exhaust gases and although many measures such as SEEMP have a mandatory element, they do not actually require any efficiency savings to be made. That changed when the Energy Efficiency Design Index (EEDI) was developed. Despite the fact that the formula used to calculate the EEDI for different ship types has been criticised and the concept itself is not fully accepted by the industry, it is a regulation that newly built ships have to comply with. In fact, by virtue of the EEDI rules, shipping is the only global industry that has been set universal targets for emission reduction. Every other industry remains either unregulated, regulated on a national basis or in the case of the EU regionally. The EEDI rules came into effect in 2011 when baseline emission standards were set and began to bite in 2015 when new ships needed to reduce emissions of CO2 by 10%. A further reduction of 10% will follow in 2020 and again in 2025 by which time ships will be required to be 30% more efficient than they were in 2011. In keeping with the concessions granted to developing countries under UN rules, ships flagged with developing countries are allowed a four-year deferment of any reduction deadline although none have so far taken advantage of this. Despite this initiative having a high cost to ensure compliance, some have argued that the cost savings coming from reduced consumption will more than offset any capital outlay. Not everyone agrees with that sentiment and some question if the technology will be available to allow the full reduction to be met without compromising safety and suitability of future ships to meet their prime purpose of moving goods. Considering the EEDI places a requirement of shipping to reduce the emissions from ships by 30% over 2011 standards by 2025, the objections of the EU that the industry is holding back are somewhat hypocritical. The EU’s regional commitment to emission reductions under the 2015 Paris Agreement are a cut of 40% over 1990 limits by 2030. The increase in ship efficiency achieved between 1990 and 2011 was quite considerable. Shipowners faced with soaring bunker bills were looking for savings in all manner of ways. Increasing ship size to gain from economies of scale was one way and it was in this period that the size of the largest container ships quadrupled from the 4,500teu of the C10 Post-Panamax types to the planned 18,000teu Maersk Triple E types. Generally better designs and use of CFD as well as improvements in engines all contributed to efficiency savings. All told, efficiency savings of new ships over this period probably exceeded 10% and when slow steaming which became imperative following the 2008 economic upheaval is added the saving on some ship types conceivably extends to a conservative 15%. That added to the 30% demanded by EEDI will mean new ships in 2025 will probably be 45% or so more efficient than ships built before 1990. Since EEDI is mandatory, the shipping industry can argue that from 2025 efficiency improvement in new ships will exceed the voluntary target of the EU under the Paris Agreement and while there will be a reasonably long phase out period of ships built before 2025, the industry will be able to show a continuing improvement in emission reductions on a per ship basis. Shipping’s share of man-made CO2 emissions has reduced from 3.2% to 2.5% since 2008 but those with an anti-shipping agenda say that because the industry’s emissions will increase by between 50 and 250% by 2050, the share attributable to shipping could be as much as 17%. It is a flawed argument of course because it relies on estimates of growth in world trade that have not materialised. The argument also takes little account of the effect of EEDI or of the fact that shipping’s emissions will only rise in response to growing trade and that will mean that the industries that generate that trade must grow in line with the shipping requirement. It would be foolish in the extreme to think that all of power the increase global output and trade growth will come from renewable energy sources and not fossil fuels. Despite the industry’s efforts, the EU has pushed the IMO into imposing a similar system of MRV, although it begins a year later and is for recording purposes only. The EU system on the other hand is quite clearly a precursor to forcing shipping to become part of the EU ETS and indeed that has been stated quite clearly as the goal by the European Parliament and will become reality if the IMO takes no further action before 2023. For ships planning to make calls to ports in the EEA – effectively any EU member state plus Iceland and Norway – the EU rules are laid out in Regulation (EU) 2015/757 which is supplemented by Regulation (EU) 2016/2072 that covers the accreditation and appointment of verifiers and Regulation (EU) 2016/1927 which details the requirement for monitoring plans and which includes a very useful plan template. The regulation is easy to find online and is worth downloading for information and for the template itself. The operator must prepare a monitoring plan by the end of August and have also appointed an EU accredited verifier to approve the plan and procedures to be applied for each of its ships. The rules apply regardless of where the ship or the company is registered and will cover voyages to, from and between EEA ports of calls, and also when in EEA ports of call. The appointment of a verifier may be the first step a this may require consideration as to their suitability. Article 30, Point 3 of Regulation (EU) 2016/2072 covers Impartiality and independence and says that; An unacceptable risk to impartiality or a conflict of interests shall be considered to have arisen, inter alia, where a verifier, or any part of the same legal entity or personnel and contracted persons involved in the verification, provide: (a) consulting services to develop part of the monitoring and reporting process described in the monitoring plan, including development of the monitoring methodology, drafting of the emissions report and drafting of the monitoring plan; (b) technical assistance to develop or maintain the system for monitoring and reporting emissions or other relevant information under Regulation (EU) 2015/757. Each member state in the EEA has a national accreditation body and it is they which must appoint and list the recognised bodies for that flag state. Despite the short period of time left before operators’ plans need to be verified, the lists are quite short. Most are a mix of classification societies and independent third party bodies. Next year, owners must begin monitoring and reporting to their verifier, data on each ship’s emission, fuel consumption and other parameters, such as distance, time at sea and cargo carried. The quantity of cargo carried is included because the EU ETS is about the amount of work done by cargo and distance which is in contrast to the IMO’s simpler variant which just records distance. The monitoring plan is required to describe the vessel and its installed combustion machinery, and provide information in a complete and transparent manner. What kind of fuel will be used and which of the provided methods for the determination of fuel oil consumption for monitoring and reporting CO2 emissions or other relevant information is chosen. There are four available methods for determining consumption; Bunker fuel delivery note (BDN) and periodic stocktakes of fuel tanks, Bunker fuel tank monitoring on board, Flow meters for applicable combustion processes and finally Direct CO2 emission measurements using calibrated equipment. It is permissible to use a combination to improve accuracy. Shipowners need to consider how to measure emissions which may involve purchasing and installing emission monitoring systems some of which can simultaneously measure and record other exhaust emissions such as NOx and SOx. As well as hardware emission monitoring equipment such as Krohne’s Ecomate, a number of software specialists are also producing systems to aid the monitoring and reporting process. Interschalt has added an MRV to its Bluetracker performance monitoring tool and Kongsberg, Danaos and many more are also adding products. In addition there are organisations such as StormGeo that will manage the whole process although they will have to subcontract the verification aspect in order to satisfy the regulations. There may be no escaping from the EU requirements but what may happen at the IMO might be considered far from certain. The EU cannot rely on the support it used to receive from the US at IMO MEPC meetings now that there has been a change of political direction in the US. There must be a strong possibility that there will not be the political will at the IMO to bring in market-based measures to further reduce CO2 emissions but there may be some support for a further phase added to EEDI. At the last MEPC 70 in November last year, the IMO set out a roadmap for future action. The IMO said at the time that it will be used for developing a comprehensive IMO strategy on reduction of GHG emissions from ships, which foresees an initial reduction strategy to be adopted in 2018. It contains a list of activities, including further IMO GHG studies and intersessional work, with relevant timelines and provides for alignment of those new activities with the ongoing work by the MEPC on the three-step approach to ship energy efficiency improvements. This alignment provides a way forward to the adoption of a revised strategy in 2023 to include short-, mid-, and long-term further measures, as required, including implementation schedules. MEPC 71 was supposed to be where the roadmap and future work would be agreed but as mentioned, US support may not be as enthusiastic as it was and other states that have expressed doubts may be more confident about their own position. The roadmap itself was criticised as lacking ambition by environmentalist NGOs which like the EU believes shipping industry has been singled out for preferential treatment under the Paris Agreement.