Regional rules are nothing to fret over

Malcolm Latarche
Malcolm Latarche

24 February 2017


Speaking this week in Indonesia at The Economist magazine’s World Ocean Summit, International Chamber of Shipping, Esben Poulsson, expressed the view that unless IMO makes significant progress on CO2 the industry could be vulnerable to regional action, not only from the EU – which is considering incorporating shipping into the EU Emissions Trading System – but also from Canada or California, which have already introduced carbon pricing. That is indeed a possibility but it is not a reason to demand that the global shipping industry should increase its costs at a time of economic fragility for an idea that is rapidly losing traction in many parts of the globe. It may well be that the Paris Agreement was the high-water mark of the CO2 emission control phenomena and the voluntary limits announced with much fanfare there will be quietly dropped as governments and politicians around the globe realise that there is little public support for further control. For the next four years at least, and possibly for much longer, the US is not likely to pursue the reduction targets that were embraced by the previous administration. Another part of the world that is seemingly giving up on ‘green’ targets is Australia where Prime Minister Malcolm Turnbull has U-turned on a seven-year long support of renewable energy and earlier this month labelled those that still hold such views as "drunk on left ideology on energy" and said they are threatening peoples' livelihoods. Turnbull is now the leader of a government that argues Australia needs more, not less, coal-fired electricity generation. In the EU itself there is a pushback against some of the CO2 reduction policies that are being put in place as Germany is building more coal fired power plants and Poland where over 80% of energy comes from coal-fired plants is planning legal action against the EU’s planned climate laws. The Polish government elected in 2015, campaigned on a pledge to defend the country’s coal industry. Shipping is well structured to cope with regional policies as it has been something the industry has needed to live with throughout history. Adding a levy to bunker fuels for ships operating regionally in SE Asia or trading between the US and Africa or Brazil and China just because the EU demands shipping in European waters be covered by its Emission Trading System is not an idea that will go down well. Ships that trade exclusively in Europe are not disadvantaged if they must pay a levy while ships operating exclusively elsewhere need not. If EU flag shipowners are at some point required to pay some levy purely because of their flag then the option for owners of switching flags is open to them. If countries are free to set different taxes on shipping incomes (which of course they are) would some paying a levy while others do not be so very different? Besides, if the argument that certain shipping customers prefer to boast of their ‘green’ credentials and choose their carriers accordingly is true, then will not those cargo interests prefer to move their goods on ships that are in some emission trading scheme rather than on any that are not? Having a choice will surely show up those cargo interests that are really committed and those that are merely paying lip service.