MEPC 73: TRUMP, VLSFO AND ECONOMIC DOOM

After another politically charged MEPC it’s easy to forget that IMO is an arena for technical debate, discussion and regulation. Given the political football it has become, and…

After another politically charged MEPC it’s easy to forget that IMO is an arena for technical debate, discussion and regulation. Given the political football it has become, and the level of global interest in the proceedings taking place at Albert Embankment, it would be no surprise if MEPC 74 introduces pay-per-view, with events announced by the ‘Let’s Get Ready to Rumble” guy.

Ostensibly, the decisions taken at MEPC 73 were well received by the global shipping industry, bar some notable voices claiming that ‘low lying fruits were left hanging’, particularly on issues such as greenhouse gas (GHG) emissions.

Delegates discussed a range of issues, from ballast water to the plastic in our oceans, but it was, unsurprisingly, fuels and emissions that took centre stage. Yet there was a general feeling that this was only the dress rehearsal with a number of crucial discussions due to take place at MEPC 74 in May next year – a little over six months out from the implementation of the global sulphur cap, and by which time discussions around the pathway to reducing GHG emissions from shipping will have become more focused technically and politically.

There was a moment of collective pause for breath at the IMO when an article in the Economist revealed that scientists at the Centre for International Climate and Environmental Research in Oslo had calculated that shipping in net terms had actually reduced man-made warming by 7% in 2000, and that the 2020 sulphur cap would in fact dramatically alter those cooling levels by around 80%. The IMO may yet hear more about this if shipping fails to develop impactful decarbonisation plans.

#EBP – the nearly was hashtag

 A much-anticipated proposal was tabled last week from a number of large flag states (most notably a vociferous Trump-backed US delegation) and shipping organisations suggesting the need for an “experience building phase” following the implementation of the 2020 global sulphur cap. The proposal was triggered largely as a response to concerns around potential technical issues as the market moves to Very Low Sulphur Fuel Oil (VLSFO), most of which will be a blended fuel and is therefore more exposed to a lack of traceability of the source of blending products.

Watching the twitter feeds of the media and those in attendance, the proposed #EBP had looked set to be the ‘hashtag of the week’, especially after strong rhetoric from the White House. However, despite initial hype this turned out to be short-lived, quickly coming apart when supporters were largely painted as wishing to delay the implementation of the regulation. Instead, as some form of compromise, it was agreed to invite further concrete proposals on how to enhance the implementation of regulation 18 of MARPOL Annex VI, in particular on fuel oil quality and reporting of non-availability of compliant fuel oils, to be tabled at MEPC 74 next year.

“MEPC has very much become shipping’s moment in the spotlight, and this is only likely to increase through to 2020.”

The outcome for the most part seemed to reveal that no one nation or organisation wanted to appear to be delaying the implementation of over a decade’s work towards the global sulphur cap. And maybe that is the case. What is clear though is the IMO’s continued commitment to its assertion that the cap will enter into force without delay on 1st January 2020.

Fuel carriage ban 

As expected, the non-compliant fuels carriage ban was accepted and is due to be implemented as planned by 1st March 2020. Amendments to MARPOL Annex VI prohibit not just the use but also the carriage of bunkers above 0.5% sulphur on ships, unless they have approved abatement technology onboard – a further indication from the IMO that there will be no leeway on the implementation of the global sulphur cap.

But it seems not all are in favour of emissions abatement technology, namely scrubbers, as an alternative to VLSFO. Tanker giant Euronav, almost certainly the technology’s most vocal opponent, has been proactive in warning of the potential damage to the environment particularly for open-loop scrubbers, which it claims could – through the discharge of wash water – release a “toxic cocktail of sulphuric acid constituents, polycyclic aromatic hydrocarbons and heavy metals” into the ocean. Coupled with concerns around ROI for scrubbers, these opinions do somewhat fly in the face of the significant jump in uptake that we have seen in recent months, with even some of the industry’s leading names completely reversing their stance and opting to install the technology.

So, with little over a year to go until the global industry needs to have addressed the issue of how it will ensure compliance with the global sulphur cap, the IMO is forging ahead – but concerns remain.

 The unintended consequences of EEDI?

The Energy Efficiency Design Index (EEDI) will see most major vessel types look to improve their efficiency and thereby reduce their environmental impact through better design using the EEDI formula. During MEPC 73 there were intense discussions over whether to keep or change the Phase III application date and reduction target, and whether to vary these for different ship types and sizes. The main concern from the floor being that decisions were being proposed without sufficient data to justify them, and in the end it was decided – once more – to return to the debate at MEPC 74, with a correspondence group working on it in the meantime.

Phase III of EEDI was due to be applied in 2025, but a move by EU countries to bring forward that date to 2022 saw significant amendments to the EEDI regulation. Without the data to support this change, some delegates asserted that actually it would cause shipping to be less efficient, rather than more environmentally friendly.

According to reports, one delegate raised a concern about the changes and cited the example that feeder container ship orders could stall following the MEPC’s decision for all new container vessels to be 40% more efficient by 2022. With the incremental increases in the size of container ships, the smaller feeder vessels – up to 40,00 dwt – will be crucial in the distribution of cargo from port hubs to smaller ports. However the new rule will likely see owners extend the life of their older vessels rather than building expensive new ships to meet the new, more stringent EEDI rules, and this will have the opposite effect to the one the EU was trying to achieve, as owners will continue to use older more polluting vessels.

It seems there will be more to discuss on the impact of the decision to bring forward the implementation of Phase III to 2022, once again to be tabled at MEPC 74.

Gathering momentum towards MEPC 74

MEPC has very much become shipping’s moment in the spotlight, and this is only likely to increase through to 2020. The fact that shipping is having such a profound political impact was perhaps best exemplified with claims made in the same Economist article, that the new sulphur rules “could…wipe 3% off America’s GDP”.

MEPC 74 promises not to let up.