Transport: EU steps closer towards maritime emissions control

Little control is currently exerted on maritime emission of greenhouse gases. For some time EU policy has been to address this. Currently a draft EU Regulation is passing through the legislative process which may prove to be a defining step towards emissions control. Assuming that the Regulation is passed, it is intended to produce a platform from which further measures may be taken, including legal, economic and fiscal instruments designed to curb rising emissions and to encourage downward pressure on emissions.

The EU Regulation (No 525/2013) is on the monitoring, reporting and verification (MRV) of carbon dioxide (CO2) emissions from ships over 5,000 gross tonnage (GT). The Regulation was approved by the European Parliament on 28 April 2015 and could become law on 1 July 2015. The immediate purpose of the MRV Regulation is to serve as a CO2 data gathering tool. However it is perhaps the subsequent use of that data which may be of most importance.

Background

The EU estimates that greenhouse gas (GHG) from the global shipping industry are on an upward trajectory and are currently accounting for approximately 3% of the world’s total emissions and 4% of the EU’s total emissions. As part of meeting the EU 2020 targets, the EU Commission pledged in the 2011 White Paper on Transport to reduce EU CO2 emissions from maritime transport by 2050 by 40% from 2005 levels. This is to be achieved through a number of measures and the MRV Regulation is one of these.

MRV Regulation

The MRV Regulation was published by the European Commission in June 2013 and relates to large ships (> 5,000 GT) sailing in and out of EU ports. On 10 March 2015 the European Commission published a Communication concerning the position of the EU Council following the European Parliament’s (“EP”) earlier first reading of the MRV Regulation. In this the EU Commission set out its views on the positions and suggested amendments of the other two bodies involved in the legislative process. These amendments were approved by the EP in its second reading on 28 April 2015.

For current purposes notable aspects of the agreed text include:

Scope of emissions: the EP first reading opinion in April 2014 called for the MRV Regulation to cover not only carbon monoxide but other GHG emissions. The EU Council chose to retain CO2 as the only emission covered in the operative provisions (while accepting some broader wording on GHG emissions and air pollutants in the recitals).

Scope: Subject to a few exemptions MRV looks set to apply to all ships above 5,000 GT calling at EU ports regardless of their flag. The EU Commission comment that ships above 5,000 GT account for around 55% of the number of ships calling into EU ports but represent around 90% of the related emissions.

Exclusions: A few express categories of ships are to be excluded: warships, wooden ships and government ships used for non-commercial purposes. Fish catching and processing ships are also likely to be excluded. The definition of “voyage” is also of relevance here. This definition relates only to ship movements the purpose of which is the transport of passengers or cargos for commercial purposes. This may effectively exclude ships serving offshore installation industries.

Coverage of journeys, intra, from and to EU ports: from 1 January 2018, ships will need to monitor, per ship and per voyage (save for ships carrying out over 300 voyages during reporting period such as ferries where monitoring will be annual) their CO2 emissions and information on the technical efficiency of the ship (the Energy Efficiency Design Index (EEDI) or the Estimated Index Value (EIV) for (i) intra-EU voyages, (ii) incoming voyages (i.e. from the last non-EU port of call to the EU first port of call), and (iii) outgoing voyages (i.e. from the last EU port of call of call to the first non-EU port of call).

Companies: The obligations will apply to “companies” and this means the shipowners or any other organisations or persons, such as managers or the bareboat charterers, which have assumed the responsibility for the operation of the ship. (References to ‘companies’ in this article bear the same meaning)

Ice class: Companies will have the option to include the 'ice class' of the ships in the Monitoring plan and annual emissions reports.

Emissions from vessels moored or anchored within EU ports will also need to be monitored, reported and verified. This is intended to encourage the use of available shore-based emission-reduction technologies.

Verification monitoring plans and emissions reports will need to be independently verified by a legal entity carrying out verification activities which is accredited by a national accreditation body.

Enforcement: In addition to any other penalties for non compliance ships that fail to comply with MRV requirements for two or more consecutive reporting periods will risk facing an ‘expulsion order’ i.e. will be refused entry into any of its ports until they can demonstrate compliance. A limited number of tasks will be assigned to the European Maritime Safety Agency mainly related to the enforcement database, in line with its founding regulation. Enforcement by Member States acting either as Flag States or as Port States or through MRV specific inspections are to check that a valid Document of Compliance (DoC) is on board of ships when visiting ports under their jurisdiction, and to follow-up by sanctions, if appropriate.

Key dates

Plan by 31 August 2017, companies will have to submit to the independent verifiers a monitoring plan indicating the method chosen to monitor and report emissions and other climate relevant information for each of their ships above 5,000 GT. Article 6 of the proposed MRV Regulation sets out broadly what the plan must cover by using a standardised template that will be provided by the Commission by virtue of subsequent implementing legislation. The monitoring plan will have to be periodically reviewed to reflect any changes or ownership or operational changes and any modifications will have to be approved by verifiers.

Monitor from 1 January 2018, companies will be required to monitor emissions for each ship on a per-voyage and aggregate on an annual basis by applying the appropriate method chosen in their monitoring plan.

Report from 2019, by 30 April of each year, companies will be required to submit to the Commission and to the authorities of the flag States concerned, an independently verified emission report concerning the emissions and other relevant information (such as distance travelled, time of journey, type of fuel used and cargo carried) during the annual reporting period for each ship under their responsibility.

Publication

Each year the Commission will publish the data and once enough data is accumulated it will be minable in order to design legal economic and fiscal instruments to curb rising emissions and to exert downward pressure on future emissions.

Regulation rather than directive

From a legal perspective it is important to note that this is a regulation and not a directive. Being a regulation the MVR Regulation will become binding once made and does not require implementing domestic legislation in Member States. Having said this what we often find is that Member States do pass domestic law, if only to ensure that the EU regulation works properly in the Member State.

Next steps

The proposed Regulation received its second reading and approval by the EP on 28 April 2015. The text will be put to a vote in a forthcoming Council of Ministers. If adopted and published in the Official Journal, the Regulation is likely to enter into force on 1 July 2015.

Comment

This Regulation is essentially an enabling Regulation. It is to enable the collation of data from which legal, economic or fiscal instruments can be designed to incentivise material reductions in emissions from maritime transport. Broadly these could include incentives for less emitting ships and/or putting a cost on CO2 emissions. It will be interesting to see how fast and in what direction(s) the EU moves once the data begins to flow.