The maritime shipping industry hauls roughly 90% of global trade every year. If the shipping industry was a country, it would be the world’s sixth-largest emitter of greenhouse gases, coming in below Japan and just above Brazil and Germany. According to the International Maritime Organization, shipping accounted for 2.5 percent of world greenhouse gas emissions in 2016, and a report released by the European Parliament estimates that the maritime shipping industry’s share of global CO2 emissions could increase to as much as 17 percent by 2050 if changes are not made.
Though initial majority support existed for addressing shipping in the recently finalized Paris Climate Agreement, a coalition led by China, Brazil, South Africa, and Russia—all economies heavily dependent on shipping—blocked it. As a result, despite the magnitude of the shipping industry’s role in greenhouse gas emissions, it was omitted entirely from the Agreement, the deal meant to comprehensively grapple with emissions.
This preliminary failure, as well as comparison to an industry of equal size and influence, evidence the need for new international regulation of the maritime shipping industry. The global aviation industry is a similarly large emitter, also accounting for approximately 2 percent of world CO2 emissions. Yet the aviation industry is tightly regulated by national governments to ensure safety and reliability. Moreover, it is composed of large, high-profile carriers subsidized by their home governments and conscious of their public images. National governments can thus use this institutional infrastructure and high visibility to regulate and incentivize emissions reductions in the same way they promote safety.
The maritime shipping industry, on the other hand, is an opaque web of flags of convenience. Ships are subject to the laws of the country they are registered with, but many ships fly numerous flags over the course of their operating lives. A ship’s country of registry is often unrelated to the nationality of the company that owns the ship due to a quirk of the maritime industry. Some countries, such as Panama, have an open registry for ships, informally called “flags of convenience.” Companies incorporated elsewhere can still register their ships under the Panamanian flag, making their ships subject to Panama’s relatively lax regulations. This has led to Panama having about 8,600 ships under its flag as of 2014, while the U.S. had only around 3,400 ships registered to its flag.
If a country raised the emissions standards for all ships bearing its flag, the owners could simply transfer the ship to a different registry based in a country with more lax regulations.
Shipping companies also do not have the public profile that airlines do, making them much more resilient to public reputation. People generally do not know how the things they buy gets from where it was made to the store or their doorstep. A shipping company being shamed for for high emissions is not likely to change consumer or retailer behavior enough to impact them.
With the limitations of controlling shipping emissions at the national and corporate level, a potential solution to this complex legal and environmental dilemma is to address maritime emissions at the international level in the 2020 update to the Paris Agreement. The Agreement’s signatories, which comprise an overwhelming majority of the world’s nations and economic activity, will be submitting their expanded national pledges, and a widespread commitment to reduced shipping emissions must be among them.
Even if an emissions standard for world shipping is not adopted by all nations, a significant impact could still be made if most of the major economies sign on. All ships flying the committed nation’s flag or entering its ports should be subject to inspection to ensure that they meet emissions standards, with the possibility of being impounded or simply turned away if they do not. It is the second part, the prohibition against unloading cargo for ships that don’t pass inspection, that would give such a commitment real bite. While changing the flag of a ship is easy, a ship that cannot deliver cargo to the major economies of the world is a bad investment, and shipping companies would thus be required to update their fleets to maintain access to major world markets. Exact specifications for this standard should be discussed at the 22nd Conference of the Parties of the UNFCCC this November in Morocco, providing clear signals to the shipping industry of changes to come as consensus is built between November and 2020. This will give industry officials adequate opportunity to prepare for the changes well before they go into effect.
Ultimately, however, international regulations must proceed whether or not these officials are prepared for them. The sheer volume of emissions from shipping means that the international community can no longer sit idly by as this industry stalls or further obstructs the goal of overall emissions reduction.
[Editor’s note: The original version of this article incorrectly identified the use of flags of convenience by shipping companies as a form of shell or holding company. These are distinct legal phenomenon, and this article has been updated to accurately explain the use of flags of convenience.]