Paris Climate Agreement: Lost at Sea?

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.

Image courtesy of Wayne Dollemore, © 2012.

Image courtesy of Wayne Dollemore, © 2012.

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 shell corporations and flags of convenience. Ostensibly, 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 thanks to the use of shell corporations, and the ease of shifting a ship’s registration undermines the potential effectiveness of national regulations. If a country raised the emissions standards for all ships bearing its flag, the owners could simply transfer the ship to a different company based in a country with more lax regulations.

This network of holding companies also protects the shipping industry from scrutiny from a public already largely blind to how their clothes and electronics find their way to their doors. The only opportunity for public pressure to incentivize good behavior would be for retailers to conspicuously make use of low-carbon shipping companies. With the ease of shifting ships between anonymous companies based out of tax havens, however, shippers do not have to live with bad reputations for long. Owners can close a company that is a known offender and shift their assets to a new company with a clean reputation.

The solution to this complex legal and environmental dilemma is to address maritime emissions 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.

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