Carbon emissions all at sea: why was shipping left out of the Paris Climate Agreement?

Ship to surf John Valentine All rights reservedShayne MacLachlan, OECD Environment Directorate

Newcastle, Australia has the dubious honour of being the world’s largest port for coal exports. There’s even a coal price index named after it: The NEWC Index. Surfing Novocastrian beaches not only means “watching out” for great-white sharks, but also “being watched” by the lurking great-red coal ships out beyond the breakers, waiting to come in to port for their fill (see photo). Growing up accustomed to these ever-present leviathans, I never questioned what ships did to the environment and to our health apart from when they crash and leak oil. This all changed recently as I discovered a raft of statistics about the shipping industry that indicate we’ve been sailing too close to the rocks since the engine started replacing sails and oars in the early 1800s.

A stern warning for climate change, and our health

Shipping brings us 90% of world trade and has increased in size by 400% in the last 45 years. Cargo ships, tankers and dry-bulk tankers are an essential element of a globalised world economy, but they are thirsty titans and they won’t settle for diet drinks. There are up to 100,000 working vessels on the ocean and some travel an incredible 2/3 of the distance to the moon in one year. Some stats floating around state that the 15 largest ships emit as much as all the 780 million cars in the world in terms of particulates, soot and noxious gases. The International Maritime Organization (IMO) says sea shipping makes up around 3% of global CO2 emissions which is slightly less than Japan’s annual emissions, the world’s 5th-highest emitting country. Ships carry considerable loads so they’re reasonably efficient on a tonne-per-kilometre basis, but with shipping growing so fast, this “broad in the beam” industry is laying down a significant carbon footprint. And local pollution created by ships when they are moored and as they rev hard to get in and out of port can be severe as most use low-grade bunker oil, containing highly-polluting sulphur. Ships also produce high levels of harmful nanoparticles, but encouragingly we’ve seen IMO collaboration to raise standards on air pollution from ships.

Mal de mer with rudderless regulation

A recent estimate forecasts that CO2 emissions from ships will increase by up to 250% in the next 35 years, and could represent 14% of total global emissions by 2050. This could wreck our hopes of getting to a well-below 2°C warming scenario. Even though many, including Richard Branson, called for emission reduction targets for international aviation and shipping to be included in the COP21 Paris Climate agreement, we failed. The IMO has introduced binding energy-efficiency measures so by 2025 all new ships will have to be 30% more efficient that those built today, but in my view there are questions about stringency and seemingly they don’t go far enough.


Navigating alternative routes to <2°C

As the Arctic ice sheet melts, a route across the North Pole would be about one-fifth shorter in distance than the Northern Sea route. But this isn’t what I have in mind for reducing shipping fuel consumption and emissions. We need to develop a copper-bottomed response to the challenge by further boosting investment in innovation and research. It’s great to all these sustainable shipping initiatives in the offing:

  1. Fit wind, wave and solar power such as kite sails, fins and solar panels. There’s some research into other energy sources underway such as nuclear cargo ships, but of course that presents another element of risk if something goes wrong.
  2. Increase carrying capacity of ships and future proofing of ships for a further 10-15 years with increased fuel efficiency by retrofitting vessels with more technologically advanced equipment.
  3. Use heat recovery technology to harness waste energy from exhaust gases to create steam, then mechanical energy, then electrical energy to power elements of the ship’s systems.
  4. Construct ships with sleeker design to reduce drag and install more efficient propellers.
  5. Use Maritime Emissions Treatment Systems (METS) in the form of a barge which positions large tubes over ships’ smoke stacks and captures and treats emissions from berthed vessels.

Let’s sink fossil fuels

Innovation and efficiency is hardly a “cut and run” approach. And typically when an industry reduces fuel costs they use the savings to increase activity, meaning carbon reduction is limited. This “rebound effect” could happen in maritime shipping. Truly green shipping will require vessels that are 100% fossil-fuel free. To help drive down fossil-fuel use, a carbon charge for shipping (and aviation) has been proposed. The International Chamber of Shipping (ICS) queried the carbon price of $US25 per tonne. Indeed this is higher than the price on CO2 for onshore industries in developed countries. What’s needed is a system where emitters that aren’t linked to a country’s climate policies are accountable. At COP17 in Durban, delegates discussed a universal charge for all ships that would generate billions of dollars. The money could be channelled to developing countries’ climate policy action. Phasing out subsidies on bunker fuel used by ships is also needed to get us on the right course.

You can’t cross the sea by standing and staring at the water

Following Paris it’s time for specific shipping emissions targets. It appears we know the co-ordinates but the fuel tanks are full of the wrong stuff. Earlier this month, the Marine Environment Protection Committee (MEPC) of the IMO discussed emissions targets but only got as far as approving compulsory monitoring of ship fuel consumption. This is a key step if one day we introduce market-based mechanisms to reduce shipping emissions. What’s needed is accelerated action consistent with the Paris agreement.

In the doldrums of COP21, it seems shipping (and it’s by no means the only sector) is rather like that surfer, sitting on their board waiting for the next wave. At the same time it’s trying to avoid the lurking great white shark.

Useful links

International Transport Forum work on maritime transport

Did shipping just fail the climate test? ITF’s Olaf Merk on Shipping Today

Kiln have produced this interactive map showing  movements of the global merchant fleet over the course of 2012, overlaid on a bathymetric map with statistics including a counter for emitted CO2 (in thousand tonnes) and maximum freight carried by represented vessels (varying units).

The Nordic Welfare Model and the Refugee Crisis: Buffer or Weakness?

social justice reportAnne Skevik Grødem, research director at the Institute for Social Research in Oslo. In collaboration with Bertelsmann Stiftung.

Demanding labor markets, high social benefits – many people believe that the universal Nordic welfare states may be less able to face the challenges of migration than other countries. But does empirical evidence support this view?

The Nordic countries tend to be found near the top when levels of living, redistribution and social inclusion are measured and ranked. In the Bertelsmann Stiftung’s latest EU Social Justice Index Sweden, Denmark and Finland occupy the first three positions in the ranking.

The inclusive Nordic welfare model, and its long tradition for social investment, has been discussed with fascination and often admiration for decades. But in the current situation, with unprecedented high levels of migration to Europe, new concerns emerge: can this model survive a mass influx of “outsiders”?

The Nordic countries have seen very high levels of immigration in recent years, both as labour migration from the European Economic Area (EEA) and as humanitarian migration from third countries.

The different countries have chosen different approaches to migration management: Sweden has gained a reputation as one of the most liberal countries in Europe, Denmark as one of the strictest. When it comes to migration management, there can be no talk of a distinct and unified Nordic model.

The challenges facing the welfare states are however similar: how can comprehensive and inclusive welfare states absorb thousands of immigrants, often with limited laboor market skills and different cultural and religious beliefs?

This can be seen as a challenge to all European countries in the current situation, but given the universal nature of the Nordic welfare states it can be argued that the challenges are written particularly large here. On the other hand, it can also be argued that the Nordic model, with its emphasis on activation and inclusion, has unique strengths when it comes to integrating newcomers.


Nordic labor markets may pose a particular challenge to integrating migrants

There are two main lines of argument as to why immigration can be particularly challenging for the Nordic welfare states: one economic and one political.

The economic line of reasoning points out that the Nordic welfare model is premised on high employment rates, among women as well as men. Given the combination of high taxes and high social benefits, non-employment represents a “dual loss” at a higher scale than in other countries: high incomes are lost for the state while high costs are incurred.

At the same time, the well-regulated Nordic labour markets may be difficult for immigrants to gain access to. The compressed wage structure implies that even the lowest wages are relatively high. For this reason, there are few “working poor” in Scandinavia. This however gives employers an incentive to replace unskilled labor with capital where possible, leading to fewer available jobs for low-skilled workers.

It also potentially makes employers extra risk-averse, as they will be particularly careful to hire workers who are assumed to have a productivity to match the high wage. Immigrants’ expected productivity is often low or uncertain: either because they lack education or language skills, or because they are unable to document the skills they have.

In short, then, the need to include immigrants in employment may be more acute in the Nordic countries than elsewhere, but the odds of success may be lower.

The Nordic tradition for inclusive policies seems to benefit migrants

These concerns are high on the political agenda in all the Nordic countries, and a number of measures are put in place to increase employment among immigrants from outside the European Economic Area (EEA). Benefit systems have been tweaked in order to avoid perverse incentives, and there are ongoing discussions about whether lower wages or short-term contracts should be allowed in some cases.

The most important approach is however the systematic endeavours to increase employability of immigrants. The emphasis on education – including state-sponsored kindergartens with high rates of participation, free schooling, and activation and life-long learning programs for adults – is an important part of the reason why the Nordic countries have high labour market participation rates.

This approach is extended to refugees and their family members through the so-called introduction programs. Such programs exist in all the Nordic countries. The aim of the programs is to teach newcomers a minimum of language skills and knowledge about the country they now live in, and thus to make them better able to move on to employment.

Available data do not indicate that immigrants systematically fare worse in the Nordic countries than elsewhere in Europe in terms of employment. The Nordic traditions for inclusive and qualifying policies therefore also seem to benefit migrants.

Little evidence that ethnic and religious cleavages undermine support for welfare state

Even if immigrants are reasonably well included in the labour market, it can still be argued that it is more difficult to sustain universal welfare arrangements in countries with large ethnic and religious cleavages. This is the political argument for immigration as a challenge: the feeling of community and shared risk will crumble when strangers settle in the country.

While this argument is plausible, empirical evidence is weak: support for welfare arrangements in the Nordic countries – indeed in Europe as a whole – is high and stable. Anti-immigrant parties have increased their support in Norway, Denmark, Sweden and Finland, but these parties are not (any longer) anti-welfare parties: instead, they portray themselves as the saviours of welfare for the insiders.

It has also been argued that inclusive and universal welfare arrangements have the capacity to breed trust, even as societies become more diverse. This is because such arrangements are transparent and outcomes are easy to predict, which gives less room for speculation about discrimination and favourable treatment of specific groups. Again, therefore, features of the Nordic welfare states can be buffers rather than weaknesses.

Immigration at a mass scale is likely to be challenging for any country, and how the challenges are perceived will be influenced by institutional arrangements in the host countries. The current challenges may look different in the Nordic countries than they do in the South or in Central- and Eastern Europe, but available evidence does not allow us to conclude that the universal Nordic welfare states are less able to face these challenges than other countries.

As the EU Social Justice points out, “If policies are designed well and EU countries act on the basis of solidarity, the current “refugee crisis” can – in the longer run – also turn into a chance for Europe.

Useful links

The Bertelsmann Stiftung conducts an annual study of developments in opportunities for social participation in all 28 EU member states. The latest report (Social Justice in the EU – Index Report 2015) shows that despite economic recovery, the gap between young and old is growing and the social divide between northern and southern Europe remains immense.

OECD Migration Insights

Take the money and run: the uses and abuses of political funding

financing democracyBill Below, OECD Directorate for Public Governance and Territorial Development (GOV)

There is something ominous in the words ‘money in politics’. It evokes payoffs and payolas, fat cats, power brokers and kingmakers dealing in smoke-filled rooms, deciding the future of people not present. Perhaps more to the point, it highlights the natural tension between egalitarian ideals embedded in a strictly non-egalitarian society. Economist Arthur Okun talked about the double standard of capitalist democracy “professing and pursuing an egalitarian political and social system and simultaneously generating gaping disparities in economic well-being.” With those gaping disparities widening to historic levels, could it be that the political apparatus of democracy is failing to deliver?

Financing Democracy, The Funding of Political Parties and Election Campaigns and the Risk of Policy Capture, recently published by the OECD, explores the state of political finance reform in the OECD and beyond. It presents the positive role money plays in our democracies, but also expresses important caveats.

We live neither in oligarchies nor in libertarian free-for-alls. Our democracies are based on the principles of fairness and equality of opportunity (although not equality of outcomes). Castes and pre-determined assignments within social hierarchies are abhorrent to the democrat. While competition is a natural feature of life on earth, equality of opportunity is an artificial notion that has been added with care to the equation. It’s part of the part we built when we built our democracies. As such, it requires active protection.

How can we do that? First, by ensuring that the widest number of people participate in democracy. In the most recent elections for which data are available, one-third of the voting-age public in the OECD did not vote. Further, because the rich vote more than the poor and the older more than the young, essential voices in our democracies consistently go missing.

Second, votes have to be meaningful. When the needs of the rich and powerful are given priority, citizens lose faith. Trust in government is already low. But more importantly, we see a growing gap in trust levels between the educated public and the general public—signs of a society that delivers for some but not for all. Campaign finance reform sets out to ensure that the apparatus of democracy is responsive to all citizens and produces fair outcomes.

From an OECD-wide perspective, some interesting data emerge. For example, 35% of OECD countries set no limits on the amount a political party or candidate can spend. This can create problems not just in establishing a level playing field, but also in preventing runaway spending races. Yet, in some cases, no limits exist because there is no real need for them. A handful of countries on the list enjoy strong reputations for corruption-free politics. It offers a reminder that one-size-fits-all solutions don’t always apply in campaign finance reform.

If you limit contributions to parties and campaigns, spending becomes a non-issue—theoretically. Restricting private contributions is intended to limit the possibility of undue influence by vested interests. 35% of OECD countries have outright bans on contributions to parties and candidates from corporations. Of 25 OECD countries examined, 15 had ceilings on private donations from individuals to parties, candidates or both.

For most countries, the origin of contributions matters. 50% of OECD countries ban anonymous donations and 38% have bans above certain thresholds. 68% of OECD countries ban donations from foreign interests to political parties and 56% ban them to candidates. This said, globalization has made it increasingly difficult to separate domestic from foreign interests. At least USD 18.1 million, and likely much more, was directed by foreign banks, telecom operators, liquor manufacturers and other industries to the US 2012 presidential campaign. Of the top 20 contributions to the campaign from foreign-owned firms, nearly 60% went to Republican candidates.

State contributions help political parties conduct their daily business and reduce dependence on private funding for parties and campaigns. All OECD countries, with the exception of Switzerland, provide public subsidies, most allowing mixed systems of public and private funding. But rules matter. Public funding ultimately helps to make the state an arbiter of who competes in elections. International recommendations suggest that the threshold for public funding should be lower than the electoral threshold to ensure that new parties and small parties have access to the political arena and can compete under fair conditions. Not doing so could lead to a cartelization of political parties, according to the report.

A variety of oversight arrangements exists across the OECD, with 47% of members having either an electoral management body (EMB – 29%) or other specialized institution (18%). In the majority of countries, the oversight function is handled by one or more existing institution. But not all bodies are granted effective monitoring and enforcement powers or possess sufficient resources. Also, sanctions can be insufficiently dissuasive.

Streamlined, online reporting practices can enhance the effectiveness of oversight bodies. Yet, only a few countries in the OECD—Estonia is a shining example—have so far managed to ensure that political finance reporting is standardized, machine readable, comparable and easily accessible for public scrutiny.

Third-party spending presents an emerging challenge. It can constitute a means of re-channeling election spending through committees and interest groups that are independent in name only. Political Action Committees (PACs), ubiquitous in American politics but also present in different forms in other countries, fall within this category. These are sometimes referred to as non-party campaigners and may include charities, faith groups, individual or private firms that campaign but do not stand as political parties or candidates. Few OECD countries currently have regulations for third-party campaigning.

Super PACs may raise unlimited amounts of money from third parties in favor of a candidate (or against the candidate’s rivals) but are prohibited from giving money directly to the candidate or coordinating with the campaign. Super PACs grew in the US after a 2010 Supreme Court decision protecting the free speech rights of independent, expenditure-only committees. Yet, loopholes and disclosure issues present challenges. Super PACs are taking on increasing amounts of basic campaign work. Meanwhile, in the 2012 election cycle, $9.6 million was spent by non-disclosing groups (whose donors are generally known to party leaders but not made public), growing to $15 million in 2014 and $23.6 million for the present year, with elections still 7 months away.

But even with unlimited contributions, campaign spending can be notoriously unreliable for those seeking a solid return on investment. In July of 2015—a full year before the US presidential primaries—one candidate’s super PAC had raised 100 million dollars, 10 million of which was from a single corporate donor. By February, that candidate had dropped out of the race.

The length of campaigns impacts the money required by parties and candidates. In Australia, federal election campaigns last approximately six weeks. France’s presidential campaign lasts for two weeks preceding the first ballot. Campaigns for seats in France’s lower house last for 20 days prior to the first ballot. In the UK, the campaign period is typically six weeks. Combined party spending for the UK 2010 general election was estimated at USD 48.5 million. By contrast, in the US, where elections are long, the cost of elections in 2012 was close to USD 6 billion. Michael Toner, former Chief Counsel to the Republican National Committee and former chair of the Federal Elections Commission, added some perspective: “Americans last year spent seven billion dollars on potato chips – isn’t the leader of the free world worth at least that?” Surely. But long, protracted campaigns and uncapped spending contests have consequences, notably the huge amount of time politicians must dedicate to fundraising—from 30% to 50% of their day for a member of the US House of Representatives. Somewhat perversely, it is time spent listening to the needs and wishes of rich donors rather than the voices of a more representative selection of constituents.

Are our democratic processes more responsive to the rich than they are to the poor and the middle class? Studies in the US point to a distinct difference in policy concerns between the affluent and the middle and lower classes, and persistent bias in policy outcomes towards the rich (Gilens and Page, 2014). As hosts to growing inequality, it is incumbent upon governments to do everything in their power so that our democracies are able to deliver on their promise of equality of opportunity and fairness for all. The OECD’s Framework on Financing Democracy identifies pathways towards averting policy capture, ensuring transparency and accountability, fostering a culture of integrity and ensuring compliance and review.

In the meantime, power and money will continue to hold court.

Useful links

Fighting corruption in the public sector

OECD Directorate for Public Governance and Territorial Development

‘Financing Democracy, The Funding of Political Parties and Election Campaigns and the Risk of Policy Capture’, OECD, 2016

Arthur M. Okun, ‘Equality and Efficiency: The Big Tradeoff’, The Brookings Institution, 1975

Martin Gilens and Benjamin Page, ‘Testing Theories of American Politics: Elites, Interest Groups and Average Citizens’, Perspectives on Politics, Volume 12, Issue 03, 2014