Shayne 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:
- 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.
- 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.
- 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.
- Construct ships with sleeker design to reduce drag and install more efficient propellers.
- 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.
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).
For at least the next half century, the United States and its allies will continue to rely on a substantial and growing amount of oil imports, according to this report from MIT in 2004. No they won’t, according to this report from the IEA this morning. The latest World Energy Outlook’s central scenario (“New Policies”) expects that by 2020 the US will become the world’s biggest oil producer and a net exporter of natural gas, thanks to a combination of technologies to exploit shale oil and “tight” gas (hard to access natural gas) and more fuel-efficient transport. By 2035, the US will almost be self-sufficient in energy and North America will be a net oil exporter, accelerating the switch in direction of international oil trade, with almost 90% of Middle Eastern oil exports going to Asia.
An even more startling change is suggested in the “Efficient World” scenario, where the growth in primary energy demand to 2035 is halved. Oil demand would peak just before 2020 and would be almost 13 mb/d lower by 2035 – the current production of Russia and Norway combined. This wouldn’t need any major or unexpected technological breakthroughs. It would be enough to remove the barriers obstructing the implementation of energy efficiency measures that are economically viable. Apart from anything else, greater energy efficiency could also be worth trillions of dollars. Additional investment of $11.8 trillion (in year-2011 dollars) in more energy-efficient technologies would be more than offset by reduced fuel expenditures. The accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest GDP gains in India, China, the US and Europe. Energy-related CO2 emissions would peak before 2020, then decline.
If you think that sounds too good to be true, you’re probably right. The central scenario isn’t very hopeful: “the world is still failing to put the global energy system onto a more sustainable path”. Global energy demand is expected to grow by more than one-third by2035, with China, India and the Middle East accounting for 60% of the increase. The IEA agrees with that MIT report in saying that fossil fuels will continue to dominate the global energy mix, in part thanks to you and me subsidizing them more than ever: fossil fuel subsidies that amounted to $523 billion in 2011, up almost 30% on 2010 and six times more than subsidies to renewables. Emissions in this scenario correspond to a long-term average global temperature increase of 3.6C, compared with less than 3C in “Efficient World”.
Each edition of the World Energy Outlook shows that the climate goal of limiting warming to 2C is becoming more difficult and more costly with each year that passes. The latest edition shows that almost four-fifths of the CO2 emissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc. If action to reduce CO2 emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in by energy infrastructure existing at that time. Rapid deployment of energy-efficient technologies, as in “Efficient World” would postpone this complete lock-in to 2022, buying time to secure a global agreement to cut greenhouse-gas emissions.
World energy in 2035
Taxes can provide a clear incentive to reduce environmental damage. Businesses need to be convinced that innovation and investment to reduce environmental damage brings rewards. Similarly, clear and sustained price signals can provide an important incentive for households, for example to reduce their energy consumption or to increase the extent to which they recycle waste. They underpin other policy instruments such as information campaigns (e.g. on the fuel efficiency of new cars or white goods) or the wider use of ‘smart’ meters for water, gas and electricity.
The use of environmentally-related taxes, charges and emission trading schemes is spreading across OECD and emerging economies. Across OECD countries, revenues from environmentally-related taxes amount to about 1.7% of GDP, ranging from about 0.7% on average in North America to 2.5% in Europe. Over 90% of these revenues come from taxes on fuels and motor vehicles.
How can we reduce fossil fuel use and make the switch to clean energy? Debates on fossil fuel dependence and its consequences for the environment have reached a crescendo as COP15 nears its deadline. But did you know that governments still subsidize the use of fossil fuels? Helen Mountford of the OECD Environment Directorate, Peter Wooders of the IISD and Dr. Fatih Birol of the IEA explain the importance of dealing with these contradictory policies.
What images come to mind when we hear “Copenhagen”? Ministers sitting around a table and protesters waving banners? COP15 is also analysts, scientists, businesses and civil society representatives working together on climate-related initiatives…OECD Analyst Christa Clapp tells us what she is doing at COP15:
“While in Copenhagen, I will be speaking at an event sponsored by Eneco, a Dutch energy company. Eneco is supporting the Luz Verde programme to distribute 30 million compact fluorescent light bulbs in Mexico. This is one of the first “programmatic” Clean Development Mechanism (CDM) projects to be approved. It groups similar disbursed projects together to lower transaction costs to access the carbon market and earn carbon credits. Such projects are a first step towards scaling-up carbon market mechanisms. The OECD is working together with the International Energy Agency to support the Annex I Expert Group, which is a group of climate negotiators, on carbon market issues. Our recent papers focus on the strengths and weaknesses of project-based carbon market mechanisms and scaled-up sector-based approaches.
More than 30 countries are already trading in carbon markets, either at a national or sub-national level. Additional countries are discussing how to design new market instruments and potentially link emission trading systems. Decisions taken in Copenhagen may impact the reach of these carbon markets and how they function. At OECD we are actively exploring how carbon markets might evolve post-Copenhagen, building on our recent Economics of Climate Change Mitigation work, which analyzes how carbon market instruments can be used to build up a global carbon market.
To further explore how carbon markets are expanding and evolving, we are bringing together experts and policy-makers for an OECD Workshop on Carbon Markets in April 2010. This workshop will offer an early post-Copenhagen opportunity to investigate these key questions:
- How can we build up a global carbon market, for example by increasing the number of countries participating, and through direct linking of emissions trading schemes?
- How will decisions taken in Copenhagen impact incentives for developing country engagement in carbon markets, including the design of “offset” mechanisms?
- Under what conditions can cities and sub-national actors access carbon market financing for local low-emission projects?
- How might voluntary markets evolve as compliance markets grow?