Integration Options for Ocean Transport into a Post-2012 GHG Regime Presentation by Stefan Seum at the UN Climate Change Conference, Bali, Indonesia, 11 December 2007 DELIVERY, TOO MUCH SLOW DOWN AND DROP OF VOICE AT THE END OF SENTENCE LOUD AND CLEAR AND EYE CONTACT AT KEY SENT

Structure Introduction. Options how ocean transport can be integrated in a post 2012 greenhouse gas regime. The international economic context. Data needs and availability under select schemes. Conclusion. 2

It is time to act and nothing should be left untouched. The current increase in CO2 emissions follows the upper limits of the most energy intense scenario of the IPCC. Between 2000 and 2004, greenhouse gas emissions increased nearly 3 times faster then between 1990 and 1999. Ocean Transportation and aviation are upon the fastest growing greenhouse gas emitters. It is time to act and nothing should be left untouched.

Only National Allocation Schemes were Debated in SBSTA The negotiations for the current Kyoto protocol could not agree on a national allocation scheme. National allocation proposals included: To country of bunker fuel sale To country of flag state, ship owner etc. To country of origin/destination of ship or ship route To country of origin/destination of cargo To country where the ownership of cargo resides To country in which territory ship travels Proportional to the national inventories

Systematically Assessed SBSTA and Other Options Ecological Effectiveness Reach of option Concrete actions Degree of reduction Economic Efficiency Promotion of cost effective measures Competitiveness Effect on global market Fairness and Justice Polluter pays principle Differentiation Historic responsibilities Administrative Burden Data availabilities Enforcement authorities Political Feasibility Rule conformity Ability to garner support

National Allocation Schemes for Ocean Transport are NOT Feasible For some options the actors in a state that causes emissions do not match the state of national allocation (e.g. flag state, ship owner etc.) Some options do not offer strong incentives for reductions (e.g. territorial, proportional) Most importantly agreements on the division of emission responsibilities are politically and methodologically infeasible.

As a Conclusion the Allocation to the Ocean Shipping Sector is the only Feasible and Effective Option Sectoral allocation options include Emission allowances based on ship activity with cap and trade Emission allowances based on ship activity combined with the creation of a special fund for financing innovation, mitigation and adaptation. Emission allowances based on ship activity combined with a multi-stage approach 7

The Sectoral Option based on Ship Activity Proved most Beneficial Example: Sectoral Responsibility based on Ship Activity as a Cap and Trade System Establish a base-year global CO2 balance from shipping Distribute CO2 certificates for trading year [kg CO2] Every shipping company or ship operator acquires certificates to cover the emissions of each individual ship in a trading year Monitoring of certificate coverage of global voyages by participating Port States upon landing of ships (import orientation) 8

Assessment of the Sectoral Scheme based on Ship Activity Positive: Covers most of the ocean shipping activities and emissions. Realizing the responsibilities on import ports takes historic responsibility into account due to trade patterns Economically soft option because of slow introduction of additional costs and promotion of cost effectiveness Shipping companies are likely to pass on cost to customers – the responsible parties for transport De-coupling activity with freight would easily avoid conflicts with international trade law Simple and easy to understand Authorities are clear and enforceable 9

Assessment of the Sectoral Scheme based on Ship Activity continued Potential Challenges: Technology transfer to the Global South not addressed. Institution of a Fund offers capacities for technology transfer. IMO may be used to block progress if issued with too much responsibilities. IMO is suited to set technical monitoring standards. Emission cap setting should rest with UNFCCC. Far reaching emission reductions dependent on political will and the sequenced reduction of free allowances. Stringent and declining caps could be complimented with purchasing of additional emission certificates from other sectors including air freight. 10

Other Feasible Sectoral Options are more complex A fund instead of emissions trading aims to promote technology innovations, mitigation and adaptation projects. Fund can garner acceptance from developing countries. Design details are easy to block or to water down. The unsolved authorities can become a major road block. The multi-stage approach combines absolute targets for rich countries, efficiency targets for countries in transition and policy measures for countries of the Global South. It thus creates the largest administrative burden.

Increased Transport Demands are a Result of Economic Asymmetries Economic globalization benefits from easier market access, better communication and cheaper transport, in particular ocean transport. Spreading international production networks are resulting in more goods transported globally. ~30% of global trade is inter-corporate trade; another 30% is intra-corporate trade; both with high growth rates. Export value added to countries of the North by far exceed that of the Global South, questioning the merits of globalization for development. GHG emissions from freight transport exemplifies the externalization of production and environmental costs. 12

Finding Solutions Requires Thinking Outside Today’s Economic Box To stabilize global warming at 2–2.4°C requires rethinking production and consumption networks. Development of the Global South and a fair distribution of wealth will localize production and consumption, leading to reduced transport demands. Internalization of environmental costs only one step towards sustainable development.

Marine Transportation is Cheap in Relation to the Price of Goods Any economic effect of policy measures marginal. 14

Data are Readily Available and not a Hurdle to Integrating Ocean Shipping Vessel data may be retrieved from various sources: Ship log-books (fuel consumption, port of calls, distances and cargo etc.) Pre-arrival documents Automated information systems (AIS) spatial data could be used – in some regions Vessels are used to submit documents upon landing at a port. The Greenhouse Gas Index currently under testing is an excellent method to bring data together 15

Ocean Shipping can be Successfully Included if International Institutions use their Distinct Characters and Strengths The IMO is the technical organization to establish onboard reporting methodologies for all ships The IMO can insure that ship operators have only one single format to follow, for example the GHG Index. The UNFCCC as an organization of nations or another international entity are better suited and more flexible in setting emission limits. UNCLOS gives States the necessary legal authority to set and enforce limits and reporting requirements. 16

A Regional Start is Legally Possible and Environmentally Effective UNCLOS provides states with authority to set emission limits and monitor compliance. States have the right to monitor performance throughout entire passages using Port State Control. IMO can assist with monitoring schemes. WTO rules are adhere to if policy measures do not directly link to the exporting country. Participation of developed and transitional countries would cover ~80% of global ocean freight transport.

Conclusion The inclusion of ocean transport into a post 2012 regime does not need to raise industry resistance, if all ships were treated equally. Cost for monitoring and compliance is marginal and secondary in a sectoral approach based in ship activity. However, the cap should be stringent and environmental costs of ocean transport need to be internalized. In order to achieve by 2050 the 50% – 80% reduction of greenhouse gases based on the 1990 levels (IPCC), a re-thinking of global production networks is necessary. International institutions should be used where there strength lies. 18

Thank you for your time International Environmental Consultant Oakland, US – Kingston, CA – Berlin, DE steseum@comcast.net