Reducing greenhouse gas emissions from maritime transport – a northern Baltic perspective
Eero Hokkanen,
Ministerial Adviser,
Ministry of Transport and Communications,
Finland
Shipping is vital for all countries around the Baltic Sea. Especially for Finland that is located a long distance away from its main European markets and very dependent on sea connections to the large European transport hubs in the south. Therefore, in the midst of the ongoing combat against climate change, it is essential for Finland to balance the measures that reduce emissions from ships on one hand, and their economic impacts on the industry and economy on the other.
This balancing act has characterized Finnish transport policies in the International Maritime Organization (IMO), the EU, and international cooperation around the Baltic Sea for years when it comes to Sulphur and other pollutants, and will likely continue to do so. Winter navigation, ensuring a level playing field for ice-classed ships, will also remain the exotic twist of Finnish environment and climate policy positions in the domain of shipping. There is no escaping the fact that all ports on the Finnish coast may freeze during the winter months, and that the northernmost ports around the Bothnian Bay face conditions comparable to the Arctic. There is no escaping the fact that this incurs additional costs to Finnish foreign trade.
How, then, should we look at the challenge of reducing greenhouse gas emissions from maritime transport here in the north? What is the role of public policy and regulation, and that of charterers? I will try to answer these questions based on the Finnish Government Resolution on reducing greenhouse gas emissions from maritime and inland waterway transport published this May. As a Government official and the ministerial rapporteur for this Resolution I will take the liberty of quoting it in the midst of my answer.
Public policy and regulation
The primacy of and preference for global regulation negotiated in the IMO is a cornerstone of maritime transport policy both in Finland and its Baltic neighbors. This is natural considering the inherently international nature of shipping. One cannot expect optimal results from any regional regulation, if there is a chance the regulation can be avoided by, for example, visiting a port outside the said region. However, effective global regulation is hard and often very time-consuming to achieve in the IMO, where negotiations among 175 states can continue for years on end, and the results watered down in the last minute. But as said, global regulation for a global industry is still preferable and should be pursued.
Finland and other EU Member States have advocated for effective global measures to reach the goals set in the Initial IMO Strategy on reduction of GHG emissions. At the 76th session of the IMO’s Marine Environment Protection Committee (MEPC) in June 2021, Finland joined other EU Member States in opposing the inadequate level of carbon intensity cuts in the negotiated short-term reduction measure. At the same session, Finland proposed to the said measure an exemption, which would apply to ice-classed ships moving in ice conditions. This would avoid imposing additional burdens on Finnish competitiveness due to winter navigation. Work on this continues in a technical Correspondence Group. Finland is not the only country supporting effective overall measures while also advocating national or regional interests.
Unfortunately, the MEPC has not yet sent a sufficiently strong signal to shipowners and the entire maritime cluster about the urgency of climate action. Enforcement of the short-term measure is weak, and negotiations on the more effective mid- and long-term measures, such as a global carbon levy or tax, will take years. Therefore, pressure is growing in the EU for large-scale regional emission reduction measures. In July 2021, the European Commission published a broad Fit for 55 climate package, which includes regulation for EU-wide alternative fuel distribution infrastructure, measures to increase the use of alternative fuels in shipping (FuelEU Maritime), and most notably a proposal to broaden the scope of emissions trading (EU ETS) to include maritime transport.
By and large, the Government of Finland views the Commission proposals favorably. However, much remains to be negotiated. Taking into account the demands of winter navigation remains a particular challenge for Finland and its northern Baltic neighbors on the EU side regulation as it does on the global level in the IMO. In addition to EU and IMO level negotiations, this challenge needs to be considered in national policies, as well as public funding for research and innovation. The Finnish Government Resolution published in May includes several measures to this end.
Charterers
There has been much discussion on the responsibility of shipowners in the midst of climate crisis and the flurry of building regulation on all levels. Many Finnish shipowners are already pioneers in testing and taking into use green shipping solutions. Yet the rapid decarbonization of Baltic Sea maritime traffic, especially scheduled short-sea shipping and the roro and ropax sector, while at the same time ensuring safe winter navigation, is a huge challenge.
Perhaps more attention should be paid to the responsibility and influence of charterers. Agreements on maritime transport are made between the charterer and the shipping company under charter parties or contracts of carriage. In some charter types, such as time chartering, the charterer is responsible for the ship’s commercial operation and travel costs instead of the shipowner. Consequently, the charter party templates underlie many decisions that affect shipping emissions.
Charter parties may make it more difficult for shipping companies and shipmasters to seek emissions reductions by operational means. For example, the clauses of the charter party may result in some vessels being empty on return voyages. The IMO, the EU or individual sovereign states have little or no possibilities to influence the content of commercial charter parties. The main responsibility for concluding charter parties that support the attainment of emissions reduction targets lies with the charterer, and the largest charterers in the northern Baltic Sea could play an important role in reducing greenhouse gas emissions from maritime transport, should they so wish.
I would like to encourage all charterers to include not only speed- or schedule-related targets, but also emissions reduction goals in their charter parties. Chartering ships, which run fully on non-fossil fuels, should be competitive in short-sea shipping in the Baltic Sea by no later than 2045.
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