The speed limit debate at the IMO

Harilaos N. Psaraftis,
Technical University of Denmark,

At its landmark 72nd  session of the Marine Environment Protection Committee (MEPC 72) in April 2018 the International Maritime Organization (IMO) took serious action for the reduction of maritime green house gas (GHG) emissions. The so-called Initial IMO Strategy includes, among others, the following elements: (a) the vision, (b) the levels of ambition, (c) the guiding principles, (d) a list of short-term, medium-term and long term candidate measures with a timeline, and (e) miscellaneous other elements, such as follow up actions and others.

Two important targets are included in the strategy: (i) to peak GHG emissions from international shipping as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008 and (ii) to reduce CO2 emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008.

To reach these targets, a broad variety of short-term, medium-term and long-term measures are being contemplated. Among the set of short-term measures, those that are to be finalized and agreed to between 2018 and 2023, speed reduction was suggested as a possible measure.

However, Chile and Peru objected to the use of the term “speed reduction”, on the ground that this may constitute a barrier to their exports to Asia (and particularly to those that involve perishable products). They suggested the use of “speed optimization” instead. In a compromise solution, both wordings were included in the IMO decision text. However, what is meant by “speed optimization” in that text is far from clear and hence is subject to different interpretations.

It turns out that the term “speed reduction” is not well defined either. In many IMO submissions and in some other documents such as studies, papers, etc. there is widespread confusion on how this term  is interpreted. Sometimes it is interpreted in a literal sense, that is, reducing speed irrespective of how the reduction is achieved. In that sense, it is often used as a synonym for “slow steaming,” which is a voluntary measure. But some other times the term is interpreted as mandating speed limits. In fact, a recurrent measure that has been and is being promoted by various Non-Governmental Organizations (NGOs) and other stakeholders is to impose speed limits.

This author has made a comparison between speed reduction achieved by a speed limit and speed reduction induced by a bunker levy. One of the results was that for any given level of levy, an equivalent speed limit can be devised so that speeds and therefore CO2 emissions are exactly the same. Another result was that a common and uniform levy would result in different optimal speeds for different ships. A larger ship would in general imply a higher optimal speed, everything else being equal. Therefore, achieving equivalence such as the above by a common and uniform speed limit would be impossible. To do so, one would have to set size-specific (or maybe even ship type-specific, route-specific or even direction-specific) speed limits, which would make the whole exercise very difficult from an administrative viewpoint. Conversely, if a common and uniform speed limit is imposed, the limit may be superfluous for some ship types and sizes and binding for some others, depending on the state of the market, the price of fuel, and a host of other parameters. In depressed market periods the speed limit may be superfluous, and in boom market periods the limit would force some ships (likely at the large end of the scale) to slow down whereas others do not. A speed limit may also be superfluous in one route direction and binding in the other direction.

A likely short term effect of speed reduction, either by a speed limit or by a bunker levy, would be an increase in freight rates due to the contraction of the fleet’s annual tonne-km supply curve. The other side of the coin is that shippers would be hit twice: they would  pay more for their cargo and also suffer increased transit times and increased in-transit inventory costs. Also, the freight rate increase is likely to be short-lived, particularly in the speed limit scenario. In the long run, the expanded fleet that will have to be built to sustain trade throughput under a speed limit regime would be larger than a fleet without  speed limits. This would ultimately result in fleet overcapacity and a subsequent drop in freight rates. A speed limit regime would exhibit  reduced flexibility to further slow down whenever the market becomes depressed, and this may result in more ships laid up. Building more ships under a speed limit regime would also increase emissions due to shipbuilding and recycling (lifecycle emissions) and may have adverse implications on ship safety.

Last but not least, a speed limit scheme would offer no incentive to improve the energy efficiency of ships or invest in energy saving technologies or fuels. Two ships of the same type and size, one energy-efficient and the other energy-inefficient, would be forced to sail at the same speed, and this would unduly penalize the energy-efficient ship.

The speed limit option was discussed at latest IMO meeting, MEPC 74 (May 2019), among other measures. To the disappointment of its advocates,  the measure was not endorsed, as many stakeholders objected to it. But MEPC 74 did not reject  it either, so the measure is still alive, at least theoretically. By contrast, the bunker levy option (and in fact any market based measure) is barely visible in the IMO agenda at this point in time, and it is not clear when (or even if) the relevant discussion will open.

Expert article 2564

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