On 1 July the new EU MRV (Monitoring, Reporting and Verification) Shipping Regulation came into force, something that may presents a number of new challenges for shipping companies. Indeed, it appears that difficulties are arising in understanding the new regulatory requirements and preparing vessel-specific monitoring plans.
According to the EC’s impact assessment, the MRV system is expected to cut greenhouse gas emissions from the journeys covered by up to 2 per cent, compared with a ‘business as usual’ situation. The system should also – it is claimed – reduce net costs to owners by up to €1.2 billion per year in 2030.
The first step of the strategy involves the design of a robust MRV system of carbon emissions for ships exceeding 5,000gt on all voyages to, from and between EU ports applicable from 2018. These vessels will have to submit a monitoring plan to a verifier for approval, indicating the methodologies chosen to monitor and report emissions and other relevant information.
The first annual monitoring period starts on January 1 2018. Throughout that year, operators will be required to keep track of carbon emissions and other relevant information by following the procedures described in the approved monitoring plan. As soon as the year is over, they will gather all relevant information pertaining to 2018 and, for each qualifying ship, compile an emissions report.
Needless to say, this has not been welcomed with open arms. For instance, the UK Chamber of Shipping reported that “Unfortunately, it is now more evident that the verification process… will be a very costly task for the industry.” And it seems likely that these costs will go further down the line, as – for instance – bunker suppliers face commercial pressures to assist their customers in meeting their obligations.
Another problem lies with the disparity between the EU’s MRV system and that which will apply to the rest of the world. As non-EU ships trading with Europe will be affected, the International Chamber of Shipping (ICS) is concerned that the EU is pre-empting the result of ongoing IMO negotiations on reducing emissions, which were generally considered to be progressing well. Non-EU nations may take a dim view of a separate regional regime, pushed forward by Europe, which might not be compatible with the outcome of the IMO’s wider global discussions. For countries such as China and India in particular, carbon dioxide regulations are politically sensitive.
Indeed, the ICS, BIMCO and Intercargo have issued a statement that said: “There is a danger that the EU initiative will be seen by non-EU nations as an attempt to present them with a fait accompli. The EU Regulation includes controversial elements, such as the publication of commercially sensitive data on individual ships.”
Clearly these are significant issues. In the longer term, however, monitoring will benefit shipowners, who will be better equipped to take decisions on major investments and to obtain the corresponding finance. Equally, such monitoring will provide useful insights into the performance of individual ships, their associated operational costs and potential resale value.
For good or ill, however, these regulations are now in place and are not going anywhere. Clearly it is now necessary for shipowners to find an efficient MRV solution for their entire fleet, tailored to their needs and minimising the risks and costs of compliance and verification. And, while the establishment of such systems may be painful at first, if they result in more efficient fleets, they are to be welcomed.