New climate demands will spread far beyond Europe’s borders

Originally published in ShippingWatch

Everyone in the shipping industry knows how difficult it is to turn a ship around when it’s at full steam.

But that’s exactly what the EU set out to do, when it introduced the world’s first regional green laws for the shipping industry back in 2021. And—contrary to what many may think—it’s succeeding.

Last year T&E published a paper looking at the impact of the EU’s climate action on shipping pollution.

We found that in 2019, four out of every 10 ships globally visited a port in the European Economic Area in that year alone. Looking at the ships that also visited China and the US, this number went up to over 8 out of 10 ships.

With this in mind, we were able to say that these three major economies could regulate the vast majority of global shipping, bringing order to the wild west of the high seas. Call it the “Brussels-Beijing-Baltimore” Effect. 

With the shipping industry finally liable to pay for its pollution in the EU’s carbon pricing system (EU ETS) from 1 January 2024, we recently looked again at our analysis and found we may have undersold the impact.

Making waves

Our message last year was simple: if just a couple of countries or economic blocs chose to regulate their shipping emissions, the impacts would ripple across the seven seas.

To make the point concrete: if a handful of Global North countries – Australia, South Korea, Japan and the US – copy the EU’s green fuel mandate (FuelEU Maritime), then three out of every four ships in the world would be forced to invest in sustainable energy.

That means massive developments in ship technology, changes in supply chains and investment in renewable energy far beyond the maritime borders of these countries. 

A drop in the ocean

But by only looking at one year of data, our analysis was limited.

The reality of shipping is that trade patterns change. One year a ship might be delivering wheat to Europe, the next, delivering iron ore to South America. 

Luckily, EU regulators took this into account when drafting their green fuels law. 

By ratcheting up the green fuel targets every 5 years, FuelEU Maritime will apply both to ships that only visit EU ports a few times a year and to those that never leave EU waters.

With this year’s publication of the EU’s shipping pollution data, we had the chance to finally paint the full picture, as 2023 marked 5 years since the EU first published data on shipping pollution. 

And our findings were much more impressive than we’d anticipated. 

Of all the ships still sailing the world’s seas in 2022, 6 out of 10 of them had done business in European ports since 2017.

This has massive implications for global shipping decarbonisation.

It means that 58% of all the ships in the world already fall into the EU’s rules on monitoring and reporting emissions.

Ships calling at European ports are part of the block’s carbon market as of this year, and from 2025 onwards, they will have to use more and more green fuels as years go by.

That means before the end of the 2020s, most of the ships, anywhere in the world, will have to invest in new fuels and pay for their pollution in the EU.

With or without EU

Of course, these ships will not spend all of their time within the EU’s jurisdiction: many of them will only visit Europe a handful of times each year.

This is why regional regulation outside the EU remains hugely important. 

If the US, China, South Korea and others make things simple for industry and copy and paste the EU rules, the blue oceans will become greener much sooner than we expect. 

That is not to say there is no role for the IMO. 

The IMO must do all it can to put in place strong international climate laws to reduce emissions as quickly as possible.

This is important even if – and when – the regulator is not able to keep the same pace as climate-ambitious regions. 

As anyone who has ever suffered through an IMO meeting can attest to: the slow pace of those negotiations, eventual loopholes and weak flag state governance means that the regulator simply won’t be able to keep the same pace as climate-ambitious regions. 

But that’s okay too.

Wealthier countries that can bear the brunt of higher costs have a responsibility to act first before the IMO eventually agrees on climate measures for the rest of international shipping.

From Brussels with love

The moral of the story is: don’t doubt the Brussels effect. Europe’s smart clean shipping rules are effective in cleaning up dirty global trade at low cost.

The EU might be struggling to play its part as a geopolitical superpower, but we all know the one thing Brussels does well: regulation.

And it only becomes more effective the more countries follow suit.

Even with just one shipping superpower adopting the EU’s blueprint, it would lock the global shipping’s  transition to zero-emission. They could be the ones to tip the scales and bolster rather than contradict international efforts.

Here’s looking at you, US, China, Japan, Korea and Australia to definitively turn this ship around.