Emissions Freight: How to Curb CO2 Emissions from International Shipping

By Henrik Selin and Rebecca Dunn

If international shipping were a country, it would be the world’s seventh largest emitter of carbon dioxide (CO₂) emissions annually.

Despite this, CO₂ emissions from international shipping are not currently covered by international treaties or domestic policies. This means that these CO₂ emissions are largely left outside collective efforts to meet the 2015 Paris Agreement’s goal to limit global average temperature increases to well below 2°C above pre-industrial levels (and to pursue efforts to limit them to 1.5°C).

In the 2010s, international shipping was responsible for approximately 2 percent of global annual CO₂ emissions. In the absence of more stringent measures, the International Maritime Organization (IMO) estimates CO₂ emissions from international shipping may increase by up to 50 percent above 2018 levels by 2050 due to an expansion in maritime trade. This creates a need to consider additional measures for mitigating CO₂ emissions from international shipping.

One option for further addressing CO2 emissions from international shipping is to allocate them to national carbon budgets. In “Mitigation of CO₂ Emissions from International Shipping Through National Allocation” (Environmental Research Letters) with Noelle Eckley Selin (MIT) and Yiqi Zhang and Alexis Lau (The Hong Kong University of Science and Technology), we analyzed five options for national allocation:

1. The country where the ship is flagged (“flag country”);
2. The country of the ship owner (“owner country”);
3. The country of the ship manager (“manager country”);
4. The country of the ship operator (“operator country”); and
5. The country where bunker fuel is sold (“bunker fuel country”).

We concluded that an effective and equitable way to address CO₂ emissions from international shipping would be (1) to allocate them to national carbon budgets of the country of ship owners, and (2) to do so through a collective mechanism operating under the United Nations Framework Convention on Climate Change (UNFCCC) in the context of the implementation of the Paris Agreement.

We found that the majority of CO₂ emissions would be allocated to a limited number of countries – just 35 countries appear in the top 20 across all options. The top 20 countries under each of the five allocation options would be allocated between 88 and 90 percent of CO₂ emissions options and the top ten countries would be allocated between 69 and 75 percent of total CO₂ emissions. However, who the top ten countries are varies across the five options.

Members of the Organization for Economic Co-operation and Development (OECD) would be allocated more than 70 percent of CO₂ emissions for three of the allocation options (“owner country,” “operator country,” and “manager country”), and for the other two options (“bunker fuel country” and “flag country”), non-OECD countries are allocated more than 60 percent.

The addition of CO₂ emissions from international shipping to national carbon budgets would result in large percentage increases to several carbon budgets, but not all. Some countries would see major increases to their carbon budgets – in some instances by an order of magnitude. Under the “flag country” option, the Marshall Islands would see a 51,203 percent increase, followed by Liberia (8,143 percent), Tuvalu (2,450 percent), Malta (2,061 percent) Antigua and Barbuda (1,798 percent), Bahamas (1,388 percent), and Panama (1,234 percent). Some national carbon budgets would increase by hundreds of percent under specific allocation options. In contrast, the carbon budgets of China and the United States – the world’s two largest country emitters of greenhouse gas (GHG) emissions from domestic sources – would increase by less than one percent.

We argue that the creation of a national allocation scheme based on the “owner country” option would be both effective and equitable. Ship owners, as asset owners, through their investments decisions are best positioned to lead the transition of the world’s shipping fleet to zero CO₂ emissions. The ship operator decides on operational issues including the routing of a ship; the ship manager is responsible for the day to day running of a ship, including determining ship speeds and the purchasing of fuel oils, and the bunker fuel seller provides the necessary fuel. However, decisions by the ship operator, the ship manager, and bunker fuel sellers are less impactful for achieving large-scale CO₂ emission reductions than capital investment decisions by ship owners. The “flag country” option is the option that puts the most burden on the carbon budgets of non-OECD members, including several smaller developing countries.

Over the past two decades, most international political debate on reducing CO₂ emissions from international shipping has taken place in the IMO. This debate has resulted in few concrete actions beyond the introduction of mandatory energy efficiency and fuel reporting measures, and these measure are not enough to ensure that CO₂ emissions from international shipping are adequately addressed together with other sources of GHGs over the coming decades. Taking into consideration the objectives, principles for decision-making, and geographical coverage of the UNFCCC and the IMO, we conclude that there are strong reasons to move at least some debate and policy-making powers on how to further address CO₂ emissions from international shipping from the IMO to the UNFCCC, including the creation of a national allocation scheme.

The UNFCCC objective centers on stabilizing atmospheric GHG concentrations, and this is further advanced by the Paris Agreement’s temperature goals. In contrast, the IMO integrates objectives to facilitate international shipping and ensure maritime safety and efficiency of navigation with controlling pollution from ships. Principles for decision-making under the UNFCCC and the Paris Agreement allow for a greater differentiation in national measures than under IMO’s principle of equal treatment of all members, providing important political flexibility. In addition, the broader geographical coverage of the UNFCCC over the IMO – with 195 UNFCCC country parties compared to 174 IMO member states – makes the UNFCCC a better global forum for reducing risks of free riding by industry actors re-locating to national jurisdictions outside of a national allocation scheme. The EU is also an UNFCCC party, but not an official IMO member.

It may be politically difficult to reach consensus among all UNFCCC parties on the creation of a national allocation scheme for CO₂ emissions based on the “ship owner” option (or any other national allocation option). The world’s countries have different political and economic interests related to international shipping and trade, which is a central component of the global economy. However, the importance of addressing all CO₂ emission sources to meet the Paris Agreement’s temperature goals reinforces the necessity of new and more ambitious measures to accelerate the reduction of CO₂ emissions from international shipping.

Henrik Selin is Associate Dean for Studies and Associate Professor at the Frederick S. Pardee School of Global Studies at Boston University and the co-author of the recent book, “Mercury Stories: Understanding Sustainability through a Volatile Element,” published by MIT Press.

Rebecca Dunn received her MA at the Frederick S. Pardee School of Global Studies at Boston University in International Relations and Environmental Policy and was a founding employee of the Global Development Policy Center.