Japan And The UN Shipping Agency’s Attitude To Climate Change

When China has a more ambitious climate plan than the country holding the reigns of the UN shipping agency, serious questions must be asked about that country’s moral leadership.  That is the farcical position that Japan finds itself today.

As California is ravaged by wildfires, Brazil sees unprecedented deforestation, Venezuela’s national parks suffer monthly oil pipeline leaks, Sri Lanka and Mauritius in the Indian Ocean are rocked by oil tanker explosions and major oil spills, and 150 million people surrounding the Red Sea watch a massive oil tanker about to disintegrate in their enclosed waters, addressing the causes of climate change is one of the biggest battles that the world faces coming out of the coronavirus pandemic.

18 September was the submission deadline for an important set of proposals for how global shipping planned to meet climate targets.  Japan has a disproportionately influential role over the committee making this decision, with its own representative being chair of the MEPC (Marine Environment Protection Committee).  This is one of the most powerful committees within the UN’s global shipping agency, the International Maritime Organization based in London that regulates the entire $3 trillion global shipping industry.  If the industry was a country, it would be the sixth largest economy in the world.

This means that Japan’s stance is under more scrutiny than ever before.

Not only is Japan’s dominance at the IMO impacting global carbon emissions, but over the past two months, several Japanese Government agencies and companies, as well as the IMO and other oil industry bodies, have overseen a disastrous oil spill cleanup effort with catastrophic implications for the Indian Ocean island of Mauritius.  All of this was caused by a large Japanese vessel, the Wakashio, that was controversially sunk.  

Something is not quite adding up.

Shipping’s dirty little secret

Global shipping has a dirty little secret.  It subsidizes the entire oil industry.

The oil that is burnt on ships is the stuff that the oil industry does not know what to do with.  It is the sludge at the end of the refining process.  There are many fancy names for it, but it is highly polluting, carbon-intensive and can cause serious human and environmental health conditions (one study estimates 40,000 deaths a year due to ship engine oil pollution alone).

It is so thick that at room temperature, this oil is the consistency of marmite or a thick peanut butter.  It is only when heated to 60C, and mixed with a toxic cocktail of other chemicals and diesel, does it start to flow into ship engines as liquid fuel.

It is then burnt off in the middle of the ocean out of the sight of most people, and sending even more carbon emissions into our atmosphere.

That is if it is not leaked into the ocean as one of dozens of major engine fuel oil leaks that happen every month.

Shipping subsidizes the entire oil industry

If shipping did not take this thick oil residue, the oil industry would have to pay to dispose of it safely.  Right now, the ship fuel industry is worth around $150 billion a year.  

It essentially acts as a subsidy for the entire oil industry, by giving oil refineries a revenue stream and customer base who would pay to dispose of this material.  By having lax environmental controls, the global shipping industry is allowed to just burn this waste product oil into the atmosphere – it is as bad as having coal power stations on the oceans.  Actually, 60,000 of them, which is the size of the global ocean shipping fleet.

But actually, the true oil subsidy is much higher than this.  Just like the end of life of nuclear power stations, disposing of toxic residue of the oil industry is very expensive.  So not only would the oil industry lose out on revenues from the shipping industry, but they would then have to pay much higher costs to safely dispose of residue oil.  

These costs are likely to be much higher than giving it to the shipping industry (it is so much cheaper to burn heavy oil out of sight of nations and citizens when sailing the world’s oceans).  

So assuming the cost of disposing of oil safely on land was double that of burning this off at sea for free, the true impact of lax environmental standards in global shipping could be as high as a $450 billion a year subsidy on the entire oil industry.

Why is this being allowed? That’s a good question for the G20.

Global shipping opting out of Climate Change commitments

There has been outrage surrounding the global shipping since the entire industry controversially decided to opt out of the Paris Agreement on Climate Change.  This makes it a pariah industry in the world, along with global aviation.

The Paris Agreement on Climate Change – signed in 2015 – was supposed to set nationally binding targets to reduce carbon emissions.  This is as the world only has ten years to avoid irreversible and runaway damage to the global climate.

Global shipping believed that it should exist outside this internationally-agreed system and promised to self regulate the industry itself.  

Since when has industry self-regulation ever gone well?  Just look at the case of the Volkswagen emissions scandal as a recent example of a multi-billion dollar, well-organized attempt to circumvent emissions targets.

The result of the global shipping industry pursuing self-regulation through a UN agency that it controls, rather than through nationally imposed targets, can be seen in the five years since the Paris Agreement was signed.  Not much has changed.

Madeline Rose, Climate Campaign Director, Pacific Environment highlights the irony of voluntary self-regulation. “The shipping industry is living on a different planet. They continue to oppose 100% decarbonization by 2050, when the health of our planet requires that they fully decarbonize by 2035.” 

One of the key reasons for this has been the controversial stance of Japan, and the powerful role it plays in global shipping as well as with the global shipping regulator, the UN’s IMO.

Role of Japan

To start with, let’s compare Japan’s stance at the IMO with the reality of what the world’s leading climate scientists at the IPCC says about climate change (in its 1.5 degrees special report) that the world has to almost halve absolute global carbon emissions by 2030 to prevent dangerous outcomes that result from going above 1.5 degrees of warming.

 Japan is not following this scientific advice at all.  Instead of supporting any outright reductions for shipping, it is lobbying for the shipping sector’s giant 1 billion tonnes of annual greenhouse gas emissions (which would place it as 6th in the country rankings), to be allowed to keep rising in absolute terms for at least another decade, in violation of Japan’s own signing of the Paris Agreement.

This would not make much of a difference if the emissions were small.  But the last forty years reveals a very different pattern about the global shipping industry.

Shipping is a boom industry

Global shipping has doubled in the last 13 years, and is expected to grow by 50% again by 2033.

Bulk carriers, similar to the one that crashed ashore in Mauritius, has been the biggest driver of this growth, accounting for 50% of added capacity.

Few industries have expanded this fast.  The world now has much larger ships and more of them in every corner of the world.  In term of weight being carried by these ships, this has now grown to over 2 billion deadweight tons, for the first time ever.

The reason the world does know how much shipping has grown is due to the role of offshore ship registries that has hidden this growth.

Over half of these ships are controversially registered in offshore ship registries, anecdotally referred to as ‘flags of convenience.’  The largest is in Panama, followed by the Marshall Islands and then Liberia.

This has been an important area that was neglected by the G20 when it took on tax evasion in 2008 with its Base Erosion Profit Shifting (BEPS) work.  Taking on Ship Registration and ‘Flags of Convenience’ is the unfinished business of that work.

With more scrutiny on how the G20 group of the most powerful nations are addressing climate change and ocean health, increased focus will be placed on the actions they are  taking in the shipping industry to end the ‘flags of convenience’ regime and insist on proper sustainability and safety reforms in shipping.

Canadian Prime Minister, Justin Trudeau, had tried to make ocean announcements at a G20 meeting in 2019 in Canada.  French President, Emmanuel Macron, has also tried to put the environment center of his G20 agenda, but has gotten France caught up in two major shipping related incidents in Beirut and Mauritius.  Both of these can be traced back to the lax standards of ‘flags of convenience’ used by half the global shipping fleet.

Japan’s controversial chair of the climate committee in the IMO

The IMO committee responsible for greenhouse gas emissions is called the Marine Environmental Protection Committee (MEPC).  It is chaired by Japanese official, Hideaki Saito and the Vice-Chair is Liberia’s Harry Conway, one of the largest ship registration territories in the world (and presumably one that would not like to see higher climate standards for its registrants).

Japan’s Hideaki Saito has had a controversial tenure as Chair of the MEPC.

In May 2019, he was widely criticized for overturning a majority of sovereign governments’ positions that had proposed developing a dedicated group to enable the IMO to fast-track work on greenhouse gas emissions.  Instead, he opted for slower, ad-hoc arrangements, that frustrated many Governments and protestors alike.

“The chair’s decision creates a major obstacle to the timely implementation of a GHG policy, and is deeply concerning given it was taken against the majority,” one IMO delegate told the Maritime Affairs publication, Splash at the time.

Protests from Extinction Rebellion were held outside the IMO in response.

Why does the MEPC matter so much?

How to meet Shipping’s Climate Targets: a choice between bold innovation or faceless bureaucrats

In the long term (20 years), there are three main ways to achieve shipping’s climate goals: electrification of the global vessel fleet, adopt hydrogen fuel or ammonia fuel.  However, while the private sector tinkers with these options over the next twenty years (that’s a separate discussion why energy innovation is so slow in shipping relative to other industries undergoing an energy revolution), it is the action of shipping in the next ten years that will determine whether the world can remain within sustainable climate parameters or not. 

So to meet the ambition levels of the Paris Agreement within the next ten years, the world faces a very simple choice in shipping: either operate ships more efficiently in the ocean or build ships more efficiently at the start of their life.  It is exactly the same choice that the automotive industry has been facing.  

All of this falls under the responsibility of the MEPC Committee, the one that Japan’s Hideaki Saito chairs.

The decision which the MEPC will have to rule over will eventually boil down to a choice between innovation and standard-setting.

Ships can either be operated more efficiently, relying on a range of exciting technology developments, such as sailing slower, wind-assisted sailing, bubble-hull lubrication, all of which could yield breakthrough innovation to meet bolder climate targets.

The other option is to regulate ship construction standards, and relies on an army of faceless inspectors, committees and standard setters, who have large, complex manuals which – at best – would only yield very small, incremental change each year.  We have already seen the accidents taking place around the world such as in Mauritius, where a model of trusting inspectors is all that stands in the way of a major ecological disaster.

There are 12 measures that are being evaluated by the MEPC at the IMO for how to meet climate commitments over the next decade. These are broadly broken down into operational efficiency and ship-building standards.  A 2019 evaluation of these proposals by the European Commission and UCL reveals that all of the proposals supported by Japan are 75% below the  ambition levels needed to met the 2030 objectives of Paris (and even that is 2 degrees celsius, and not yet at the 1.5 degrees celsius that is needed to save the world’s coral reef systems).

To understand this low level of ambition, let’s explore some of Japan’s motivations a little further. 

Choice 1: ‘Operational efficiency’ and bold shipping innovation

The only way to meet Climate Commitments is to set a legally binding target each year, and then allow the power of innovation to decide how ship operators would meet this.  Ship operators would then be free to choose from a range of levers (e.g., better software, better performance management of crew, new ship design, more effective fuel source etc).  For example, setting a target of 2% carbon efficiency per mile traveled for each vessel means that ship operators have to think creatively about how to meet these targets each year, thereby forcing change.

It will also force a change among ship operators to only charter more efficient and cleaner vessels.

Climate Campaign Director of Pacific Environment,  Madeline Rose, points out that “we need ‘Operational Efficiency’ carbon reduction standards applying to every ship at sea, that are actually enforced, not voluntary. This policy, supported by many governments, will unlock huge fuel savings, cost savings, and CO2 reduction in the short term, and ultimately pave the way to get ships off fossil fuels.”

The shipping industry has notoriously under-invested in innovation compared to every other industry (less than 1.5% of revenue invested in IT in the shipping industry compared to over 10% of revenue in banking, according to Deloitte).  Having a carbon efficiency target each year would force a greater investment into maritime innovation hubs around the world and tap into the broader energy revolution happening in every other industry.  If private space flight was possible within a decade, taking the same approach and tapping into innovative partnerships is all that it would take to reduce global shipping’s environmental footprint.

‘Operational Efficiency’ is the only policy that would, if set at the right stringency, force shipping emissions lower this decade through operational and speed changes, and incentivizing retrofits of the full range of existing technologies like flettner rotors, bubble-hull lubrication.

These ‘Operational Efficiency’ proposals are supported by international NGOs such as the  Clean Shipping Coalition (NGOs), France, Denmark, Germany, Spain, Pacific Island states, and even China).  

Faïg Abbasov, Shipping Programme Manager of Transport and Environment, a major policy research organization, highlights the importance of science in the Clean Shipping Coalition’s proposal that would meet the 21% reduction target by 2030 to make it compatible with the Paris Agreement. “The Clean Shipping Coalition’s proposal is the only one on the table that is science-based, in line with the Paris Agreement. Adopting it will send a clear signal to markets that an orderly transition is underway in shipping, and give the certainty required for companies to invest in, and switch to, non-fossil fuel types.”

Although China’s proposal does not have a set target yet, the fact that China recognizes that only regulating actual vessel operations, rather than theoretical ship inspections and certifications, should speak volumes about how wide a gulf there is between China’s and Japan’s sustainability positions at the IMO.

Choice 2: the tale of Japan – complex standards, unusable technology and unavoidable red tape

Japan has instead gone the other way – not unlike what happened with the Wakashio.

Its key policy proposal to IMO is called ‘EEXI’ – Energy Efficiency for Existing Ships Index.

It is essentially a fancy piece of software that states how vessels are performing in theory, and not in real time.  It also promotes secrecy over transparency (and we saw what happened in Mauritius when such an approach was taken).

In contrast to other more ambitious country proposals, Japan’s EEXI proposal would only shave between 1% and 6% from the business-as-usual growth path of shipping emissions, allowing outright emissions to be even higher in 2030 onwards than they are today (1 billion tonnes). (Just like aviation, the growth in shipping/trade is outpacing the improvements in efficiency, meaning overall emissions are rising).

Looking at the comparison of the various Short-Term measures under discussion at the IMO, it is clear that Japan supports only the weak policies limited to single-digit % impact versus business-as-usual.  This means outright emissions will be allowed to keep rising. 

Japan’s speed limiting devices – ‘cruise control’ for ships

In terms of how its ‘EEXI’ measure will actually be complied with, Japan submitted a joint policy proposal with industry lobby group BIMCO that all ships in the world install ‘shaft power limitation devices’ – effectively a piece of software similar to cruise control on a car, that sets the maximum power limit going to the propeller shaft of the ship, which in theory (on paper) would reduce fuel consumption, and hence emissions. 

However instead of setting a public speed limit that anyone can check is being followed (as all ships must legally carry AIS transponders on board), Japan and Norway’s proposal make it a commercial secret that the public has no right to know; which ships have these systems installed or when are the systems actually switched on.

Transparency is important because shipowners have a record of falsifying their own records, covering up environmental breaches, and even doing advanced engineering on their vessels to allow them to emit pollution cheaply into the ocean, to avoid more expensive environmental compliance. 

Even for the regulators who have access, EEXI is a ‘technical measure’ meaning compliance is just a hypothetical test on paper, rather than actual sea trials to see how much exhaust is coming out of the ship in real life.

A growing number of ocean and climate protection advocates (e.g Pacific Environment, Environmental Defense Fund) believe it will be very hard or impossible to verify whether ship operators are not simply switching off these devices at sea. That is, it will incentivize ship operators to cheat and show big emissions reductions in test conditions, just like the VW Dieselgate scandal, while in real world conditions, heavy pollution continues unabated.

‘EEDI:’ a possible cause of the crash of the Wakashio?

Japan’s proposal for the ‘EEDI software fix’ has been flagged as problematic by a European Commission Report in 2019.  The paper was entitled, ‘Study on methods and considerations for the determination of greenhouse gas emission reduction for international shipping.’  On page 22 of the UCL-produced paper, several issues were flagged about EEDI.  

The report goes on to say, “For some ship types, a further strengthening of the EEDI could result in under-powered ships which cannot maneuver safely in adverse weather conditions. This appears to be the case in particular for large tankers and bulkers”

With outrage and protests continuing in Mauritius, last week saw all three mainstream opposition parties, and the former biodiversity-scientist President of Mauritius, all calling for a full and independent  international investigation into the incident that caused the grounding of the Wakashio.  They all gave an expression of no confidence in Panama’s ability to look into all these technical aspects of the Wakashio, and appealed to the countries from the G20 to intervene.

Countries with advanced accident investigation boards like the USA’s NTSB, Australia’s ATSB, the UK’s Marine Accident Investigation Branch, and Canada’s TSB, are some of the best in the world, and can quickly assess whether there were any software devices installed in the Wakashio that could have impaired control.  This would avoid any unintended destruction or tampering of evidence by parties not experienced in handling such sensitive information.

The owners of the Wakashioa, Nagashiki Shipping and the operator of the vessel the world’s second largest ship operator, $12bn Japanese giant, Mitsui OSK Lines, have been asked for a comment, but have not yet responded on the use of EEDI software on the Wakashio.

The Japan and Norway partnership

Japan submitted an initial explanation of the ‘shaft power limitation device’ to the IMO’s MEPC committee on 8 March 2019.  Then on 27 September 2019, it submitted a joint proposal with Norway.

Japan and Norway are now trying to broaden this ‘ship cruise-control’ appeal by saying ‘shaft power limitation’ can be just one of the options you can use to meet the ‘Energy Efficiency Existing Ship Index (EEXI).’  But guess what – if ship operators are given a range of compliance options, they will choose the cheapest.  So, in reality there is no incentive to install better propellers, flettner rotors, let alone hydrogen fuel cells in the real world when these operators can just promise the regulators you will keep some software turned on out at sea.

Japan’s government is pushing for regulation globally that will do nothing to incentivize the scale-up of all the amazing battery or hydrogen shipping projects that are underway at smaller scales (e.g., ferries). 

This is because “Many, if not most, ships in operation throughout the 2020s would have to do literally nothing in order to comply” with EEXI. That is, it’s been designed at a low enough level that most ships already meet it.  No technology change or operational change would be needed. 

Letting industry interests set environmental regulation at levels which are already being met, so no change is needed, is highly disingenuous for the public. It is certainly not serving the interests of the people of Japan (or Mauritius) in a safe and stable climate system, and oceans at safe acidity levels.

Japan’s track record of weak ship standards

Japan has a long record of designing ship regulations that are intentionally weak. Japan has chaired the working group at IMO on efficiency standards for newly built ships (‘EEDI’) for the last decade. 

These EEDI standards were set so low that most ships built in 2015 already met the standards only coming into force in 2020 – i.e. the regulation lagged behind what the industry was doing already, instead of pushing it. 

As outrage grew over how weak the standards were, there was growing political pressure at IMO to tighten them up. 

In response to this, in 2018 Japan argued they had not been able to find enough data to make a decision on tightening up these efficiency standards. But it was Japan itself chairing the working group that originally designed the data collection system to be voluntary, not mandatory, resulting in the lack of data! 

Japan uses the lack of data resulting from its own choices as an excuse to argue against toughing up standards. In other words, the 3rd largest builder of oil tankers in the world has mysteriously failed to do enough work to regulate itself better. 

Other greenhouse gases from shipping are mysteriously exempt

The second major problem with the EEDI framework is that Japan limited it to only cover CO2, not any other greenhouse gases (GHG). This is a problem because Methane – which traps 86 times more heat in the atmosphere than the same amount of CO2 over a 20-year time period –  represents a small but rapidly growing share of GHG emissions from shipping. 

 The 150% growth in methane emissions from 2012 to 2018 was largely due to a surge in the number of ships fueled by liquefied natural gas (LNG). Japan has systematically failed to regulate methane leaks in shipping.

An Axis of Convenience between Japan and Panama

The next crucial round of talks at IMO starts on 19 October 2020 (the Inter-sessional Working Group on Greenhouse Gases or ISWG-GHG for short) and as things stand, it looks likely the Panama-Japan alliance will have their way and keep shipping CO2 regulation meaningless. 

The Panama flag is very popular with Japanese shipowners, particularly tankers. So there are always suspicions at the IMO that favors are being done (such as whether Panama is speaking on behalf of Japanese commercial interests and vice versa). 

This Axis of Convenience has been brought into the spotlight by the MV Wakashio disaster, where Panama appears to have been rushing to judgement that actions by the crew caused the accident, even though satellite and other data indicate otherwise.

The deadline for policy submissions to this Greenhouse Gas working group was earlier today on Friday September 18.  

Japan is trying to reach a big diplomatic agreement with the high-ambition states whereby it supports their Operational Efficiency regulation in name only, in return for removing any mechanism for it to be enforced.

Madeline Rose, Climate Campaign Director, Pacific Environment, suggests a more ethical approach. “If Japan changes course to embrace a Paris-aligned pathway for shipping decarbonization now, in these last few months of 2020, they could positively alter the trajectory for shipping decarbonization forever.”

An organized campaign of greenwashing shipping by Japan

The scale of greenwashing in the shipping industry appears to be even greater than in the IMO.

Japan and Norway have also been active in other forums attempting to influence outcomes by funding friendly scientists and policy groups to put out sympathetic reports.

The High Level Panel on the Sustainable Ocean Economy is one such example.  It is chaired by the Prime Minister of Norway, Erna Solberg and has the outgoing Prime Minister of Japan, Shinzo Abe, as a member.

Norway’s track record on the ocean has already been criticized following a decision in 2018 to veto a decision to protect part of Antarctica, and going against 22 other nations, by voting with Russia and China.

The High Level Panel on the Sustainable Ocean Economy, supported by NGO, the World Resources Institute, has not even made shipping one of its priorities in the blue papers that it had asked scientists to create submissions for.  

Even in its recently published 108-page report entitled ‘A Sustainable and Equitable Blue Recovery,’ on behalf of the High Level Panel, it describes Marine Transport as one of five important priorities for investment in the blue economy, but a closer look reveals the details are only listed on two pages (pages 54-55).  Even then, there is no evaluation of any of the pathways listed by the European Commission – UCL paper.

These are serious omissions for a panel with such esteemed ocean leaders and a long list of reputable organizations supporting ‘independent analysis.’  Perhaps greater scrutiny is called for there on the quality of these research papers, and the role of Japan in what topics are covered.

Madeline Rose, vows to continue the fight regardless of Japan’s and the IMO’s stance on climate change. “The shipping industry will simply face regional and national climate regulation around the world, if it does not accept the need for science-based climate regulation at the IMO now,” she says. 

A call to the G20

With shipping continue to claim it is ‘doing all it can,’ and piles upon piles of reports, papers and endless committee meetings, let’s look at the results.

In the last two months alone, there has been a massive explosion in the Port of Beirut, two major oil spills in Venezuela, Mauritius suffering not just a major oil spill, but the ignominy of the leading international shipping organizations who somehow ‘forgot the manual’ on how to clean up a major oil spill, a Panama-flagged supertanker exploding off the coast of Sri Lanka, the loss of a cattle ship that headed straight into the eye of a typhoon with the loss of 40 lives and 6000 cows, and another ecological crisis looming for 150 million around the Red Sea as a large Yemeni oil tanker starts to disintegrate. 

Hundreds of thousands of seamen have been stuck at sea and contacting seafarers unions for support.  Even the Pope, UN Secretary General, Sir Richard Branson among many other world figures have called for big changes in this industry.

This is an industry in crisis.

It is an industry that cannot fix itself.

It is an industry where urgent reform is needed in order to prevent more lives being lost and more of the fragile environment being destroyed.

2020 was supposed to welcome the greatest set of announcements for nature.  Instead, it has seen some of the worst ecological effects, and all caused by the shipping industry.

The UN Agency responsible for cleaning up global shipping appears to have gone rogue.

Leaders of the G20 made such strong statements on the environment, but have suddenly lost their voice when it comes to global shipping.  If ever there was an industry that needs urgent fixing because of its importance to the planet and the global economy, it is shipping.  

But don’t ask the inmates to run the asylum – it will take external intervention to see real change.

Ordinary citizens around the world have been rising up to demand this.  Without serious action, the next Mauritius, Beirut, Venezuela, Sri Lanka, Red Sea could be just around the corner.

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