Executive Briefings

Warning: Bureaucrats at Work

Everywhere you look today, somebody's yelling about a cause. Our world is full of raging pundits, media blowhards and carefully staged mass demonstrations. But I sometimes wonder whether the most potent political force of all isn't something quieter and more mundane. I'm talking about bureaucracy.

Functionaries gather in stuffy rooms and drone on about committees and subcommittees and working groups and amendments to amendments. Do you suffer from insomnia? Try sitting in on one of those meetings, or reading the position papers that emanate from them. Be careful, though - the most devastating regulations tend to get passed while you're sleeping.

Here's one debate you should stay awake for. The International Maritime Organization is the United Nations agency that addresses a wide range of issues related to global shipping. Its binding conventions cover everything from crew training and certification to vessel and port security, navigation safety, ship design, transportation of hazardous materials, maritime piracy - I could go on. Currently IMO's Maritime Environment Protection Committee is looking into the issue of greenhouse gas (GHG) emissions from ships. The panel just wrapped up a session in London at which it considered new international regulations on vessel design and operation, with the aim of cutting back on air pollution.

Fair enough - according to Oxfam America, global shipping spewed out 847 million tons of carbon dioxide emissions in 2007. That's more CO2 than is produced by 15 of the world's top 20 emitting countries - including Germany, the U.K., France and Saudi Arabia. Currently there are no mandatory emissions laws or guidelines covering shipping on a global scale; the non-binding Kyoto Protocol, developed under the United Nations Framework Convention on Climate Change (UNFCCC), does not include vessel emissions.

Clearly there are steps that need to be taken to address the issue. In fact there are more efforts underway at the international, national, state and local levels than I could possibly cite here. For its part, MEPC is looking into the question of whether a voluntary environmental initiative should be made mandatory for new ships. The Energy Efficiency Design Index (EEDI) is a guide for designing and building more eco-friendly ships, and the Ship Energy Efficiency Management Plan (SEEMP) offers best practices for improving fuel efficiency. Committee members are far from agreeing on a mandatory EEDI; China and Brazil apparently oppose the idea. The Chinese in particular have been blocking progress because they insist that the committee's work match up with the guidelines of the Kyoto Protocol. Having thus emerged from the London meetings without a consensus, MEPC is looking to revisit the topic at its next session in July 2011.

Even more problematic is what the committee blandly refers to as "market-based measures" (MBMs) for curbing GHG emissions. These could take the form of a cap-and-trade scheme for ship operators, or the purchase of emission-reduction credits through a new GHG fund. They could also lead to an international tax on commercial shipping.

What would that figure be? Nobody seems to know. Last month, Oxfam called on the international shipping industry to raise $10bn a year in carbon levies. According to Heather Coleman, senior policy adviser on climate change with Oxfam America, the money would be funneled to "vulnerable communities" around the world that are struggling to deal with the damage wrought by climate change. Impacts include more frequent storms, droughts, floods, melting glaciers and damage to crops. The need by poor and developing nations for financing is "well recognized," Coleman says, citing the work of the Copenhagen Accord on Climate Change. Participants in that effort have called for "fast-start" financing in the 2010-2012 period, with $100bn a year being generated starting in 2020.

In casting about for creative ways to generate the cash, planners have placed international aviation and ocean shipping squarely within their sights. "Because it represents a growing source of GHG emissions, because it's international in scope, and because of the impact of climate change on vulnerable sectors around the world, this sector has responsibility to generate finance," says Coleman.

Acknowledging that Oxfam is no expert on international shipping, Coleman nonetheless cites research by the organization showing that putting a price on vessel carbon emissions, whether in the form of an emissions trading scheme or outright fuel levy, "would have minimal if any impact on international trade."

Perhaps. Still to be determined is how much the levy would be, who would get the money, how it would be enforced and who would pay it. (Shippers, get ready for a "Carbon Levy Surcharge.") Presumably the system would be administered by IMO and the International Civil Aviation Organization. But backers of the idea, despite early signs of stiff opposition by industry, seem to feel that the momentum is on their side. There's even a veiled threat involved, with a World Wildlife Federation official suggesting that if maritime interests fail to reach an emissions-reduction solution through IMO, they "face the possibility of less sympathetic regulation from elsewhere."

Without knowing the details of the carbon-levy plan, it's tough to assess its wisdom or potential impact. Instinctively, I'd say that positive measures, such as designing more energy-efficient ships, switching to cleaner-burning fuels on certain routes and relying on other types of green technologies are a better way to go. Even a cap-and-trade scheme seems less onerous than an outright levy. Slapping a fee on vessel GHG emissions amounts to a large-scale "sin tax," much like those on cigarettes and alcohol, with society coming to rely on bad behavior for essential revenues. In other words, the dirtier the ship, the more money it generates.

The bureaucrats are hard at work. I'd advise everyone to stay alert.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article

Everywhere you look today, somebody's yelling about a cause. Our world is full of raging pundits, media blowhards and carefully staged mass demonstrations. But I sometimes wonder whether the most potent political force of all isn't something quieter and more mundane. I'm talking about bureaucracy.

Functionaries gather in stuffy rooms and drone on about committees and subcommittees and working groups and amendments to amendments. Do you suffer from insomnia? Try sitting in on one of those meetings, or reading the position papers that emanate from them. Be careful, though - the most devastating regulations tend to get passed while you're sleeping.

Here's one debate you should stay awake for. The International Maritime Organization is the United Nations agency that addresses a wide range of issues related to global shipping. Its binding conventions cover everything from crew training and certification to vessel and port security, navigation safety, ship design, transportation of hazardous materials, maritime piracy - I could go on. Currently IMO's Maritime Environment Protection Committee is looking into the issue of greenhouse gas (GHG) emissions from ships. The panel just wrapped up a session in London at which it considered new international regulations on vessel design and operation, with the aim of cutting back on air pollution.

Fair enough - according to Oxfam America, global shipping spewed out 847 million tons of carbon dioxide emissions in 2007. That's more CO2 than is produced by 15 of the world's top 20 emitting countries - including Germany, the U.K., France and Saudi Arabia. Currently there are no mandatory emissions laws or guidelines covering shipping on a global scale; the non-binding Kyoto Protocol, developed under the United Nations Framework Convention on Climate Change (UNFCCC), does not include vessel emissions.

Clearly there are steps that need to be taken to address the issue. In fact there are more efforts underway at the international, national, state and local levels than I could possibly cite here. For its part, MEPC is looking into the question of whether a voluntary environmental initiative should be made mandatory for new ships. The Energy Efficiency Design Index (EEDI) is a guide for designing and building more eco-friendly ships, and the Ship Energy Efficiency Management Plan (SEEMP) offers best practices for improving fuel efficiency. Committee members are far from agreeing on a mandatory EEDI; China and Brazil apparently oppose the idea. The Chinese in particular have been blocking progress because they insist that the committee's work match up with the guidelines of the Kyoto Protocol. Having thus emerged from the London meetings without a consensus, MEPC is looking to revisit the topic at its next session in July 2011.

Even more problematic is what the committee blandly refers to as "market-based measures" (MBMs) for curbing GHG emissions. These could take the form of a cap-and-trade scheme for ship operators, or the purchase of emission-reduction credits through a new GHG fund. They could also lead to an international tax on commercial shipping.

What would that figure be? Nobody seems to know. Last month, Oxfam called on the international shipping industry to raise $10bn a year in carbon levies. According to Heather Coleman, senior policy adviser on climate change with Oxfam America, the money would be funneled to "vulnerable communities" around the world that are struggling to deal with the damage wrought by climate change. Impacts include more frequent storms, droughts, floods, melting glaciers and damage to crops. The need by poor and developing nations for financing is "well recognized," Coleman says, citing the work of the Copenhagen Accord on Climate Change. Participants in that effort have called for "fast-start" financing in the 2010-2012 period, with $100bn a year being generated starting in 2020.

In casting about for creative ways to generate the cash, planners have placed international aviation and ocean shipping squarely within their sights. "Because it represents a growing source of GHG emissions, because it's international in scope, and because of the impact of climate change on vulnerable sectors around the world, this sector has responsibility to generate finance," says Coleman.

Acknowledging that Oxfam is no expert on international shipping, Coleman nonetheless cites research by the organization showing that putting a price on vessel carbon emissions, whether in the form of an emissions trading scheme or outright fuel levy, "would have minimal if any impact on international trade."

Perhaps. Still to be determined is how much the levy would be, who would get the money, how it would be enforced and who would pay it. (Shippers, get ready for a "Carbon Levy Surcharge.") Presumably the system would be administered by IMO and the International Civil Aviation Organization. But backers of the idea, despite early signs of stiff opposition by industry, seem to feel that the momentum is on their side. There's even a veiled threat involved, with a World Wildlife Federation official suggesting that if maritime interests fail to reach an emissions-reduction solution through IMO, they "face the possibility of less sympathetic regulation from elsewhere."

Without knowing the details of the carbon-levy plan, it's tough to assess its wisdom or potential impact. Instinctively, I'd say that positive measures, such as designing more energy-efficient ships, switching to cleaner-burning fuels on certain routes and relying on other types of green technologies are a better way to go. Even a cap-and-trade scheme seems less onerous than an outright levy. Slapping a fee on vessel GHG emissions amounts to a large-scale "sin tax," much like those on cigarettes and alcohol, with society coming to rely on bad behavior for essential revenues. In other words, the dirtier the ship, the more money it generates.

The bureaucrats are hard at work. I'd advise everyone to stay alert.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article