A few weeks back, I wrote about a scheme to impose a carbon levy on oceangoing ships, with the money to be funneled to developing nations coping with the damage caused by climate change. For the moment, that proposal remains in bureaucratic limbo. But even if it ends up getting blocked, vessel operators won't be shielded from the debate over global warming and greenhouse gas emissions. The only question is: what kind of changes will they have to make, in order to comply with more stringent regulations?

The hottest debate right now is over the fate of the older, dirtier steamships that used to account for the bulk of the commercial fleet. The new mega-containerships are mostly driven by diesel engines, which aren't exactly paragons of green energy, but burn much cleaner than their predecessors.

For ships in global commerce, the big concern is over their environmental impact as they draw close to shore. In March of this year, the International Maritime Organization adopted a U.S. and Canadian proposal to designate a North American Emission Control Area (ECA), extending 200 miles from the continent's coast. Ships transiting this area will be required to progressively reduce emissions of nitrogen oxides (NOx) and sulfur oxides (SOx) to 23 percent and 86 percent, respectively, of what they would have been without establishment of the ECA, by the year 2020. In addition, fine particulate matter, known more quaintly as soot, will have to be cut by 74 percent. The numbers are drawn from Annex VI to IMO's International Convention on the Prevention of Pollution From Ships, also known as MARPOL 73/78, referring to the years in which it was crafted.

To reach the emissions goals, ships entering the ECA will have to switch over to cleaner-burning fuels, consisting of just 1 percent sulfur by 2012 and 0.1 percent by 2015. Requirements for reducing NOx, including the use of emission control systems, will kick in as of 2016. In the alternative, operators could possibly employ techniques such as particulate scrubbers and cold ironing (the use of shoreside power by ships in port) to reach the same emission-reduction targets. Precise details have yet to be fleshed out by regulators, according to Ramon Alvarez, senior scientist with the Environmental Defense Fund.

No surprises there. There's little argument that ships need to do their part to clean up earth's atmosphere. But environmentalists are ticked off about the U.S. government's move to exempt steamships from the ECA requirements until 2020. Originally, the U.S. had sought a permanent exclusion for those older vessels, but appears to have settled for the longer timetable.

Proponents of the rearguard action argue that it's too costly to retrofit the older steamships, which in any case account for a small portion of the world's oceangoing vessel fleet. They would prefer to phase out the clunkers altogether at some undefined point in time. Furthermore, they ask, doesn't the act of retrofitting old, inefficient ships keep them in service longer?

Alvarez counters that while steamships might indeed be outnumbered by motorships, they are concentrated in the U.S. domestic trades and account for up to 15 percent of total emissions in those areas. "We're concerned that the [exemption] will really cut into the impact of the new rules," he says. "The implication of the waiver wasn't fully considered."

There's also the issue of vessel greenhouse gas emissions, which is where that controversial carbon levy comes in. Alvarez says GHGs are "maybe the big issue facing the industry." Today, he claims, oceangoing vessels account for between 2 and 3 percent of total GHG emissions. With the continued growth in international trade, that number is likely to rise to as much as 20 percent over the next 40 years, assuming that other sectors of the global economy cut back on their own emissions. "That's something we need to get our arms around," Alvarez says.

It's a tough problem, given commercial ships' overwhelming reliance on the burning of fossil fuels. For the moment, the best bet lies in improved designs to make vessels more aerodynamic, along with the creation of more efficient engines. Even then, Alvarez anticipates only "marginal benefits," compared with the huge reductions envisioned by other GHG emitters.

There's little consensus among IMO members on how to confront the GHG dilemma, Alvarez says. Certain developing countries and "flag-of-convenience" states don't want to be placed in a non-competitive position by having to invest heavily in new fuels and vessel technology. (Although I suspect they wouldn't turn down the bounty from a worldwide carbon levy on ships.) Cap and trade, an approach that relies on economic incentives to reduce emissions, has its ardent foes and supporters as well.

Alvarez does see promise in the notion of targeting the purchasers of transportation services, such as retailers. He suggests an extension of the U.S. Environmental Protection Agency's voluntary SmartWay Transport program, which serves as a guide for companies looking to purchase the cleanest possible transportation options. Up to now, SmartWay has largely been focused on trucking, but there's no reason why it can't embrace all modes, including international ocean shipping. Participants can burnish their brands in the eyes of customers, while making strides toward environmental sustainability. As another possible model, Alvarez cites the Clean Shipping Project, an effort launched in Sweden to encourage the booking of ships based on their environmental impact.

New and costly environmental requirements on ships are as likely as the next high tide. But the early involvement of carriers and shippers can help to ensure that a workable solution consists of more carrot and less stick.

- Robert J. Bowman, SupplyChainBrain

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