In response to the latest report from the International Transport Forum (ITF) on decarbonisation of transport, a leading port expert has warned against placing too great a burden on ports to limit greenhouse gas (GHG) emissions emanating from the shipping sector.
The latest ITF report, entitled ‘Reducing Shipping Greenhouse Gas Emissions, Lessons From Port-Based Incentives’, reviews port-based initiatives to reduce GHG emissions. This report follows hard on the heels of the recent agreement at the International Maritime Organisation (IMO) in London to limit shipping’s GHG emissions by 50% (based on 2008 levels) by the year 2050. This article forms part of our ongoing ‘Decarbonising Freight Transportation’ series.
Research by the ITF discovered that there are presently numerous port-based incentives in place to encourage the reduction of GHG emissions. The most popular method is the “environmentally differentiated port fee”, and is applied in 28 of the largest ports in terms of cargo volume handled. Ships with reduced emissions have decreased port fees.
However, research suggests port-based GHG incentives play a small part in incentivising emission reduction measures in ships at present. “Any incentives ship-owners may currently have to order more efficient ships with lower emissions can only, to a very small extent, be a result of savings from port-based incentives,” report authors’ research revealed.
Despite these misgivings, the report urges ports to play a “hugely important role” in moving shipping away from heavy GHG emissions. One major drawback to date has been the lack of data monitoring the effectiveness of any policy measures adopted by ports to reflect ships’ emissions. They insist the ‘polluter pays’ principle must operate at ports, and that differentiating vessels this way will hasten change.
The report cites some recommendations:
- Acknowledge the important role of ports in mitigating shipping emissions
- Expand port-based incentives for low-emission ships
- Link port-based incentives to actual emissions
- Move to a more harmonised application of green port fees
Professor Michele Acciaro, Associate Professor of Maritime Logistics, Kühne Logistics University, told Forward with Toll that he has some reservations about incentives aimed at improving the environmental performance of the ships visiting the ports. Acciaro’s research was cited extensively in the ITF report.
He said, “For many ports, these incentives are primarily an exercise in public relations, and in the absence of ways to measure their effectiveness, their role should not be overestimated.”
He believes it is up to the individual ports to decide how they spend their revenues and set up their pricing. Presently, the environmentally differentiated port fee is applied in 28 of 100 largest ports. He suggests more ports adhering to the scheme would increase the effectiveness of such incentives.
But Acciaro then warned, “A fundamental question that needs to be answered is how the revenue foregone as a result of the incentives is made up? Ports are operating in a competitive environment, and their port dues levels are set with the objective of recovering the costs of operating and managing the port.
“If a port loses 5% of its revenue as a result of the environmental discount fees, where is the money coming from? Are they covering the difference by raising the fees for the other port users? Are they receiving more support from their shareholders? Are they postponing some of their investment programs? These are important economic questions that need to be considered when developing such schemes.”
The ITF urges ports to play a much larger role in improving environmental performance.
Acciaro questioned this reasoning, “Conceptually, why should ports subsidise shipowners’ improvement of environmental performance?”
He added, “I have a difficulty, conceptually, to justify why a port should be made responsible for incentivising the reduction of GHG emissions. Local pollutants are, of course, a concern for the local communities and the countries where the port is located, but without a mandate from the IMO, why should a port tackle global emissions?”
“It is implicit, in this recommendation, the idea that port incentives are for ‘free’, in the sense that they come from thin air. It should be considered that they come at the expense of port revenue. Should some port authorities subsidise the GHG emission reduction of the shipping sector? This could only be done at a global level and within the framework of an IMO-led regulation,” he insisted.
Though he believes there could be arguments in favour of subsidies to new technologies, in the absence of a set of environmental emission regulation at a global level, he insists port-based incentives are not going to change the way the industry operates dramatically.
“The impact is marginal if a single port is considered. What is necessary is a clear, effective and long-term policy from the IMO. The first steps made last week by the IMO’s Marine Environment Protection Committee (MEPC) are very promising, but now it is necessary to come up, urgently, with regulation,” Acciaro implored.
Acciaro also pondered who stands to gain the most from the introduction of incentives by the ports. Port dues are often charged to the charterer, Acciaro explained, not the party that makes the investment decision on whether to improve the environmental performance of a vessel. This creates what economists term split incentives, he added.
According to Dr Yip, Associate Professor, Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, not all ships respond to incentives as anticipated. In September 2012, Hong Kong port launched a voluntary emissions-reduction subsidy scheme for vessels concerning local air pollutants. Yip’s initial analysis on the Hong Kong port incentive scheme found that ship-owners of a large fleet and whose ships dock at Hong Kong over five times per year are more motivated by the incentive scheme. He revealed the Hong Kong port will switch to a command-and-control scheme to regulate ship emissions.
One of the recommendations of the ITF report is that there should be a move to a more harmonised application of green port fees.
Yip added, “Port incentive policies are not globally homogeneous. My previous studies show that vessels may shift to adjacent ports. However, as the ship emissions spill across a region, the regional emission level may not improve. Therefore, regional governance on ship emissions should be more effective.”
However, Acciaro suggests ports believe that they should retain their ability to set fees independently on the basis of their strategic objectives, their development priorities and the characteristics of the port.
He stressed, “Harmonisation intended as a harmonised set of tariffs and reductions, would not work in such an industry and might not be desirable. What is necessary is a coherent, transparent system of incentives, where shipowners can clearly understand what they can claim and when. A simplification of how incentives are claimed is also important.”
Another key concern voiced in the ITF report is lack of data to monitor vessels on their environmental performance. Acciaro concurs that more accurate information is always needed to ensure that regulation (and incentives) are applied in a fair manner and that there is no free riding.
Emissions from port activities are very limited, and while the ports have a role to play, the IMO’s is critical, he concluded.
Yip suggested ships that “go green” should be rewarded in ways other than pure financial gain. He concedes that it remains difficult to carry out remote sensing of ship emissions by in-port vessels.