Billion-dollar decisions

MEPC 91 controls the fates of an estimated 40,000 ships. (Credit: International Maritime Organisation)

Next week the world’s shipowners will be front row to a stage where the decisions of government could significantly alter how they choose to run their business over the next half decade.

The stage will be occupied by the International Maritime Organization’s Marine Environment Protection Committee, their 91st meeting. Big on their agenda is the ballast water convention, in which the committee must decide whether to delay implementation for two years beyond this coming 8 September for both newbuilds and existing ships – a scheme supported by a large number of shipowner groups and flag states.

A compromise that backs the two-year delay for existing vessels, but keeps implementation in place this year for ships constructed after 8 September, is supported by Liberia, India, Norway, Brazil, UK, and Cook Islands.

Add to the potential delay the ability of shipowners to decouple their IOPP certificate, and the compliance deadlines for some vessels stretches to 2024.

With these proposals on the table, MEPC 91 controls the fates of an estimated 40,000 ships whose owners are planning to invest millions in a ship’s ballast water treatment equipment or, depending on the timing, to scrap the ship altogether.

Shipowners aren’t the only ones with money on the line: their interests are intertwined with those of the ballast water system manufacturers. These equipment makers want implementation as soon as possible so they can begin ramping up sales. But the price shipowners end up paying to buy their products will be affected if delaying implementation takes manufacturers out of the equipment game – and therefore less product competition among suppliers.

Government decisions on ballast water are having just as big an effect on shipowners on the other side of the Atlantic. I spoke with dozens of shipowners over the last several months at various locations around the world about their ballast water compliance concerns, and the issue consistently raised among all was the lack of equipment type approved by the U.S. Coast Guard (four have the US stamp of approval as of 28 June).

While some bulker owners asserted that this lack of choice will force them to trade elsewhere, the majority see the US market as being too lucrative to avoid, which puts a lot of market power in the hands of American regulators as well.

If there could be more certainty as to whether the regulation will actually do what the convention set out to do in 2004 – drastically reduce the harm and costs caused by invasive species carried in ballast water tanks around the world – there would be solid justification for the power wielded by government regulators.

It’s much more difficult to forecast at this point the power government will have over shipowner costs when it comes to carbon emission reductions, the other major issue to be discussed at MEPC 71. Unlike ballast water, nothing exists on which to base cost estimates, nor is there a specific carbon reduction programme on the table.

What we do have is a “roadmap” approved at MEPC 70 that sets out 12 “elements”, including “levels of ambition” and “guiding principles” that will be discussed, with an initial strategy planned for adoption at MEPC 72 next year. The IMO’s greenhouse gas working group, which has been meeting this week, is expected to report more details to next week’s committee.

IMO wheels turn slow, which is considered by some to be a drawback. It took the IMO 13 years to come up with an implementation date for ballast water, and the dates tossed around in carbon discussions extend out as far as 2050.

If that translates to regulations that turn shipping into a model for tackling the biggest environmental concern in the industrial sector today, the power over compliance costs wielded by shipping’s regulators will seem like less of a burden.