Reviewing Malta’s progress in improving energy efficiency of its shipping industry

An island with an important maritime industry has to give attention to improving energy efficiency a part of the energy transition. Edward Mario Camilleri of SAGA Juris Advocates writes in the Times of Malta about recent progress. Following the post last week on progress in industrial energy efficiency it is good to see Malta, having the rotating presidency of the European Council, let us all know about recent developments.


Energy-efficient shipping in Malta

It is undeniable that the maritime industry is one of the pillars of Malta’s economy. Boasting the sixth largest registry in the world and the largest registry in the Europe, Malta has become an established and reputable jurisdiction.

In this respect, Transport Malta has been making strides to dispel the notion that the Maltese registry is a flag of convenience through the implementation and enforcement of both local and IMO sponsored legislation.

In 2015 alone, the Maltese shipping registry registered a considerable increase over 2014, while the registered gross tonnage amounted to 66.2GT. This trend has persisted over the last decade, with the Maltese shipping registry strengthening gradually.

Nonetheless, it is time to address a concern that may potentially jeopardise Malta’s progress in the maritime sector, namely energy-efficient shipping, with international benchmarks set to enter into force by 2020, both at an EU level and at an international level.

The role of the EU is particularly important given that around 19 per cent of the global shipping fleet above 19GT is registered in the EU. Moreover, studies have shown that the level of nitrogen oxide, sulphur oxide and particulate matter are estimated to increase exponentially by 2020, in some cases even reaching the levels of land-based sources.

Despite the absence of emissions regulations in international treaties such as the Kyoto Protocol and the United Nations Framework Convention for Climate Change, the shipping industry has begun to be more receptive to energy efficient shipping. This is the result of greater awareness but also financial incentives and legislative restrictions on greenhouse gases, which are making shipbuilders and charterers alike more wary over emissions.

At an EU level, the Sulphur Directives (Directive 1999/32/EC, later amended through Directive 2012/33/EU and Directive 2016/802/EU) oblige Member States to decrease sulphur levels in marine fuel by 2020, which is no easy task and a plan must be put into effect with immediate effect. This decrease must amount to a total content level of not more than 0.5 per cent, which is a marked decrease since sulphur content in the EU is presently set at 3.5 per cent. These directives are complemented by the Alternative Fuels Directive, which seeks to promote LNG as a marine fuel.

It is important to note that this requirement applies to all vessels exercising their right to freedom of passage in EU waters, regardless of registration and destination of the vessel concerned. Additionally, the sulphur directives clearly state that all EU Member States must ensure that all vessels flying their flag and entering their ports are compliant with these directives. This introduces a notion of extraterritoriality that has yet to be openly challenged by third parties. Nonetheless, this principle appears to be upheld by the European Court of Justice, which analysed similar issues in a separate case concerning aviation.

Regardless of the fact that non-compliant vessels may not be prohibited from exercising their freedom of passage, penalties may be applied, although it remains unclear how these will be calculated and effected.

The IMO has enacted legislation through Marpol Annex VI, even though this Annex largely focuses on decreasing harmful emissions rather than energy efficiency. The IMO also introduced Emission Control Areas, where vessels exercising freedom of passage have to comply with specific emissions benchmarks concerning carbon monoxide, sulphur oxide and nitrogen oxide. This measure has been adapted to an extent by principal ports in Asia and North America, with ports in Hong Kong and California achieving exceptional success.

In 2013, the IMO developed the Energy Efficiency Design Index (EEDI), which is calculated as a ration of CO2 emissions per ton per mile of transported cargo. Acceptable values vary according to the type of vessel and its capacity, with older vessels bound to its restrictions. This regulation applies to all vessels of 400 GT and above.

Marpol Annex VI also introduced the Ship Energy Efficiency Management Plan (SEEMP), which establishes a mechanism to increase energy efficiency on ships. It is estimated that the EEDI will contribute to a 30 per cent decrease in GHG emissions by 2030, while the EEDI and SEEMP in conjunction aim to reduce emissions by 180 million tonnes by 2020 and 390 million tonnes by 2030. The EEDI was rendered mandatory for new ships since 2011, while the SEEMP is applicable to all vessels.

At the 70th session of the Marine Environment Protection Committee, the IMO confirmed 2020 as the date when similar criteria to the EU sulphur directives enter into effect, a measure with potential widespread ramifications for the maritime industry. As a maritime nation, it is in Malta’s interest to start preparing for these deadlines in the immediate future in order to ensure that it is fully compliant with these standards.

Failure to do so will undoubtedly have a negative effect on Malta’s reputation as a strong flag state, while also keeping in mind EU infringement proceedings which will affect Malta more than other EU States due to Malta’s strong shipping register.

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