Case gives clarity on the incorporation of standard terms. Credit: 3D Animation Production Company, Pixabay

New 2025 regulation cannot be ignored

By Carly Fields

 

As 2024 draws to a close, the shipping industry is facing up to an increasingly complex and rapidly evolving regulatory landscape over emissions.

With the European Union’s FuelEU regulation set to take effect in January 2025, shipping companies face a pressing deadline to comply with stringent emission reduction targets. 

At a recent Baltic Exchange Tanker Forum, a panel discussed the myriad regulations, which threaten to slice the world into regions with differing emissions requirements. Martin Crawford-Brunt, CEO of Lookout Maritime and emissions lead at the Baltic Exchange, emphasised the shift from prescriptive to goal-based regulations, making it difficult for operators to navigate the shifting landscape. As he put it: "We're moving into a situation where, with this goal-based regulation, effectively, we've got a moving target." 

This uncertainty, coupled with the introduction of carbon pricing mechanisms like the EU Emissions Trading System (ETS), adds significant complexity to the equation.

Panellist Jasmin Fichte, managing partner at Fichte & Co, pointed out the paradoxical situation where regulators are making decisions about new fuels without a full understanding of their implications.

"Now you have a regulator deciding on something they do not understand,"

she said, highlighting the challenge of regulating new technologies like green hydrogen and ammonia. The international nature of the shipping industry further complicates matters, as nations with varying levels of ambition and regulatory frameworks compete for influence.

 

Road to decarbonisation

The panel discussion underscored the need for a global, co-ordinated approach to decarbonisation. While the International Maritime Organization (IMO) is working towards developing global regulations, the EU has taken a more proactive stance by implementing its own ETS. This divergence in regulatory frameworks creates challenges for ship owners and operators who must comply with multiple sets of rules. 

Panellist Jaideep Vohra of Bahri Ship Management said Bahri is focusing on a two-pronged approach to address the challenges. Firstly, Bahri is committed to ensuring strict adherence to current regulations, including rigorous monitoring and compliance measures. Secondly, the company is proactively exploring strategies to enhance the efficiency of its existing fleet and to inform the design of future newbuilds.

However, the future of the industry remains uncertain, as the IMO has yet to finalise specific regulations regarding global carbon taxation or alternative mechanisms. "The future is little blurry at the moment, until the time IMO comes up with rules or regulations in terms of a global tax or whichever way they want to handle it," Vohra said. 

Both Vohra and Martin Rowe of Anglo-Eastern Ship Management noted the importance of preparing for the future. This includes investing in energy-efficient technologies, exploring alternative fuels, and adapting to evolving regulatory requirements. 

Rowe said: "The whole decarbonisation agenda is something which we've been focusing a huge amount of attention on recent years." He noted the industry's proactive approach to environmental sustainability.

"Historically, we've been rule takers rather than rule makers,"

he said. "However, we've demonstrated our ability to adapt to regulatory changes, as seen with the successful implementation of balanced water treatment systems to comply with IMO 2020."

 

FuelEU compliance

Rowe noted the importance of strategic planning and resource optimisation to comply with the incoming FuelEU regulation. Pooling resources, such as deploying a single biomethanol-fuelled vessel within a fleet, can be a cost-effective approach to meeting regulatory requirements.

Rowe highlighted the significant progress made in reducing emissions, citing a 17% decrease in emissions from ships entering the EU, despite a substantial increase in ton-miles. This achievement underscores the industry's commitment to efficiency and innovation, he said.

Looking ahead, he acknowledged the complexity of the decarbonisation landscape. While a variety of alternative fuels, including ammonia, methanol, and LNG, are being considered, he said that a single solution is unlikely to emerge. "We're going to need a diverse mix of fuels to meet our future needs," he said. While LNG has emerged as a short-term solution for larger shipping companies, concerns over the availability of green methanol have prompted a shift in focus. Ammonia, on the other hand, shows immense potential as a long-term fuel, he said. 

To address these and other challenges, the industry must adopt a collaborative approach, the panellists agreed. By sharing knowledge, best practices, and resources, stakeholders can work together to develop innovative solutions. 

However, Fichte suggested that a lack of regulatory oversight has become a significant barrier to innovation and co-operation within the industry. "It's odd to say it, but this time we actually need regulation because we are not moving forward without regulation,” she said. “We need global regulations. It will be extremely hard to find the charterer to get the agreements if it's not regulated, if you're not pushed to do it."

But while the challenges ahead are significant, Rowe expressed optimism about the industry's ability to adapt and innovate.

“FuelEU is coming, and we need to be thinking very seriously about it,”

he said. “But I would not want to scare people in the room by saying something we need to be over-worried about it because it is possible to comply, provided that it is done in a scientific and methodological manner.”