EU move will harm shipping sector's climate fight

EU move will harm shipping sector's climate fight
Simon Bennett | China Daily Global | http://epaper.chinadaily.com.cn/a/202104/19/WS607cb54ea31099a2343557cf.html

As China's trading partners contemplate economic recovery in the post-pandemic period, the last thing the world needs are new barriers to trade. However, this is exactly what the European Commission is proposing with its plan to unilaterally extend the European Union's Emissions Trading System to international shipping, including Chinese ships calling at EU ports.

This EU proposal also threatens to undermine global negotiations on decarbonizing international shipping in which the Chinese government is playing a constructive and leading role.

Under draconian EU proposal, expected to be finalized in a few months' time, non-EU ships trading with Europe may have to purchase allowances for carbon dioxide emissions throughout the ships' voyage, which－as is the case with ships moving cargo from China to Europe－could have commenced tens of thousands of kilometers away from the EU's borders.

Setting a price on CO2, whether through carbon taxes or emissions trading systems, is an important policy tool for governments to help national economies deliver on their commitments under the Paris Agreement on climate change. And the government of the People's Republic of China, along with many other governments worldwide, is already implementing such measures.

However, the United Nations Framework Convention on Climate Change recognizes that CO2 emissions from international shipping cannot be attributed to any one country's economy. It has therefore been agreed by the state parties to UNFCCC－which includes all EU member states, as well as China－that CO2 emissions from international shipping, like international aviation, need their own special arrangements to address this complexity.

This is why the UN International Maritime Organization－of which China is a leading member state－has been given the responsibility for addressing CO2 emissions from shipping, including the development of market-based measures. The shipping industry fully supports this move and is encouraging governments to move forward with the market-based measures.

The Chinese government is committed to fulfilling its international obligations and only applies such market-based measures to visiting foreign-flag ships. With the exceptions that apply to activities that take place within its territorial waters, the only measures which China applies to ships visiting its ports are those which have been negotiated, multilaterally with all of its trading partners as part of the global regulatory framework that has been agreed by governments of all countries.

Unfortunately, the EU does not seem to respect this international framework for regulating global shipping and its CO2 emissions. Under the guise of pursuing the EU's decarbonization objectives as part of its new "Green Deal", the European Commission hopes to raise billions of euros a year from international shipping companies, including Chinese shipping companies, to support the EU's post-pandemic economic recovery. In other words, by extending the application of the EU's Emissions Trading System to international shipping, the EU is planning an extraterritorial "tax" on trade.

Far from being a sensible move, this initiative risks alienating major players in the global economy including China and the United States. The governments of Japan and the Republic of Korea have already objected to the move. Other non-EU member states are expected to do likewise after the complete regulatory proposal is published by the European Commission later this year.

Apart from adding to trade tensions the other potential casualty of this unilateral EU initiative is the International Maritime Organization's progress with respect to negotiations on how to decarbonize international shipping. The unilateral EU proposal is contrary to the IMO's greenhouse gas-reduction strategy agreed by all maritime countries including China in 2018, with China playing a major part in helping implement the strategy.

The question which many governments maybe asking now is: Why should they invest political capital in seeking agreements, if the EU just presses ahead with its own shipping regulations which show little respect for its international trading partners?

The shipping industry is not against the application of a carbon price. Indeed, the industry advocates for a carbon price that will catalyze the decarbonization of shipping. But for a global industry, we need a global solution, and this can only be negotiated at the UN body tasked by member states to do the work.

President Xi Jinping announced in September 2020 that China would reach peak CO2 emissions before 2030 and achieve carbon neutrality before 2060. International shipping has very similar targets. Both these goals are like beacons for the rest of the world, but they will not be easy to achieve if the EU chooses to undermine collective efforts to reach global agreements on reduction of carbon emissions with its international partners.