The global focus on environmental protection and climate change sees “regulatory authorities increase pressure on the shipping industry to take measures” according to interviewees, who anticipate consequences that may shake up the market and the global economy. Sources claim the “regulatory space continues to grow and is becoming of vast importance”, while a “focus on technology and development overshadows the traditional admiralty practice”.
The “continued stress applied by regulatory authorities on ship operators” has become particularly pertinent in recent years as member countries within the IMO, in 2018, called upon shipping companies to reduce emissions to 50 per cent by 2050. While several key players in the industry have agreed to comply to this effort which would require sizeable adjustments to the building and fuelling of ships, the changes to the MARPOL Annex VI will come into effect on 1 January 2020 and will test whether the shipping industry is prepared to actualise this goal to significantly cut emissions.
The amendment to MARPOL Annex VI targets sulphur emissions by reducing the sulphur limit from 3.5 per cent to 0.5 per cent, which will be the largest reduction in sulphur content of transportation fuel ever undertaken at once. The ramifications could affect the global economy as the prices of compliant fuels may rocket as the demand increases significantly, and producers of these low-sulphur oils, such as Brazil, could prosper while traditional sulphur-heavy oil refineries in the Middle East may suffer. Along with this, shipping freight costs will increase alongside the cost of compliant fuels.
Impending environmental regulation may be responsible for the “uptake in shipbuilding and construction” which has been noted by sources. “The strong environmental agenda” is expected to spark an uptick in reform and innovation within the shipping industry – not only when it comes to vessels and fuels, but also in regard to operations and technological capabilities, as an increase in investment from shipping companies into new technologies could establish ways to remain compliant with the ever-increasing environmental regulations.
Lawyers can expect significant changes within the shipping space as the continuous growth of environmental regulation will be met not only with compliance and shipbuilding issues, but efforts to innovate and advance technologies to deal with the 2050 goal too.