Navigating the Seas of Change: A Comprehensive Guide to Carbon Emission Regulations in Shipping

If it seems difficult to keep up with the latest carbon emission regulations and upcoming requirements, there is a reason: the world is in the middle of a shift from awareness of the need for sustainability to action. More governing bodies, both on the national and international stages, are establishing new requirements, frameworks, and tools to steer organizations where they need to go—the world needs to reduce emissions drastically in the next 5 to 10 years to avoid reaching the threshold of 1.5 degrees C above pre-industrial levels, as cautioned by the Paris Agreement. At this temperature, the world would see potentially catastrophic environmental effects.

To help do their part, companies, especially those with global supply chains, must be aware of the requirements they and their supply chain partners are subject to, and freight forwarders can help support them. In this article, we’re giving an overview of various carbon emission regulations in the U.S., Canada, Europe, and China, as well as international regulations.

Understanding Greenhouse Gas Emissions in Shipping

With the scope and scale of global shipping, companies are responsible for seeking sustainability. 2.5% of the world’s emissions come from ocean freight shipping. For most companies, supply chain emissions, including emissions from purchased goods, transportation, and logistics processes, are by far the largest source of carbon emissions.

For most companies, these processes are handled by third-party providers, making tracking these emissions challenging. They fall into the category of Scope 3 emissions, which are not directly owned or controlled by the company. To reduce these emissions, companies must have data on their current activities’ emissions and options available to them. For reporting purposes, there must be standardization on carbon emissions measurement and calculation as well as a robust methodology that supports highly accurate and highly precise data. This would enable greater visibility and, in turn, promote greener practices. With this common goal, this is where regulations come in, as organizations attempt to get companies on the same page regarding sustainability.

Major Regulations in the U.S.

U.S. National Blueprint for Transportation Decarbonization

The U.S. National Blueprint for Transportation Decarbonization outlines a strategy to achieve a carbon-free transportation sector by 2050, encompassing measures such as expanding electric vehicle infrastructure, promoting sustainable fuels, and investing in public transit. This blueprint is intended to be followed up soon by the release of action plans.

Clean Trucks Plan

The Clean Trucks Plan is a regulatory initiative aimed at improving fuel efficiency in trucks, starting with 2027 model-year trucks. It sets emission standards and promotes the adoption of cleaner technologies, such as electric and low-emission vehicles.

California Air Resources Board (CARB) Regulations, including the Low Carbon Fuel Standard

CARB Regulations, specifically the Low Carbon Fuel Standard (LCFS), set targets for fuel producers to gradually decrease their emissions, incentivizing the adoption of cleaner and more sustainable fuel options in California.

SmartWay Program by the EPA

The SmartWay Program, established by the Environmental Protection Agency (EPA), is an initiative that provides resources, tools, and recognition for companies that adopt environmentally friendly practices, such as utilizing fuel-efficient technologies, optimizing logistics, and reducing idle time.

Major Regulations in Canada

Transport Canada’s Emission Regulations

Transport Canada’s emission regulations are a set of policies and standards implemented by the Canadian government to control and reduce emissions from various modes of transportation. The regulations cover areas such as vehicle fuel efficiency, engine emissions, and adopting cleaner technologies to promote sustainable transportation in Canada.

Major Regulations in Europe

EU Emission Trading System

The EU Emission Trading System (EU ETS) is a market-based approach implemented by the European Union to reduce greenhouse gas emissions. It operates on a “cap and trade” principle, where a limit is set on the total amount of emissions allowed, or companies must purchase emission allowances.

EU Monitoring, Reporting, and Verification Regulation

The EU Monitoring, Reporting, and Verification (MRV) regulation is a policy framework established by the European Union requiring ship owners to monitor and report greenhouse gas emissions from large ships operating within EU ports.

EU Ship Recycling Regulation

The EU Ship Recycling Regulation is a policy implemented by the European Union establishing standards for the management of hazardous materials on ships, requiring the use of authorized ship recycling facilities and promoting the proper disposal and recycling of ships.

Major Regulations in the Asia-Pacific Region

China’s National Carbon Market

China’s National Carbon Market is a carbon emissions trading system established by the Chinese government. The market sets a cap on emissions and allows companies to trade carbon allowances, incentivizing reductions.

International Regulations

Energy Efficiency Existing Ship Index and Carbon Intensity Indicator

The Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) are two regulations of the International Maritime Organization. The EEXI measures the energy efficiency of existing ships and sets minimum requirements for reducing their carbon emissions. The CII measures a ship’s carbon intensity and requires it to meet specific emission reduction targets based on size and type.

International Maritime Organization Regulations

The International Maritime Organization (IMO) is a specialized agency of the United Nations responsible for regulating international shipping to promote safety, environmental protection, and efficiency in the maritime industry. One notable regulation is IMO 2020, which mandates a significant reduction in sulfur oxide emissions from ships by requiring lower-sulfur fuels or installing exhaust gas cleaning systems (scrubbers).

MARPOL Annex VI

MARPOL Annex VI is an international treaty developed by the IMO that sets regulations for preventing air pollution from ships. It specifically addresses the control of emissions of sulfur oxides and nitrogen oxides from ship exhausts, as well as the control of emissions of ozone-depleting substances.

Energy Efficiency Design Index

The Energy Efficiency Design Index (EEDI) is a regulatory framework developed by the IMO to improve the energy efficiency of newly constructed ships. The EEDI sets mandatory energy efficiency standards for different ship types and sizes, promoting the use of innovative technologies and designs that reduce fuel consumption and greenhouse gas emissions.

Ship Energy Efficiency Management Plan

The Ship Energy Efficiency Management Plan (SEEMP) is an IMO requirement for ships to develop and implement a plan to enhance their energy efficiency and reduce emissions. The SEEMP encourages ship operators to adopt best practices and measures to optimize fuel consumption, such as improved voyage planning, hull and propeller maintenance, and crew training.

Greenhouse Gas Protocol

The Greenhouse Gas (GHG) Protocol is a widely recognized accounting and reporting standard helping companies quantify emissions from various activities and sectors, track their emissions, set reduction targets, and make informed decisions to mitigate climate change impacts.

Carbon Offsetting and Reduction Scheme for International Aviation

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global program that addresses carbon emissions from international flights. CORSIA aims to achieve carbon-neutral growth in international aviation by requiring airlines to offset emissions by purchasing carbon credits from approved projects.

United Nations Framework Convention on Climate Change

The United Nations Framework Convention on Climate Change (UNFCCC) is an international treaty that serves as the foundation for global efforts to combat climate change. The Paris Agreement, mentioned earlier in connection to the threshold of 1.5 degrees C, was adopted under the UNFCCC.

Impact of These Regulations on the Shipping Industry

The combined weight of these regulations is leading to a seismic shift in the shipping industry, pushing it towards greater transparency, accountability, and efficiency. Companies are compelled to examine their operations at a granular level, looking at not only their own activities but also those of their partners and suppliers. This is driving a move toward more sustainable practices.

For example, the IMO 2020 regulation on sulfur content in ship fuel has forced shipping companies to switch to cleaner, albeit more expensive, fuels or invest in technologies like scrubbers. This has had a ripple effect on freight rates and supply chain costs. However, companies that were proactive in adapting to these changes and communicating their efforts to their stakeholders have turned this into a competitive advantage.

By choosing to work with supply chain partners that are compliant with these regulations and prioritizing sustainability, shippers can help drive change in the industry. More importantly, they can leverage accurate and granular carbon emission data to make informed procurement decisions. By understanding the carbon footprint of each shipment, they can identify areas of improvement and take concrete steps to reduce their emissions. This, however, requires moving beyond average emissions data and adopting a more detailed, shipment-based approach.

The Importance of Technology in Compliance and Sustainability

Technology is essential in collecting and analyzing this granular emissions data. Advanced data analytics and modeling techniques can provide a more accurate picture of a shipment’s carbon emissions, factoring in variables like port pairs, vessel speeds, and modes of transport.

This is where Searoutes excels. With a modeled data methodology and by sourcing data specific to port pairs, Searoutes provides highly accurate, granular carbon emission data that covers all modes of transport. This data empowers procurement professionals to make more informed decisions and contribute to their company’s sustainability goals. Searoutes’ commitment to global coverage, accurate vessel-level models, and GHG Protocol-accredited calculations makes it an invaluable tool for any company looking to navigate the complex landscape of emission regulations and sustainability.

Navigate Carbon Emissions Regulations Easier with Searoutes

The shift toward sustainability is reshaping the shipping industry, and companies looking to stay ahead must understand and comply with carbon emissions regulations. But compliance is just the starting point. The real opportunity lies in leveraging accurate, detailed, shipment-level data to drive sustainable procurement practices and reduce carbon emissions.

Companies like Searoutes are leading the way in providing the tools needed to make this shift. With Searoutes’ data, companies can gain a comprehensive view of their carbon footprint and make informed decisions that meet regulatory requirements and contribute to long-term sustainability goals.Now is the time for all stakeholders in the shipping industry to embrace this data-driven approach to sustainability. To learn more about Searoutes, book a demo with us today.