Worldwide Shipping Could Jeopardize Climate Goals 

By Sean Buchanan

Worldwide, shipping contributes an estimated 2.5 percent of global emissions, but left unchecked this could grow to 17 percent by 2050, warns Transparency International – an international non-governmental organisation based in Berlin.

Failure to dramatically reduce the sector’s greenhouse gas (GHG) emissions, says the NGO, will jeopardise the pledges signed by 195 states in the Paris Agreement, which aims to limit planetary warming to “well below” 2°C, and ideally to no more than 1.5°C.

On July 2, the International Maritime Organisation (IMO) – the United Nations specialised agency with responsibility for the safety and security of shipping and the prevention of marine and atmospheric pollution by ships and whose work supports the UN Sustainable Development Goals (SDGs) – released a new report evaluating its governance structure and considering whether it will help or hinder the development of policies, including an effective GHG strategy.

Commenting on the report, Transparency International identifies a number of critical governance flaws at the IMO and says that private influence and poor transparency and accountability policies put the IMO at risk of severely under-delivering on its targets.

“In order for the IMO to meet its ambitious goals to reduce shipping emissions, several things need to change,” said Rueben Lifuka, vice chair of Transparency International. “Our biggest recommendation is to transform the IMO’s accountability policies, which are currently hindering policy-making and leaving the agency susceptible to private influence. While the IMO’s initial strategy adopted in April is a big step forward for the international shipping sector, more must be done to ensure the agency meets its targets.”

According to Transparency International, the IMO’s 2018 GHG strategy will probably need to be revised upwards in light of the findings of the forthcoming special report of the Intergovernmental Panel on Climate Change (IPCC) on the impacts of global warming of 1.5°C, in order to decarbonise the maritime sector in line with well below 2ºC and/or 1.5ºC temperature goals of the Paris Agreement.

An increasing body of research suggests that the shipping sector’s emissions must decline to zero by 2050 at the latest.

In its analysis of the IMO report, Transparency International points the finger at four key issues that could endanger achievement of climate goals: uneven influence of Member States, influence of open and private registries, disproportionate influence of industry, and lack of delegate accountability.

Uneven influence of Member States

According to Transparency International, a small group of Member States has the power to exert undue influence over the IMO because of structural weaknesses in the organisation’s financing and policy-making processes that tip the scales in favour of states that have the most ships registered under their flags.

Under current rules, two-thirds of the IMO’s financial contributions come from just 10 countries, which provide contributions based on the size of their fleets (measured in deadweight tonnage). Nine of the IMO’s top 10 contributors currently occupy elected positions on the Council, which is the organisation’s executive body.

The provision of funding does not necessarily equate to a seat on the Council or to influence within it. Yet, says the NGO, the Council – which publishes no substantive information about its regular activities or elections – lacks mechanisms to provide public assurance that the states that fund the IMO are not simply buying influence.

The same states that finance the IMO also have an advantage in the policy-making process. IMO policies do not become active until they have been ratified by Member States that collectively regulate a specified percentage of the world’s shipping fleet (also measured in deadweight tonnage).

The states with greater tonnages not only contribute more funding to the IMO, but also have a greater say, in proportion to their tonnage, on whether and when a policy comes into effect.

Influence of open registries

In practice, argues Transparency International, the risks of undue influence are exacerbated because tonnage is concentrated in the handful of states that operate open registries.

Also known as flags of convenience and international registries, open registries allow ship-owners of any nationality to register under their flag. They are controversial because they offer ship-owners extremely favourable regulatory environments that commonly include effective anonymity, a zero corporate tax rate and minimal implementation and enforcement of environmental and social regulations – all in exchange for the registration fees from ship-owners.

More than 50 percent of the world’s fleet sails under the flags of just five open registries: those of Panama, Liberia, the Marshall Islands, Malta and the Bahamas. These states, by virtue of their tonnage, can exercise influence over the IMO through the funding and ratification mechanisms – yet concerns remain about their commitment to regulation and enforcement.

For example, three of these five open registry states (Panama, the Marshall Islands and Bahamas) were recently classified as non-cooperative tax havens by the European Union.

There are an estimated 35 open registry states and, while their approach to regulation is not uniform, the Berlin-based NGO says that serious questions could be asked regarding their interest in formulating and implementing ambitious decarbonisation measures.

At least 17 open registries have outsourced the management of their registries to private companies, which suggests around 10 percent of delegates to the IMO may actually be drawn from the private sector. By allowing private companies to debate and vote on issues of transnational public interest, the IMO is said to undermine a basic premise of the UN system of international governance.

Disproportionate influence of industry

As individual companies and as a sector collectively, Transparency International notes that the shipping industry has a pervasive influence over the policy-making process and can access and submit documents and observe and speak at meetings at every level of IMO decision-making.

These privileges are available to other interest groups but attendance records of recent meetings of the IMO’s five committees show that industry representatives outnumbered civil society organisation (CSO) representatives by almost five to one (312 to 64) and labour organisation representatives by more than three to one (312 to 101).

Private interests also have other ways of exerting influence. There are no rules governing the appointment of national delegations and states appoint companies and representatives of ship-owners directly to their national delegations.

For example, a recent delegation from Brazil to an environmental meeting contained five advisors who were employees of the logistics multinational company Vale SA, which has substantial shipping interests.

Transparency International points out that an effective GHG strategy would require long-term investment in clean technologies, but should companies and trade associations want to resist these measures, they are well placed throughout the IMO to delay or dilute polices that promote such investment.

Lack of delegate accountability

Finally, across the IMO, Member State delegates are shielded from public scrutiny. IMO reports of meetings do not reflect the positions taken by individual representatives, while journalists are forbidden from naming speakers at meetings without gaining their consent. The result is that the public do not know which delegates are arguing for which policies.

Delegates are also unaccountable to the IMO itself, says Transparency International. The organisation has no code of conduct to regulate how delegates are appointed or place restrictions on secondary employment, conflicts of interest, gifts and hospitality. Meanwhile, the organisation’s whistleblowing policy and complaints mechanism only apply to staff in the Secretariat, and the IMO’s oversight body has no jurisdiction to investigate the activities of delegates.

Nevertheless, concludes Transparency International, the IMO does perform more positively in some areas and, in particular, the transparency around the organisation’s governance framework is relatively high.

Information about the remit, powers and rules of procedure of its key organs (the Assembly, the Council and the committees) is easily accessible and provides a picture of how the organisation operates in principle.