Recent and possible future regulatory developments in

international shipping - a key driver for managing future risks

Future Ready Shipping 2017
Singapore, 25th September 2017

Dr Edmund Hughes
Marine Environment Division
International Maritime Organization
Recent regulatory developments for international shipping

Ø  Control of emissions from ships

§  ODS
§  SOX and PM
§  NOX
§  IGF Code
Ø  Energy efficiency of ships
§  over 2,400 new ships certified to EEDI standard to date
§  EEDI phase 1 (10%) until 31 December 2019
§  EEDI phase 2 (20%) for new ships from 1 January 2020
§  Phase 3 review – start date 2022? Phase 4?
Ø  Mandatory global data collection system for fuel oil consumption of ships
§  entry into force 1 March 2018
§  first data collection calendar year begins 1 January 2019
Ø  GHG emissions
Ø  Ballast Water Management Convention entered into force on 8 September 2017

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Picture credit: GothiaTankerAlliance and Svensk Sjofart
GHG emissions

Ø  GHG emissions

§  in 2012 international shipping emitted 2.2% of global CO2 emissions
§  2015 Paris Agreement – “well below 2oC”
Ø  What does this mean for international shipping?
Ø  What are the risks? How should they be addressed?
Ø  MEPC 70 approved a roadmap for the development of a comprehensive
IMO strategy on reduction of GHG emissions from ships with an initial
strategy adopted by 2018 leading to adoption of a revised strategy to
include short-, mid-, and long-term further measures, as required, with
implementation schedules by 2023

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Roadmap for development of a ‘Comprehensive IMO strategy on
reduction of GHG emissions from ships’

The draft outline for the structure of the initial IMO strategy includes:

1.  Preamble/introduction/context including emission scenarios

2.  Vision
3.  Levels of ambition
Guiding principles
4.  List of candidate short-, mid- and long-term further measures with
possible timelines and their impacts on States
5.  Barriers and supportive measures; capacity building and technical
cooperation; R&D
6.  Follow-up actions towards the development of the revised Strategy
7.  Periodic review of the Strategy

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Driving thinking about future risks
Future risks to shipping likely to include:

1.  Technological
§  fuel
§  data and telemetry – collection, use, protection
§  integration of supply chains
§  autonomous/remote controlled ships
§  materials

2.  Demographic/social
§  supply of competent crew, shore based personnel
§  seafaring as a career
§  understanding of shipping and services that support it

3.  Financial
§  withdrawal of banks from investing in shipping
§  growth in financial scrutiny/reporting
§  economics of transport of goods by ship - charter rates?
§  insurance/liability 7
Picture credit: DNV GL
 Do
regulations
increase or
decrease
risk?
Picture credit: Tesla
Picture credit: Tesla
Ref: The Guardian, 13 July 2017
Ref: The Daily Telegraph, 27 July 2017
Picture credit: Rolls-Royce
Picture credit: Yara/Kongsberg Gruppe
Driving thinking about future risks

Risk is uncertainty of outcome, and good risk management allows:

Ø  increased confidence in achieving a desired outcome;
Ø  effective constraint of threats to acceptable levels; and
Ø  informed decisions to be taken about exploiting opportunities.

With risk comes opportunity for those effectively managing risk:

1.  New technologies/systems to be researched and developed
2.  Economies of scale identified and managed effectively
3.  Ships and ports become more efficient
4.  Competitive advantage exploited
5.  New business/markets identified
6.  Confidence of stakeholders enhanced

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Driving thinking about future risks
Dealing with risks:

Ø  Leadership –Transformational change of any sort must always be communicated from the top, even if
driven from the bottom. The board, C-suite and other senior management must sing from the same hymn
sheet. If adapting to disruption involves a strategy for change, a senior executive or leader must own it.

Ø  Culture and purpose – Employees must want to experiment and innovate, rather than be directed to do
it. Changing attitudes can take a long time, but management can accelerate the process by creating
incentives, and removing obvious structural barriers to team collaboration. Just as important is articulating
a sense of purpose – values that employees enthusiastically buy into and make them want to innovate.

Ø  Customers – Companies tend to see competitors as the sources of disruption. But customers are often
the driving force, particularly where digital technology is involved. Companies must be able to spot
emerging changes in customer behaviour, model their potential impact, and be ready to change products
or revenue models accordingly.

Ø  Trends – Similarly, companies must be able to see through industry noise and identify the technologies
that have a real chance of winning favour among customers. There is much more involved in this than
guess-work or simply hedging your bets.

Source: Thriving through disruption: How business leaders are fostering disruption across their
Organizations, Economist Intelligence Unit, September 2017

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Driving thinking about future risks

What role will the regulator have?

Ø  provide the right environment for risks to be effectively identified and
managed
Ø  stimulate understanding and communication of risks
How can regulatory action help?
Ø  drive more efficiency to address administrative burden on both ship
and shore
Ø  more robust decision making based on information and data
Ø  more inter-disciplinary thinking bringing new ideas, new ways of
working, best practices to shipping
Ø  less conservative and more proactive in addressing risks – cannot
afford to wait for risks to manifest themselves, you either manage
the risk or the risk will manage you

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 Those that manage risks
(opportunities and threats)
more effectively will be
more ready for the future
Thank you for your attention

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