Green Economy in a Blue World-Full Report

Due to continuous improvements in technology and efficiency, maritime transport costs are very competitive. For example (in 2011) (ICS, 2012e): • The typical cost to the consumer in the United States of transporting crude oil from the Middle East, in terms of the purchase price of gasoline at the pump, is about US$0.01 a litre. • The typical cost of transporting a tonne of iron ore by sea from Australia to Europe is about US$20. • The typical cost of transporting a bottle of whisky from Europe to China is about US$0.15. Maritime transport operates in a very unrestricted trade environment. With the exception of cabotage restrictions (trade between two ports in the same country), international shipping enjoys relatively free trade without restrictions to market access. The majority of companies (especially in non- containerized trades) are small and medium- sized enterprises, and shipping is characterized by markets with very high levels of competition (CRSL, 2012). From an environmental perspective, shipping operations have the potential for significant damageandit is IMO’s role,withthecollaboration of industry and civil society interests, to develop and introduce measures to minimize all such impacts. Another very important factor in the environmental performance of shipping is the role of the shipyards which build the ships used to conduct world trade, with about 90 per cent of new shipbuilding capacity now located in Asia (China, Japan and Republic of Korea) (UNCTAD, 2011). Shipyards clearly have an important part to play in introducing new technologies which will further improve ship construction standards (for example, to help prevent oil spills caused by accidents), or which will radically improve fuel efficiency to reduce CO 2 emissions. 2.4.2 Incentives for reducing marine pollution The shipping industry has two strong economic motivations for maintaining and improving its environmental performance. The first concerns the financial benefits of ensuring full compliance with widely enforced international environmental regulations; the second concerns the indirect economic benefits derived by companies which have a progressive and proactive approach to implementing environmental improvements. Shipping also has the potential to become greener and initiatives such as the Sustainable Shipping Initiative are

looking at a ‘beyond-compliance’ sustainability framework. The financial liabilities which shipping companies, or ships’ charterers, may face should they be involved with a serious pollution incident such as a major oil spill (even if entirely accidental) can potentially amount to millions if not billions of US dollars. Additionally, the criminal penalties which can be associated with offences which may actually result with relatively minor impacts on the environment – such as the illegal disposal of oil residues, or garbage at sea – can also be very significant and serve as a deterrent. At a different level, any ‘technical’ non- compliance with MARPOL regulations which is identified during port State control inspections can result in ships being detained and not permitted to sail, with the ship operator being subjected to very significant commercial penalties, as well as damage to its commercial reputation. It should be understood that, following the establishment and expansion, since the 1980s, of regional co-operation agreements between national port State control authorities – which share sophisticated databases on the safety and inspection records covering virtually the entire world merchant fleet – it is increasingly difficult for ships which do not meet acceptable international standards to operate to ports located in the major trading areas in Europe, the Americas and Asia (IMO, 2012k). Such ships will be targeted for inspection by port State control officers and detained so that they cannot sail. In this respect, port State control also applies to requirements such as the sulphur content of fuel and, in advance of the implementation of the stricter international standards which have recently been adopted by IMO, port States have already announced large financial penalties for non-compliance. With the development of the internet, there has been a massive increase in transparency with regard to information which is widely available about the quality of ships, including the extent of their environmental performance, to which the customers of ships (charterers, shippers and freight forwarders), as well as insurers of ships and their cargoes, have access. In addition to insisting on full compliance with relevant international regulations concerning the protection of the marine environment (such as IMO’s MARPOL Convention and ISM Code), customers and insurers of shipping companies increasingly insist that shipping companies meet additional environmental standards, suchasthosedeveloped

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