While MEPC 80 Falters, the Industry Innovates

Industry-led measures can serve as a prelude to government regulation

It looks like the MEPC 80 will produce little more than a “watered-down” resolution on the IMO’s GHG strategy. Is it any wonder that developing countries pushed back on a carbon levy? And, why is China still considered a “developing” country? The industry may be left with a splintered regulatory regime, led by the EU both in terms of ETS as well as the FuelEU initiative. Legislation has been introduced in the United States proposing a $150/mt levy on carbon emissions. Frankly, it’s hard to see how anything like that gets to President Biden’s desk prior to the 2024 election.

So, where does that leave maritime?  Where we always have been: With the need for industry-led solutions that will create “facts-on-the-water” (to coin a phrase) to which regulators must adapt.  

Industry-led measures can serve as a prelude to government regulation, shaping the landscape before official policies are implemented. This process usually occurs because industries and businesses are more nimble and able to quickly respond to emerging needs or issues. They are often the first to spot problems or opportunities due to their frontline position in dealing with the intricacies of the market.

We’ve seen this before. Two prominent examples of this dynamic are the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and the General Data Protection Regulation (GDPR).

Dodd-Frank

Before the financial crisis of 2008, many within the financial industry began noticing and commenting on the risk-laden practices, including the increasing complexity and lack of transparency of financial instruments like collateralized debt obligations and mortgage-backed securities. Some financial institutions started to take measures, albeit limited, to address these risks. They did so either individually or collectively through industry associations. Despite these efforts, the magnitude of the problem was too large, and the global financial crisis ensued. Following the crisis, the Dodd-Frank Act was passed in 2010 by the U.S government, which established a number of new government agencies tasked with overseeing various components of the act and by extension various aspects of the banking system. In this case, the industry-led measures did not prevent the crisis, but they did help to inform the comprehensive regulations that followed.

GDPR

In the case of data privacy and protection, many tech companies started taking proactive measures before the GDPR came into force. This was due to growing public concern about data privacy following high-profile data breaches and misuse of personal data. Companies such as Apple began emphasizing privacy as a selling point for their products, and some industry associations began developing best practices for data privacy. In 2018, the European Union implemented the GDPR, a wide-ranging regulation aimed at giving individuals more control over their personal data and enforcing greater penalties for data breaches. The regulation had a global impact because it applied to any company, anywhere in the world, that processed the data of EU residents. Here, the industry's growing recognition of privacy concerns helped to pave the way for the government's comprehensive regulatory response.

In both of these cases, industry-led measures preceded government regulation, although the measures varied widely in their effectiveness. The Dodd-Frank example shows that industry measures can sometimes be too limited or too late to prevent problems, while the GDPR example demonstrates how industry can sometimes help to lead the way toward greater public awareness and eventually, comprehensive government regulation.

We’ve played a part in those industry-led measures with our Orbit platform. Additionally, OrbitMI and Ifchor Galbraiths joined forces under the joint venture named Maritime Carbon Solutions (MCS) to address carbon emissions form the charterer’s perspective. 

Earlier this week, Kenneth Aasland, shared how by implementing a price on carbon at the oil trading desk he managed—well in advance of EU ETS—he gained a deeper understanding of that price would impact practical decisions (read that piece here). Aasland envisioned the need for a platform that would give the oil majors and other charterers visibility into the emissions of each voyage per-fixture (for planning and estimation), during the voyage (for potential optimization) and post-fixture (for reporting and compliance). To him, Orbit’s user-friendly interface was the gold standard in technology.   

By harnessing the power of innovative technology and the expertise of the ship brokers at Ifchor Galbraiths, MCS strives to revolutionize the way shipping is conducted, while paving the way for a greener and more sustainable future. Today, MCS can be found on the screens of every oil major. That’s what industry-led decarbonization looks like.

To learn more about MCS, click here to watch a conversation between Ali Riaz, CEO of OrbitMI, and Kenneth Aasland at the recent OrbitMI Flow event.