Climate change, IMO’s decarbonisation effort, and the Belt and Road Initiative

The climate crisis is considered as the biggest challenge faced by humans collectively, and the shipping industry is directly linked to the livelihoods of millions globally. Given its intercontinental engagement, decarbonisation of the maritime industry is considered as one of the most difficult sectors to regulate. For example, a ship carrying a bulk from Italy could be registered in Panama, yet the shipowners could be from Japan and the management from Korea. Moreover, the ship captain and the crew could be Greek or Russian, with a vessel that was built in South Korea, sailing in international and territorial waters.

However, the IMO was given the mandate from the Kyoto Protocol to address the issue of regulating GreenHouse Gas (GHG) in the maritime sector, and the current Paris Agreement calls upon all member parties to take action to meet the 1.5 targets.

What are the disagreements among member states?

Since the beginning of the climate change regime, developing states were demanding to continue their national development programs and not slow down due to climate change. Also, many developing nations demand the developed world to be obliged by the principle of “Common but Differentiated Responsibilities (CBDR).” The whole climate change regime is mobilised among different states around the CBDR principle. The parties to the United Nations Framework Convention on Climate Change (UNFCCC) agree that climate change is a common threat to all mankind, while nations agree that the responsibilities to meet this threat are different according to their own interpretation of the climate crisis. However, the CBDR is more favoured by the developing nations and mostly less supportive by the developed nations.

Opportunities provided by the Belt and Road Initiative (BRI) for developing nations

Since the inception of BRI in 2014, the initiative has grown into a global framework with over 142 member nations, while around two-thirds of BRI member states are low/lower-middle-income nations. The sea-based component of the BRI focuses on increasing investments and economic collaboration among the countries along the ancient Maritime Silk Road; the BRI was able to bring value to the global shipping industry mainly by flowing funding to build ports and transferring technical ‘know-how’ on maritime operational services.

China is considered an emerging maritime powerhouse with over 100 ports in 63 different countries, and around seven Chinese ports are ranked among the top 10 busiest container ports in the world. Chinese State-Owned Enterprises (SOEs) have secured investments into a vast connected network of ports across the globe. China remained the world’s largest shipbuilder as of early 2021 February with ship orders reaching 96.85 million deadweight tons (DWT) or 46.9% of the world’s total. Moreover, China remains as the world’s second largest shipowner nation and an important stakeholder in regulating shipping. 

China’s state support for the shipping industry has reached over $ 130 billion since the implementation of BRI and are maintainers of the world’s second-largest fleet of commercial shipping vessels. China’s BRI is an important initiative to further maximise the maritime and shipping industries. Apart from terminals and shipping companies, China is also a leading manufacturer of shipping equipment and produces up to 96% of the world’s shipping containers and 80% of port terminal cranes and at present has become a powerhouse in global trade. It is worth mentioning that China has more shipping ports at home than any other country.

Apart from meetings and negotiations at the IMO’s MEPC, the ground-level reality is that IMO’s global shipping decarbonising process or the GHG Strategy needs much more investments and capital not only in R&D but also in building infrastructure in order to transform the whole industry.

These new investments should include building new ports, expanding new fuel supply chains, improving fuel storage capacity, and sharing the technology among other member states at IMO, and especially among the emerging economies and least developed nations.  

The sea routes that make up the 21st century Maritime Silk Road, which sails through Southeast Asia to South Asia, the Middle East, and Africa, are critical to the success of international trade in the region but the ships that travel these routes are significant sources of emitting GHGs. As the BRI is famously providing a great opportunity, it can also lead the way for countries to cooperate on decarbonising shipping. Although each member state at IMO has its own view and demands on the climate change regime and decarbonisation process, these demands can be framed into three categories: Port Infrastructure Development, Port Digitalisation, and Technology Transfer and Capacity Building.

Technology transfer and capacity building

The underline debate among the disagreeing parties at the IMO is the lack of support provided to developing nations to adopt modern technologies and build capacity among these economies in transition. However, many BRI projects follow the Economic model of Public-Private Partnership (PPP) or Build Operate Transfer (BOT) which has been an effective way of building capacity among developing nations. Also, the BRI managed to build trust among the developing, least developed nations, and Small Island Developing States to integrate their national resources and assets into the global economy.

Although for the last few years the IMO conducted Maritime Technologies Cooperation Centres (MTCC) network or the special Department for Partnerships and Projects (DPP), it’s clear that these initiatives were not as effective to meet the demands among the disagreeing member states at the IMO. However, technology transfer and capacity-building demands can vary depending on the country.

“Most emerging economies are fond of automation, 5G technologies, and modern AI cloud-based operations, whereas the majority of nations or the least developed nations are more interested in basic upliftment of their infrastructure, management and operational systems, appropriate funding, and technical education.”

Port infrastructure development

Chinese Leader Xi Jinping once quoted that ‘economic powers are maritime powers and shipping powers’ and under his administration from 2012 to 2019 started constructing new ports and upgrading existing port infrastructure at an estimated cost of $ 150 billion. Especially since 2012, Chinese companies have acquired stakes as investors and constructors of overseas ports not only in developed nations but also in both high-income and emerging economies.

The BRI Port infrastructure spreads across all continents, and according to data published on the COSCO official website as of June this year, the group has operated and managed 357 terminals in 36 ports around the globe. Its port portfolio has stretched from Southeast Asia to the Middle East, Europe, and the Mediterranean. In addition, China Merchants Group, another major port developer and operator in China, says on its website that the company completed the “equity acquisition of eight high-quality ports in Europe, the Middle East, and the Caribbean last year alone, expanding the group’s global port layout to 27 countries and 68 ports.”

The Hambantota port in Sri Lanka which was funded and built by Chinese SOE is now operational since 2014, and currently supplies IMO compiled low sulphur fuel to meet IMO’s 2020 sulphur regulations. The port itself is equipped with a state-of-the-art petroleum testing laboratory that can provide innovative and bespoke assurance, testing, inspection, and certification services which have placed the Sri Lankan port on the maritime map of shipping decarbonisation.

In South America, under the BRI, China granted a loan of $ 120 million to modernisation of the Santiago de Cuba Port which is the second largest port in Cuba. Similar involvement in purchasing 90% of shares in Brazil’s largest port of TCP Participações SA, and a $ 225 million agreement with the Port of Chancy of Peru. In addition, China’s BRI reached El Salvador, Bahamas, Trinidad and Tobago, Panama, Argentina, Chile, Uruguay, Antigua, and Barbuda.

Although African ports only consist of 3% of the global maritime traffic and neglected by international inventors and lending organisations for decades, Chinese SOEs looking at the future business opportunities have invested in around 74 African ports, out of which 28 ports are larger ports, including 7 deep water ports. Apart from that over 50 African seaports had financial, construction, or operational involvement from Chinese banks and SOEs.

These investments in the marine sector are developing the entire coastal infrastructure around Africa, making more ground for future investments related to clean energy and new fuel supply stations, moreover, these infrastructures around Africa serve as service stations for shipping supply chains, and furthermore, most of these ports and coastal infrastructure are connected with inland hard infrastructure as road networks and industrial parks.

China’s port digitalisation

As shipping is the leading facilitator for global trade with a direct link to the livelihoods of millions of people, ports play a major role in the maritime decarbonisation process. China is expanding its 5G technologies into the digitalisation of the port operations, which would eventually make the port operations much more efficient, consistent, and competitive. The IMO’s Facilitation Convention incorporated electronic data exchange mandatory to promote member states to improve the digitalisation of the maritime industry. Also, IMO’s 2020 facilitation committee approved a revised version of the IMO Compendium on Facilitation and Electronic Business which highlights IMO’s future direction in maritime digitalisation.

However, China’s digitalisation ambition is encrypted into the BRI to lead new technologies to flow into many ports across the globe which is limited to a few developed states. China is leading the world in the digitalisation of the port sector as the Ningbo – Zhoushan port which is one of the busiest ports in the world has started building its digital infrastructure in 2019 and is now able to operate its Rubber Tyred Gantrycranes (RTGs) fully remotely by the operators in a central office location with comfortable and better working condition.

The Tianjin Port which is also another leading port in the world also completed one of its terminals to operate at zero emissions by using renewable sources of energy from wind and solar. The Tianjin Port terminal No. 2 also developed 5G technologies to improve its navigation satellite systems to get more accurate information and increase efficiency. The port also developed an AI system which increased efficiency by 20% compared to the traditional terminal.

The China Merchants Port Holdings, a leading port operator, recently opened the ‘Mawan Smart Port’ in China’s greater bay area with a 5G enabled container terminal which is widely seen as Xi Jinping’s ambition to integrate BRI to the Greater Bay area’s linking Hong Kong, Macau, Shenzhen, and other nine cities. The CMPort identified that the project consists of nine elements working together to give a full-stack solution:

1. China Merchants Core (CMCore)

2. China Merchants ePort (CM ePort)

3. Artificial Intelligence

4. 5G Application, BeiDou

5. Navigation Satellite System (BDS)

6. Automation

7. Smart Customs

8. Blockchain Technology 

9. Green and Low-Carbon Operation

In 2020 December China Merchants Port (CMPort) kicked off a major port intelligent construction project for application at Sri Lanka’s Colombo International Container Terminals (CICT) while also investing $ 40 million in transferring the terminal into a green port initiative. The CMPort which operates in around 20 countries globally is an important global player to meet the demands of the global shipping framework.

The Vladivostok port in Far East Russia is integrated into China’s BRI linking Asia and Europe by rail and sea, also the port will be an important pivot for the North Sea Route. At present, the Vladivostok port has already taken steps to automate operations and build a ‘smart shipping port’. This includes using artificial intelligence, big data, internet of things (IoT), and blockchain to digitise operations for remote system access. The recent initiative ‘The Finland Bridge’ is a unique model connecting the rail networks to Pacific ports from East China to Far East Russia and all the way to Finland. The containers are transported by sea from Chinese ports in Shanghai, Ningbo, and Qingdao and transferred to the Trans-Siberian rail route via the Vladivostok port to reach Vuosaari terminal in Helsinki, Finland.

Observations:

The IMO was struggling to find common ground among Common but Differentiated Responsibilities (CBDR) + No More Favorable Treatment (NMFT) principles since the UNFCCC, Subsidiary Body for Scientific and Technological Advice (SBSTA), Kyoto Protocol, and Paris Agreement negotiations.

The major emerging economies as China, India, Brazil, Argentina, Saudi Arabia, and South Africa welcome and stand by the idea of developed major economies taking a lead on emission reduction and allowing room for developing nations to develop their economies. They also stand by the idea of flowing a fair amount of funding to developing nations. These nations are much more interested in negotiating the views and demands on the climate change regime and these demands can be framed into three categories in the shipping industry: Port Infrastructure Development, Port Digitalisation, and Technology Transfer and Capacity Building.

However, it seems the BRI managed to use few effective tools in order to work among the Least Developing Countries (LDCs), Small Islands Developing States (SIDS) and the Developed world.

(The writer is an independent researcher on maritime affairs and BRI development. He graduated from Dalian Maritime University, and in 2016 was awarded by the Chinese Government a scholarship to complete a Master’s program on Environment and Natural Resources Protection Law at Ocean University of China. He is the co-founder of Belt and Road Initiative Sri Lanka (BRISL), an independent and pioneering Sri Lankan-led organisation, with strong expertise in BRI advice and support.)