Thursday 19th Jul, 2018

INDUSTRY OPINION: The Global Green Freight Agenda

The Australian logistics industry will be subject to major environmental reform, whether we like it or not, writes TRAVIS BROOKS-GARRETT

MOST logistics companies have traditionally shown little interest in environmental policy. With no commercial imperative there was no real need for change.

This year, with the International Maritime Organization (IMO), the United Nations and China, our largest trading partner, undertaking major environmental reforms, logistics companies will have no choice.

China will be setting a price for carbon and this is likely to include carbon emissions from supply chain activities, including the production and exporting of goods from Australia.

Energy-intensive supply chains will be penalised in the Chinese market while energy-efficient supply chains will suddenly have a commercial and competitive advantage. A new world is on our doorstep, with new rules and new drivers.

In 2015, the Chinese Government announced that it would be rolling out a National Emissions Trading Scheme, to be delivered sometime in 2017.

In the simplest of terms, an Emissions Trading Scheme is where a price is set for carbon emissions. Where companies exceed their allocation, they must purchase extra permits. The “carbon credit” becomes their tradeable property.

While details are still evolving, it is becoming increasingly evident the Chinese Emissions Trading Scheme will include “Scope 3” emissions. That is, indirect emissions, including transportation (upstream and downstream).

This means that Australia’s energy-intensive exports will be subject to a carbon price regardless of whether Australia has its own Emissions Trading Scheme. Some experts are warning that non-compliant Australian companies could be locked out from trade with China.

Australia’s proximity to China could be an advantage (less transport emissions), but this could be outweighed by input energy mixes which may not be as clean as other parts of the world e.g. New Zealand.

While the scheme will start with a limited number of sectors – including power generators, cement and aluminium – experts have indicated that by 2020 it will be rolled out to wider industry.

FTA/APSA has engaged DFAT on this issue, as well as actively working with Cloud Global Logistics, Australia’s consultee to the Global Logistics Emissions Council.

Debate is also heating up at the International Maritime Organization (IMO), with the second meeting of the Intersessional Working Group on Reduction of GHG Emissions from Ships taking place last week.

The IMO is the body responsible for managing maritime environment policy with shipping responsible for about 5% of the world’s air pollution, according to environmental campaigner Transport & Environment.

While the Paris Agreement on Climate Change is an aspirational agreement, the IMO’s decisions in this area are legally binding.

The IMO have already put a cap on Sulphur Emissions by 2020 and are now looking at instituting more wide-reaching policy relating to Green House Gas emissions.

It has been widely reported that shipping line representative bodies are aggressively lobbying the IMO and other branches of the U.N. on this issue, no doubt concerned about the massive cost of compliance.

One proposal from shipping line representative bodies is for a mandatory bunker levy to be applied on shippers to offset carbon emissions. Under this proposal, shipping lines would be responsible for the measurement, the setting of the price and the offsetting activity.

Unsurprisingly, the Global Shippers Forum (GSF) has rejected this model outright, noting that by transferring the cost liability to the shipper the shipping lines will have no commercial incentive to change their own practices.

The GSF maintains that shippers/cargo owners should be responsible for the measurement and offsetting of their own emissions. They have also warned shippers to watch out for any “surcharges” from shipping lines relating to the Sulphur Emissions Cap.

So please let FTA/APSA know if any of these questionable line items start appearing on your invoices.

It is an interesting area that is evolving by the day with the UN Climate Change Conference taking place on November 6 this year in Germany.

Smart companies, like Walmart, are getting ahead of the game and not waiting for the international regulators to mandate change. They have announced a target to reduce a gigatonne of carbon dioxide from their Scope 3 emissions by 2030.

While this is not on the radar for most Australian exporters, it should be, and smart logistics suppliers should take note.

In the meantime, FTA/APSA will continue taking a lead on this issue on behalf of industry.

* Travis Brooks-Garrett is secretariat at Australian Peak Shippers Association

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