China requests carbon data from ships as the trading scheme grows

Chinese authorities have begun requesting some overseas shipowners to report their carbon emissions, signalling increased scrutiny of the industry as the regulatory landscape evolves.

The requests for data on voyages servicing local ports target certain tanker and container ship owners, according to sources familiar with the situation who wished to remain anonymous. This initiative follows the European Union’s recent implementation of a carbon levy on vessels and could support China’s efforts to expand its emissions-trading system to include shipping. It remains unclear how many ports are involved.

Ocean-going vessels transport the majority of global trade, and any decision by China to require carriers to pay for emissions would represent a significant shift in the international maritime sector. As the world’s largest crude importer, China has some of the busiest ports in terms of container throughput. In March, Beijing established its first carbon-emissions management agency for the shipping sector in Shanghai to gather data from Chinese-flagged vessels.

In response to inquiries from Bloomberg, the Ministry of Transport confirmed that it had issued verbal notices to some ports, stating that the requests were aligned with the International Maritime Organization’s data collection requirements. China’s outreach to overseas shipowners coincides with the EU’s introduction of a carbon levy this year, mandating that vessels entering the bloc’s ports pay for carbon emissions, regardless of their flags or the locations of their owners. Most ships continue to operate on oil-derived fuels, which remain significantly cheaper than low-carbon alternatives.

A spokesperson for Vitol Group, the largest independent oil trader, noted that the people will need to consider the costs of these varying carbon environments in their vessel economics, in their voyages, and for their customers.
According to the International Energy Agency, international shipping accounted for approximately 2% of global energy-related carbon emissions in 2022. The Paris-based organization has highlighted “notable progress” in decarbonizing the industry, including the EU’s initiatives and efforts by Asian shipbuilders to develop vessels that utilize alternative fuels.

Beijing, which aims to achieve net-zero emissions by 2060, is expanding its carbon trading system by increasing the number of industries required to pay for their emissions. Currently, this framework includes power utilities and will extend to sectors like steel, aluminium, and cement production. However, progress has been sluggish due to low prices and trading volumes.

The International Maritime Organization (IMO), the shipping regulator, has been drafting regulations to assist the industry in meeting emission reduction goals, potentially establishing a global standard. However, advancements have been slow, leading shipowners to express concerns about the increasingly uneven regulatory environment.
Andrew Wilson, head of research at BRS Shipbrokers, commented that whether China is doing this solely to pressure the IMO for a global carbon-emissions regime, or if they are trying to align with the EU, there is a strong business case for them to proceed.

China is one of the world’s leading shipbuilders, with its shipyards securing 70% of global orders for new vessels powered by cleaner fuels like LNG, methanol, and liquefied ammonia in the first nine months of this year, according to reports from state broadcaster China Central Television.