Smart Regionalism: A New Approach to Shipping’s Carbon Emissions

The shipping industry has long clung to the mantra of “global solutions for a global industry.” It’s a convenient refrain, one that requires little thought or innovation. No matter the issue, the answer remains the same: shipping is global, so regulation must be too. But this rigid mindset is beginning to crack as the case for smart regional intervention grows stronger.

The logic behind the “global industry-global solutions” argument is straightforward. Shipowners can easily switch flags to avoid stringent regulations, flocking to jurisdictions like Panama, Liberia, or the Bahamas. This creates a race to the bottom, where the fear of losing competitiveness stifles meaningful regulation. The result? Leakage effects, where emissions simply shift elsewhere rather than being reduced.

But what if regional regulation could sidestep these pitfalls? The European Parliament is already testing this idea with a proposal to include shipping in the EU Emissions Trading Scheme (ETS). The design is clever: shipowners can either comply with the ETS or contribute to a shipping fund, with 20% of the fund dedicated to green innovations. This mirrors Norway’s successful NOx fund, which slashed emissions and spurred advancements in LNG-powered ships.

Shipping's carbon emissions: time for smart regionalism?

Critics argue that regional measures could distort competition or drive business to nearby ports outside the EU. Yet, the costs of rerouting shipments—such as clearing goods in non-EU ports like Tanger-Med for European markets—make such workarounds impractical. The EU’s scheme ensures a level playing field by applying uniformly to all flags, minimizing leakage risks.

Unsurprisingly, the shipping industry’s response has been predictable: recycled warnings about global playing fields and leakage. But these arguments fall flat this time. The EU’s proposal is meticulously crafted to avoid distortions, and global solutions remain distant. The International Maritime Organization’s (IMO) glacial “three-step approach”—data collection, analysis, and policy decisions—has yet to yield concrete action. Meanwhile, China has reportedly ruled out global market-based mechanisms for shipping before 2025.

In an era where shipping is touted as “indispensable to the world,” the industry’s reliance on tired rhetoric does it no favors. If European shipowners truly fear uneven competition, why not champion a global carbon tax instead of opposing regional progress? Rejecting smart solutions without offering alternatives is a surefire way to alienate the public and accelerate climate change. The time for hollow phrases is over; the time for smart regionalism has arrived.