The Ministry of Transportation recently attended the 80th Session of the Marine Environment Protection Committee (“MEPC 80”) on 3-8 July 2023 at the International Maritime Organization (“IMO”) Headquarters in London, where the implementation of green shipping agenda was discussed. The IMO’s member states reached an accord on the revised 2023 IMO Strategy for reducing greenhouse gas (“GHG”) emissions following this session. Further, according to this session, some states concur with the IMO’s goal of achieving zero emissions from the shipping industry by 2050, while Indonesia has stated that 2060 is a more reasonable timeline.
As part of efforts to cut greenhouse gas emissions from the shipping industry, the IMO has mandated that ships begin using fuel with a maximum sulfur-concentration fuel with a maximum concentration of 0.50% m/m as of 1 January 2020, as stipulated in Annex VI of the International Convention for the Prevention of Pollution from Ships 1973 as modified by the Protocol of 1978 (“MARPOL”).
Indonesia, as an IMO member, has also made steps to support the green shipping agenda. Minister of Transportation Regulation No. PM 29 of 2014 on the Prevention of Marine Environmental Pollution, which was last amended in 2022 (“Marine Pollution Regulation”) governs the use of low-sulfur fuel for vessels sailing in Indonesian territorial waters. Furthermore, the Ministry of Energy and Mineral Resources also stipulated in Director General of Oil and Gas Decree No. 0179.K/DJM.S/2019 that a low sulfur Marine Fuel Oil (“MFO”) has a maximum sulfur concentration of 0.50% m/m.
Nevertheless, to this date, the Indonesian government has yet to provide business actors in the shipping industry with a clear roadmap for the implementation of green shipping. This roadmap is expected to include a defined date for reaching zero emissions and extensive government activities to do so. Indonesia appears to view that the IMO’s objective to achieve zero emissions globally by 2050 in the shipping industry is impracticable.
For instance, even if the regulatory aspect of implementing low-sulfur fuel has been set forth, it would still be difficult for the vessels sailing in Indonesia to comply with such regulation. This is due to the fact that the facilitation of low sulfur fuel is restricted to significant Indonesian ports such as Tanjung Priok Port, Tanjung Perak Port, and Batam Port. Consequently, it would be farfetched for remote ports and ship owners to comply with such regulations. The Indonesian government has also been well aware of such conditions and, thus, stipulates exceptions under the Marine Pollution Regulation for Indonesian flagged vessels to use high sulfur MFO (if the low sulfur is not available in ports where the vessels are berthed).
Other than that, the obligation to use low sulfur MFO could cause a burden to the Indonesian shipping company in particular due to the high price of the foregoing product, reaching approximately 13.5% more expensive compared to the high sulfur MFO. Due to such a price difference, the ship owners believe it is more reasonable to use fuel with a higher concentration of sulfur. However, in reality, the ship owners using fuel with a higher sulfur concentration may be able to reduce the emissions by equipping their vessels with a scrubber and/or exhaust gas cleaning system (“EGCS”) to ensure cleanliness from previous fuel residues or deposits. However, it is understandable that the ship owners would consider the prices of such pieces of equipment, ranging from USD 500,000 to USD 5,000,000.
Potential Detention to the Foreign Flagged Vessels
Unlike the Indonesian-flagged vessels, whose position is relatively secure because the Marine Pollution Regulation provides them an exception not to use a low sulfur MFO in certain conditions, the foreign-flagged vessels sailing to Indonesian territorial waters without a scrubber and/or ECGS and do not use low sulfur MFO are possible to be detained by the Indonesian port authority under the ground of unseaworthiness. In addition to the Indonesian law, such detention may also be permissible under the 2011 IMO Resolution A.1052 (27) regarding Procedures for Port State Control.
If that is the case, a dispute might arise between the ship owners and insurers. The insurer might not cover the losses suffered by the ship owners due to such detention as it is the ship owners’ fault not to use low sulfur MFO as regulated by the IMO and Indonesian law. This issue may arise in the future, if Indonesia rigorously implements the use of low sulfur MFO for ships in the interest of maintaining a sustainable shipping industry.
Based on the above, by observing Indonesia’s current gesture, it is understandable that Indonesia’s national interest in the shipping industry is a priority. Strict implementation of green shipping in Indonesia might negatively affect more than 22,000 Indonesian flagged vessels registered under the Indonesian Ministry of Transportation, particularly small and medium-sized shipping enterprises.
Considerable Actions for Indonesia to Overcome the Green Shipping Agenda
The optimal strategy for Indonesia to address this global agenda is to be the first to establish facilities for low sulfur MFO that are accessible to all Indonesian ships in all ports, including remote ports. This strategy is feasible given Indonesia’s favorable position to produce low sulfur MFO; state-owned enterprises like Pertamina or even private entities can produce low sulfur MFO on a large scale, given that Indonesia is one of the world’s leading producers of vegetable oil, a key component of low sulfur MFO.
In light of the foregoing, future domestic demands for low-sulfur MFO will likely be met, which could help Indonesian-flagged vessels sailing to the other states’ territorial waters to avoid sanctions or detention from other states that enforce strict compliance on the use of low-sulfur MFO.
In parallel, the Indonesian government may also consider to apply non-discrimination regulations upon foreign-flagged vessels by allowing the use of high sulfur MFO when entering certain Indonesian ports that do not facilitate low sulfur MFO. Given Indonesia’s strategic location between the Indian and Pacific Oceans and its status as one of the largest domestic markets in Southeast Asia, it is well-known that foreign-flagged vessels play a crucial role in the passage and transport of goods to Indonesia. Implementing equal treatment on using low sulfur MFO to foreign flagged vessels is expected to prevent detriment to Indonesia and strengthen Indonesia’s reputation on maritime security among global shipping practitioners.