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A new advent for renewable offshore resources


9
A new advent for renewable offshore resources


Ivan Vella
Maritime practitioner and advocate



This chapter is dedicated to Professor David J. Attard; an erudite scholar and a remarkable man with whom I am proud to have walked a mile or so.



Introduction


In scientific and technological terms the proximate future may well be a golden age where tremendous possibilities appear to be within the reach of human ingenuity. More pointedly a growing and generally widespread awareness of the shortfalls resulting from the utilization of fossil fuels, including the potentially deleterious effects of the use thereof on the natural and human environment, wedded to the equally pressing consideration of their intrinsically exhaustible nature, has led efforts to be concertedly redirected, on a large scale and with encouraging results, to the assessment of renewable resources as an emerging source to fuel eventually global energy needs. Undoubtedly, even for reasons explained later herein, efforts in this regard are likely to be multiplied in the coming years.


In principle renewable resources that are or may be located offshore include: (a) fisheries;1 as well as the (b) offshore production of energy by various means including thermal processes, currents and wind. The European Commission has defined ‘renewable energy sources’ as ‘ “renewable non-fossil energy sources” such as wind, solar, geothermal, wave, tidal, hydro-power, biomass,2 landfill gas, sewage treatment plant gas, and biogases’.3



1 A discussion of fisheries, however, falls outside the scope of this chapter.


2 This would include biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, and includes the biodegradable fraction of industrial and municipal waste.


3 European Commission, Green Paper – A European Strategy for Sustainable, Competitive and Secure Energy (SEC(2006) 317), COM (2006) 105 final, 8 March 2006; and Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sectors in the internal electricity market, OJ L283/33 of 27 October 2001.


In a maritime context some of the abovementioned sources of renewable energy may be created only in the marine environment, indeed even at sea. These would include wave, tidal and hydro-power. Others, such as wind, solar, biomass and landfill gas, may be created indiscriminately on land and at sea. At sea they may be located on offshore installations or other manmade or artificial islands or structures that may be established offshore. Although often an expensive option, this may be done both to maximize land use where land is only available at a premium and sometimes also to mitigate the negative environmental impact on human health resulting from the related processes as well as for aesthetic or urban planning considerations. In either hypothesis it is submitted that the use of marine space in and toward the production of renewable energy sources is destined to increase in the coming years, even if this would inevitably require the transfer of the energy produced to the mainland by cables, pipelines or other vessels.



The Climate Change Convention4 and the Kyoto Protocol5


Climate change has been aptly described as ‘a defining issue for the twenty-first century’.6 It is certainly one of the ‘defining issues’ of this and forthcoming generations.



On the one hand it poses an unprecedented and as yet still not fully understood threat to the global climate system upon which mankind depends; on the other hand remedial action requires an extensive, and expensive, overhaul of northern industrial economies which are still heavily dependent on non-renewable carbon-based fossil fuels. For decades scientists have understood the chemical processes by which emissions of carbon dioxide and other gases might warm the planet through the so-called ‘greenhouse effect’, nevertheless it was not until the 1980s that international concern about anthropogenic impacts on the atmosphere through such emissions came to a head, and it was only in the last two decades of the twentieth century that the United Nations took the first, somewhat faltering, steps towards recognizing and addressing the issue. These first steps led to the conclusion of the 1992 Framework Convention on Climate Change, followed by its innovative 1997 Kyoto Protocol that is designed, inter alia, to utilize ‘market mechanisms’ to assist with the massive reductions of greenhouse gas emissions necessary to arrest the processes of climate change.7



4 United Nations Framework Convention on Climate Change, 1992.


5 Kyoto Protocol to the United Nations Framework Convention on Climate Change, 1997.


6 D. Hunter et al., International Environmental Law and Policy (New York: Foundation Press, 2002), 2nd edn, p. 589.


7 D. Freestone, ‘The UN Framework Convention on Climate Change, the Kyoto Protocol, and the Kyoto mechanisms’, in D. Freestone and C. Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (New York: Oxford University Press, 2005), p. 3.


The Climate Change Convention came into force on 21 March 1994. The 1997 Kyoto Protocol which came into effect on the 16 February 2005 was designed to strengthen the commitments of the Climate Change Convention by establishing a definite timetable for the reduction of greenhouse gas emissions by Annex I countries and firm targets to be met within an agreed commitment period. Perhaps the most innovative aspect of the Kyoto Protocol is the introduction of so-called market mechanisms into the process by which Annex I countries can meet their obligations.



Joint responsibility


The Kyoto Protocol, Article 3(1), reaffirms a principle first enunciated in Article 4(2)(b) of the Climate Change Convention in the sense that the reduction of their overall (greenhouse gas) emissions by at least 5 per cent below 1990 levels in the commitment period 2008 to 2012 may be accomplished by the Parties included in Annex I either ‘individually or jointly’. This ‘mechanism’ is further addressed in Article 4 of the Kyoto Protocol that provides that Parties included in Annex I which reach an agreement to fulfil their commitments under Article 3 jointly – even in the framework of, and together with, a regional economic integration organization such as the EU – shall be deemed to have met those commitments if their total combined aggregate anthropogenic carbon dioxide equivalent emissions of greenhouse gases do not exceed their assigned amounts calculated in accordance with Annex B. In the event of failure of the group of States to meet the required reductions, then each Party becomes again individually liable for its own levels of emissions.



Transfer and acquisition of emission reduction units


Article 6 of the Kyoto Protocol provides for a mechanism whereby emission reductions financed by a Party included in Annex I in the territory of another such Party may be set off against the financing State’s reduction targets.



The theory behind this approach is that the ‘marginal abatement cost’, that is, the cost of financing an emission reduction, will usually be far higher in a relatively fuel efficient industrialized country than in a country such as an EIT [economy in transition] or a developing country which may have less efficient fuel-use technology. As the global climate system benefits from reductions wherever they are made, then making reductions in an EIT or a developing country as part of a national strategy (which also of course includes the introduction of domestic ‘policies and measures’ to reduce emissions at home), will make the cost of reaching these reduction targets cheaper and increase the chances that they will actually be reached. The consequential advantages for the project host countries are new resource and technology transfers, including access to cleaner technology and contributions to sustainable development.8



8 Op. Cit, Freestone, fn 7, p. 11.


Article 6(1) of the Kyoto Protocol allows any Party included in Annex I to transfer to, or acquire from, another Party included in Annex I, reduction units of greenhouse gas emissions – described as emission reduction units or ERUs – resulting from investment in projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks, including the sequestering of carbon by land use, land-use change or forestry, of greenhouse gases in any sector of the economy. This mechanism is subject to a number of requirements that are set out in Article 6(1). First, the project requires the approval of both the parties involved as transferor and transferee respectively. Second, the reduction of greenhouse gas emissions resulting from any such project must be ‘additional to any that would otherwise occur’. In other words, if the reduction of emissions would have still resulted otherwise, independently of the project, then no ERUs would be available for transfer or acquisition. Third, a State may not acquire ERUs if it is not itself in compliance with its obligations under Articles 5, requiring the establishment of a national system for the estimation of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, and 7, requiring submission of information, of the Kyoto Protocol. Finally, the acquisition of ERUs must in any case be ‘supplemental to domestic actions for the purposes of meeting commitments under Article 3’.


It may perhaps be added that the Kyoto Protocol also envisages participation by ‘legal entities’ other than State Parties – presumably including the private sector and international organizations – in the finance and organization of such projects. Article 6(3) of the Protocol permits a Party to authorize a legal entity to participate in ‘action leading to the generation, transfer or acquisition’ of ERUs, provided however that the generation, transfer or acquisition remains under the responsibility of the authorizing State Party.



The Clean Development Mechanism (CDM)


Under Article 12 of the Kyoto Protocol, Parties included in Annex I may finance emission reduction projects in States which have not made commitments under the Protocol to meet greenhouse gas emission reduction targets; in other words, in the territories of those developing States that are not listed in Annex I. Article 12(2) of the Protocol sets out clearly the objective which is to ‘assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their … commitments under Article 3’.


The underpinning principle of the CDM is that a reduction of emissions anywhere in the world will still have an equally beneficial impact on the global climate system and should therefore also be rewarded. So by virtue thereof developing States may share the benefits of project investments in clean technology within their economies thereby making emission reductions more possible. For this purpose the Kyoto Protocol also envisages a supervisory structure, the CDM Executive Board, and an emission reduction verification and certification system. In terms of Article 12(5) of the Kyoto Protocol CDM projects must be validated and registered by ‘operational entities’ designated by the Conference of the Parties serving as the meeting of the Parties of the Protocol. These operational entities are also responsible for verifying and certifying that emission reductions actually occur. An emission reduction so certified is referred to as a Certified Emission Reduction (CER) to distinguish it from the product of Article 6 projects, which is termed an ERU.9


Article 12(5) of the Kyoto Protocol establishes the conditions for certification of CDM projects. Participation in CDM projects must be voluntary and approved by each Party involved. Moreover the projects must have real, measurable and long-term benefits relating to mitigation of climate change. Finally a project activity generating CERs must be ‘additional’ to that which would have occurred in its absence. Under Article 12(9) of the Kyoto Protocol participation in the CDM is also open to the involvement of private and public entities which, it seems, may directly own CERs ‘subject to whatever guidance may be provided by the executive board of the clean development mechanism’. No mention is made here – contrary to the equivalent provision in Article 6(3) relating to ERUs – of authorization by, and responsibility of, Parties to the Protocol in relation to participation by private or public entities.



Trading


The third mechanism, envisaged by Article 17 of the Kyoto Protocol, allows emissions trading among Parties to the Protocol of parts of assigned amounts, CERs, ERUs and removal units that are generated by land use, land-use change, and forestry activities such as afforestation or reforestation that capture carbon. ‘Assigned amounts’ refers to the quantity of greenhouse gases a Party to the Kyoto Protocol is allowed to release in the global atmosphere as calculated on a yearly basis in Annex B of the Protocol.10



The EU emission trading scheme


A Directive of the European Parliament and of the European Council11 sets out the framework for an EU-wide system of greenhouse gas emission allowance trading at company level. The Directive requires each Member State to impose binding caps on carbon emissions from inter alia installations involved in energy activities, the production and processing of ferrous metals, the mineral – for example, cement, glass, or ceramic – production, and pulp, paper or board production. The EU institutions believe that emissions trading will reduce the cost of



9 See above pp. 138–139.


10 Article 3 of the Kyoto Protocol.


11 Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emissions allowance trading within the Community and amending Council Directive 96/61/EC, OJ L275/32 of 25 October 2003.


meeting the aggregate commitments of EU Member States under the Kyoto Protocol by around 35 per cent – representing around 1.3 bn in ‘savings’ in each year between 2005 and 2012. Analysts have estimated the total size of the resulting trading market at around 5 to 10 bn per year.



The economics of renewable sources of energy


The foregoing discussion attempts to briefly portray the growing economic importance of projects that are designed to reduce greenhouse gas emissions. This may theoretically be achieved also by turning to renewable – also referred to as clean or as green – sources of energy to replace reliance on fossil fuels. Not only are such projects important for some States – and indeed for other States, compulsory – in order for them to meet their international environmental obligations, but as seen earlier the mechanisms established in international instruments, most notably the Kyoto Protocol and the EU Emission Trading Scheme Directive, provide added tangible economic incentives to establish such projects. For developing States and States with economies in transition there is also the added benefit of potential direct foreign investment in sustainable activities and projects. It is not impossible to imagine that a good number of such projects are, and may increasingly be in due course, established in marine space!



The use of marine space in the generation or production of renewable energy sources



The territorial sea and internal waters


Article 2(1) of UNCLOS12 provides that a coastal State’s sovereignty ‘extends, beyond its land territory and internal waters’. The said sovereignty also ‘extends to the air space over the territorial sea as well as to its bed and subsoil’.13 The coastal State has ‘the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with [UNCLOS]’.14


Conventional and customary international law recognizes that, subject only to the right of innocent passage, a coastal State enjoys and exercises sovereignty over its territorial sea. One would therefore surmise that within this maritime



12 United Nations Convention on the Law of the Sea, 1982.


13 UNCLOS, Article 2(2).


14 Ibid., Article 3. Moreover in this regard Article 15 of UNCLOS provides that:



where the coasts of two States are opposite or adjacent to each other, neither of the two States is entitled, failing agreement between them to the contrary, to extend its territorial sea beyond the median line every point of which is equidistant from the nearest points on the baselines from which the breadth of the territorial seas of each of the two States is measured. The above provision does not apply, however, where it is necessary by reason of historic title or other special circumstances to delimit the territorial seas of the two States in a way which is at variance therewith.


space the coastal State enjoys full and unrestricted rights to establish, construct, operate and use, and to authorize and regulate the construction, operation and use of, artificial islands, installations and structures for any purpose whatsoever, including for the purpose of harnessing renewable energy sources by any means. The only ‘restriction’ placed on the coastal State in this regard is the obligation not to hamper the innocent passage of foreign ships through the territorial sea inter alia by imposing ‘requirements on foreign ships which have the practical effect of denying or impairing the right of innocent passage’.15



The continental shelf



Nature of coastal State’s rights over the continental shelf

A coastal State also exercises ‘sovereign rights’ over its continental shelf ‘for the purpose of exploring and exploiting its natural resources’.16 For this purpose the continental shelf is described in UNCLOS as comprising:



the sea-bed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance.17


The said rights are ‘exclusive’ – in the words of the Convention – ‘in the sense that if the coastal State does not explore the continental shelf or exploit its natural resources, no one may undertake these activities without the express consent of the coastal State’.18 It is however significant that a coastal State’s sovereign rights over its continental shelf do not extend to the waters superjacent to the seabed; nor do they cover other activities such as those for the economic exploitation and exploration for the production of energy from the water, currents and winds.19 The Convention also expressly provides that ‘the rights of the coastal State over the continental shelf do not depend on occupation, effective or notional, or on any express proclamation’.20 The ICJ in the North Sea Continental Shelf Cases,21 while commenting on Article 2 of the 1958 Continental Shelf Convention which



15 UNCLOS, Article 24(1)(a).

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