Divisions Among Countries Hindering Shipping’s Decarbonization

As the shipping industry, but also the IMO is facing increased pressure towards its decarbonization goals, it’s important to note that reaching consensus among all member states, is proving to be rather difficult, as some blocs (like for example China and its allies), are exerting significant pressure to delay decisions, or reduce the targets set, citing high costs and other reasons. Overcoming these issues is rather difficult, especially without compromises being made. Meanwhile, shipping is eager to have a clear and defined road ahead, with strict enforcement for all, i.e. a level playing field.

In its latest weekly report, shipbroker Gibson said that “the Maritime Environmental Protection Committee (MEPC80) took place in London in early July. A variety of different subjects were discussed, and measures adopted, ranging from matters related to the EEDI/EEXI calculations to interim guidelines for the use of biofuels. Yet, the biggest outcome was agreeing upon more ambitious environmental targets. The initial GHG Strategy was adopted in 2018 and it envisaged a reduction in CO2 emissions of international shipping (per transport work, as an average across international shipping) of at least 40% by 2030, and pursuing efforts towards 70% by 2050, compared to 2008. The same strategy called for total annual GHG emissions to be reduced by at least 50% by 2050 compared to the 2008 baseline. In recent years, however, there has been growing pressure from various industry stakeholders to strengthen these environmental targets to align them more closely with the Paris agreement”.

According to Gibson, “addressing these concerns, the IMO GHG Strategy 2023 set a new target, for GHG emissions from international shipping to reach net-zero GHG emissions by “close to” 2050, although some sceptical members called for a better assessment first of how feasible it is to reach these ambitions. Another new goal set by the IMO was for the uptake of zero or near zero GHG emission technologies, fuels and/or energy sources to form at least 5% (and aiming for 10%) of the energy used by international shipping by 2030”.

The shipbroker said that “whilst the initial target to reduce CO2 emissions by 40% by 2030 was left unchanged, two new “indicative checkpoints” were introduced. First is to cut GHG emissions by at least 20% (and aiming for 30%) by 2030; and by at least 70% (whilst targeting for 80%) by 2040, compared to the 2008 baseline. The IMO 2023 GHG strategy also addressed a basket of “potential” mid-term measures, including technical and economic measures. A technical element is a goal-based marine fuel standard regulating the phased reduction of the marine fuel’s GHG intensity, which should consider the Well-to-Wake approach. An economic element focuses on a maritime GHG emissions pricing mechanism. Several different mechanisms, including a Cap-and-Trade system, a universal mandatory GHG levy and a sustainability and reward fund were proposed”.

Gibson commented that “it is important to note that these proposed economic measures still need to be fully determined, assessed and evaluated. One measure attracted much of the political debate. Prior to MEPC 82 taking place, France rallied 22 allies to support an introduction of a shipping emissions levy. The Financial Times reports that shortly afterwards China distributed a “diplomatic note” to developing countries, urging them to oppose a levy on shipping emissions and stronger targets for decarbonation, arguing that these goals are “unrealistic” with “significant” financial costs. Brazil, Argentina and South Africa also opposed a levy on shipping emissions”.

“Such deep divisions in opinion between member states is perhaps the main reason behind the IMO decision for the impact assessment of these economic mechanisms to be finalised by 2024 at MEPC 82 before adoption in 2025. Any economic measure will help to accelerate industry’s effort to reduce shipping’s carbon footprint, yet some are arguably more effective but costlier than others. It remains to be seen what measure will win in the end, but what is clear is that it will be challenging to reach a consensus opinion”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide