International Shipping

The International Maritime Organization's revised greenhouse gas strategy will only deliver limited improvements on its predecessor, and while decisions made at its July 2023 Marine Environment Protection Committee (MEPC80) meeting made some progress, the sector remains far off track toward either net zero or a 1.5˚C pathway, and is still rated "Highly insufficient".

With a new “indicative checkpoint” for 2040 and a net zero target of "by or around 2050", the IMO has made some progress on objective setting. It also set an 'indicative checkpoint' for 2030. While this new emissions reduction goal reduces some of the uncertainty around the 2030 target emissions level, it will only drive further emission reductions, compared to the existing carbon intensity target, if the most ambitions end (a 30% reduction) is met.

Despite numerous proposals put on the table, the meeting did not adopt any concrete policy measures for a market-based mechanism nor a global fuel standard. Instead, it decided to postpone adoption to beyond 2025, further delaying the action desperately needed this decade. The meeting adopted a new sustainable fuel and technology mandate, but it still leaves the door open for LNG loopholes. LNG is not a "bridging fuel" towards decarbonising the sector: indeed it may lead to increased emissions in the shipping sector.

The main outcomes of the July 2023 MEPC80 meeting were:

• A net zero target for around 2050 with ‘indicative checkpoint’ emission reduction goals for 2030 and 2040;
• Delaying policy measures to achieve the emissions cuts needed by means of a technical and a economic mechanism in some form of market-based measures and marine fuel GHG standard;
• A new target for the sector to be using 5-10% of zero and near-zero emissions fuel by 2030;
• Expanding the scope of targets and future measures to full lifecycle GHG emissions and adopting Life Cycle Assessment guidelines; and
• Consideration of just and equitable transition needs for seafarers and vulnerable countries in the formulation of measures.

While the IMO strengthened its long term target to ‘net zero’ "by or around" 2050 (from a 50% reduction below 2008 levels by 2050), there is still uncertainty around what this means. With the vague deadline and no indication of what the remaining level of emissions should be in 2050, it is not possible to quantify. The new 2030 indicative goal still needs work as it will only drive further emission reductions, compared to the existing 2030 carbon intensity target if the IMO achieves the higher level it is ‘striving’ for.

Stronger targets are only as good as the policy measures that can make them happen: central to the much needed success of MEPC80 was the adoption of a global fuel standard and a robust global market-based measure on shipping. Instead, the decision was made to unnecessarily explore these options further, and delay the decision to 2025, with implementation even later. This will severely hamper the much-needed action to drive the uptake of zero emission fuels this decade. A market-based measure would put a price on shipping emissions, make alternative zero emission fuels cost-competitive and help generate the finance required to support an equitable transition in developing countries. On a more positive note, the IMO did agree to ensure that all emissions are considered (i.e full GHG lifecycle emissions).

Urgent action is still needed as the sector shows no signs of peaking emissions, let alone decarbonising entirely. New historical emissions data reveal that the COVID pandemic had a limited impact, and after a slight dip in emissions in 2020, CO₂ emissions began rising again in 2021, and without further policy action, they are likely to continue to do so right through to 2050.

Energy efficiency measures that came into effect at the beginning of the year are likely to reduce CO₂ emissions in the near-term only, but at the expense of driving up overall GHG emissions as operators shift to LNG use (with its high methane emissions). The sector is not on track to meet its insufficient 2030 targets and is even further off track to achieve net zero emissions.

While action at IMO/international level has been slow, at a regional level, the EU has shown accelerated action, recently adopting several regulations addressing either maritime emissions or facilities available at ports to aid the use of low or zero-carbon fuels. Given the lack of meaningful outcomes at MEPC80, the EU ETS and FuelEU Maritime regulations will still be the only market-based measures and fuel standards being implemented in the near term.

To decarbonise the shipping sector, it is imperative that governments not only increase their ambition at the global level through the IMO, but back this up with domestic action. This means, for example, including shipping in domestic targets, while first movers need to address the knowledge, administrative and technological barriers to scaling up zero emission fuels and technologies. To ensure an equitable transition, domestic actions by first movers should also take equity into consideration in their policies and decisions to ensure vulnerable and developing countries are not left behind, particularly around finance, technology transfer and capacity building. One mechanism that can be used to facilitate this is Green Shipping Corridors.

Climate action at the global level by countries through the IMO has been neither fast enough nor effective at achieving the necessary emission reductions from international shipping. While keeping to the agreed schedule of actions under the Initial GHG Strategy, in 2020 and 2022, the IMO failed to adopt any new measures at its MEPC sessions. New energy efficiency measures for existing ships were adopted in 2021. The latest Carbon Intensity Indicator (CII) and the Energy Efficiency Existing Ship Index (EEXI) require ship owners to improve ship energy efficiency, but set the bar low enough that most ships were already in compliance due to speed optimisation tactics.

In 2023, the CII and the EEXI came into force, along with the Ship Energy Efficiency Management Plan (SEEMP) Part III, which will apply to existing ships (DNV, 2022). The CII is a rating scheme that evaluates the operational efficiency of existing ships, providing a rating between A and E. However, all three measures lack the stringency necessary to enable emissions reductions: in fact, they are so ineffective that policy projections incorporating the impact of the CII and EEXI result in no difference in the long term. They show all GHG emissions will continue to grow through to 2050.

Methane emissions in shipping increased by 150% between 2012 and 2018, directly corresponding to the increase in Liquefied Natural Gas (LNG) as a shipping fuel (ICCT, 2020), and this trend is projected to continue, mostly driven by an increase in ships equipped with LNG-fuelled engines.

LNG is not an option to support the transition to alternative energy sources, despite the industry's insistence that it is a bridging fuel. Studies have shown that instead of reducing emissions, adopting LNG could increase international shipping’s climate impact when the whole lifecycle of all greenhouse gases is taken into account. Investments in LNG facilities are growing and could lead to stranded assets or perpetuate a carbon “lock-in” effect as investments in ships and onshore LNG infrastructure would make it more difficult to transition to low-carbon fuel.

EU action moves forward
The EU adopted five regulations in 2023 addressing either maritime emissions or facilities available at ports to facilitate the use of low or zero-carbon fuels.

The revised EU ETS now includes international maritime emissions covering half of both incoming and outgoing international voyages, ships at berth and intra-EU voyages. The FuelEU Maritime regulation sets a binding emissions intensity reduction target per energy consumption of 6% by 2035 and 75% by 2050 below 2020 levels.

While the EU's initiative could put pressure on others to elevate ambition in the sector, some elements of the new EU regulations allow for the uptake of so-called "low carbon" fossil fuels (such as LNG), sending mixed signals to industry and other countries. LNG is still a fossil fuel.

With the EU's regional approach to have a maritime ETS without the IMO's July 2023 MEPC80 meeting establishing a global market-based measure, this could present new future challenges. Some experts suggest there is a risk that if other countries were to follow the EU’s lead, it could result in a patchwork of regional shipping market-based measures. This could lead to a complicated international regulatory situation: regional regulation of international emissions may have negative ramifications for vulnerable and developing countries who may be excluded from accessing any of the finance generated through a national market-based measure in another country.

While domestic action should still be taken, regulating bodies would need to incorporate equity considerations into their policy design, particularly around finance, capacity building and technology transfer. In essence, there needs to be action at all levels and, ideally, multilaterally rather than in silos. Partnerships to establish Green Shipping Corridors are one example of how domestic action in a multilateral context can be used as a mechanism to decarbonise international shipping and incorporate (GMF, 2022; Petroni & Ancygier, 2023).

In June 2023, we have updated our temperature pathways from the IPCC SR1.5 scenario database to the AR6 database to reflect the latest science. See the 1.5°C Rating tab for more details on our methodology.