International Shipping

Although the main measures to reduce GHG emissions that have been implemented so far focus on the energy efficiency of ships, a series of measures could be implemented by ships container companies and incentivised by national policies in order to reduce their emissions to reach carbon neutrality by 2050 at the latest (OECD, 2018).

While the switch to alternative fuels - along with operational and technical measures - constitute major mitigation options to decarbonise shipping, there is significant emissions reduction potential for the sector in the trade of fossil fuel commodities. This could be driven by government commitments to decarbonising their economy and reducing their use of coal and oil. In 2018, fossil fuel commodities trade represented between 29%-31% of total trade (OECD, 2018; UNCTAD, 2019).

Demand and global consumption play a major role in shipping emissions - dry goods made up 70% of global trade in 2018 - and could be reduced through restructuring producer-consumer paths and using levers such as the circular economy. Even though the international shipping sector is mostly regulated through the IMO and its member-States, governments have a role to play in decarbonising this sector. They could consider measures such as a conditional licensing of ships allowed to operate in a port or country, applying differentiated port tariffs based on a ship’s environmental performance (already in place in the Port of Rotterdam) and setting efficiency standards for the nationally-owned fleet (OECD - ITF, 2018; OECD, 2018).

To achieve full decarbonisation, the shipping sector will need to adopt alternative fuels to power its vessels. In 2017, 82% of international shipping’s fuel consumption came from Heavy Fuel Oil (HFO - or residual fuel), an extremely polluting fuel that comes from the remnants of the oil refining (IMO - MEPC, 2020a). In 2017, around 81% of international shipping CO₂ fuel emissions were caused from the use of HFO (IMO - MEPC, 2020a).

Although Liquified Natural Gas (LNG) is often seen as a key bridging fuel and investments in LNG infrastructure are on the rise, studies have shown that it would actually exacerbate shipping’s climate impacts when taking in account all greenhouse gases (Pavlenko et al., 2020b; Transport & Environment, 2019). LNG is simply not a viable option to mitigate international shipping’s climate impact. (Pavlenko et al., 2020b). Increasing gas infrastructure investments will create stranded assets and foster carbon “lock-in” as ships and on-shore LNG infrastructure will make it more difficult to transition to low carbon fuels (Pavlenko et al., 2020b; Transport & Environment, 2019).

The IMO’s 2018 Initial Strategy contains a number of measures related to the introduction of low-carbon and zero-carbon fuels, such as the development and provision of zero-carbon or fossil-free fuels or alternative low-carbon and zero-carbon fuels implementation programmes. Unfortunately, the proposed timeline for adoption of these measures is too late to enable the sector to decarbonise by mid-century (Lloyd’s Register & UMAS, 2019; D. Rutherford & Comer, 2018).

In June 2021, the IMO approved a ban of HFO in the Arctic through draft amendments to MARPOL Annex; however, the Arctic nations’ own ships are exempted from the ban for another five years (Comer et al., 2017; The Canadian Press, 2020). Due to this and other exemptions, an estimated three quarters of ships will be eligible for exemption from the ban (Saul, 2021). As the commonly-used replacement fuels to HFO are distillate fuels (MDO and MGO), this measure won’t have a positive impact on emissions unless it considers low-carbon alternative fuels such as biofuels and fuel cells, which could potentially serve as an alternative to HFO in the Arctic (Roy & Comer, 2017).

There are some private sector initiatives focused on fuel-switching. In June 2019, Maersk, the world’s largest container shipping company, pledged to achieve net-zero emissions from operations in 2050 and to have developed commercially viable carbon neutral vessels by 2030 (MAERSK, 2019). Key area of work will consist of developing new fuels and vessel technologies and optimising networks, including building a new supply chain (MAERSK, 2019).

Several operational and technological options to reduce emissions exist. How ships and maritime transport systems operate constitute operational measures, while the properties (design of the ship, size, machinery, engine, and fuel type) constitute the technological measures.

Studies have shown that the emissions reduction potential from measures focusing on increasing machinery efficiency and wind assistance - together with optimising the ship design - could increase energy efficiency from 30% to 50% for new build ships compared to the existing fleet (Energy Transitions Commission, 2019). The highest potential for energy efficiency improvement comes from speed limits (13-24%) and cargo space utilisation (7-24%) for the technological measures, while it comes from the use of wind assistance technologies when operating the ship (5-30%) (University Maritime Advisory Services, 2019). Other operational measures include improving the ship-port interface by reducing the ship waiting time before entering a port and providing onshore power facilities while ships are in ports allowing to turn off their engine (OECD, 2018).

The IMO has historically addressed air pollutants mostly through the MARPOL Annex VI framework. In January 2020 the mandatory new limit for sulphur content of marine fuels of 0.50% came into force. This limit was previously 3.50%. Sulphur oxide (SO_x) emissions from ships’ combustion engines cause acid rain and generate fine dust, damaging human health (European Commission, 2020). A mechanism that has been introduced to control air pollutant emissions is the Emissions Control Areas (ECA) that establishes limits to minimise airborne emissions from ships. There are currently four ECAs in the world that protect densely-populated coastal regions with high ship traffic (Mao et al., 2019). While SO_x emissions have a cooling effect, studies submitted to the IMO in February 2020 show that new hybrid fuels with 0.50% sulphur content could increase black carbon emissions from 10% to 85% compared to HFO (IMO, 2019c).

The Republic of the Marshall Islands, together with the Solomon Islands, have proposed that the IMO impose a greenhouse gas levy on all shipping emissions, with an initial price of USD 100/tCO₂ , ratcheted up every five years (RNZ, 2021). These countries note that this price is below the USD 250-300/tCO₂ price need to spur rapid decarbonisation; however they say it would be a start and could help support further research and development (Kachi et al., 2019).

The EU also approved the decision to include emissions from ships over 5,000 gross tonnes in the EU-ETS by January 2022 (Iago, 2020). Additionally, the European Parliament called for the establishment of an Ocean Fund to improve energy efficiency and decarbonisation of shipping, funded by 50% of revenue from the sale of allowances to the shipping industry.