International Shipping

After decades of slow paced and ineffective action, the International Maritime Organization (IMO) has an opportunity to right its climate ship at its July 2023 meeting, where both stronger targets and measures to help achieve them are on the table. The sector is still a long way off meeting its existing, insufficient, 2030 target and its 2050 goals are even further off track. It also appears to be, worryingly, working on the basis that liquefied natural gas (LNG) is a "bridging fuel" on the way to decarbonising the sector, but this is a false notion. In fact, LNG may lead to increased emissions from the shipping sector. While one region - the EU - has begun making progress by introducing new regulations, without a global regime this risks action in the shipping sector becoming fragmented. Right now, without further action being agreed at the upcoming IMO meeting, shipping emissions are set to continue rising through 2050. The CAT rates the IMO’s overall ambition as “Highly insufficient”.

In early July, the IMO’s Marine Environment Protection Committee (MEPC) will meet to discuss revisions to the organisation’s GHG strategy (MEPC80). Four critical issues to be decided are:

• Adoption of stronger targets for 2030 and 2050 and an interim target for 2040;
• Policy measures to achieve the emissions cuts needed for those targets, including a global levy on global GHG emissions (or another market-based measure to price carbon) and some form of a fuel standard;
• Approach to calculate lifecycle GHG emissions of international shipping’s energy use; and
• Commitment to ensure a just and equitable transition for seafarers and vulnerable countries.

Some of the proposed 2050 target options are likely to be 1.5°C compatible, but the 2030 target proposals still need work. Stronger targets are only as good as the policy measures that can make them happen: central to the potential success of MEPC80 would be ensuring that all emissions are considered (i.e full GHG lifecycle emissions), and a global fuel standard and a robust global market-based measure on shipping are adopted. 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.

Urgent action is 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 like 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 existing, insufficient 2030 target and its 2050 goals are even further off track.

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.

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 into equity 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.

At a technical inter-sessional working group meeting (ISWG-GHG 14) in March 2023, governments were split between wanting to introduce an absolute GHG target of a 37% reduction below 2008 levels by 2030 - or no new target at all.

A large number of IMO member states supported a zero or net zero GHG target by 2050, as opposed to the 50% reduction target in the IMO's 2018 Initial GHG Strategy. Governments also supported increasing the scope to cover all GHGs as defined by the Kyoto Protocol, rather than only CO₂ emissions (Smith & Shaw, 2023a). However, a group of twelve countries including China, Brazil, Saudi Arabia, UAE, India and South Africa, are pushing for a less ambitious target to “aim for net zero GHG emissions preferably around mid-century and before the end of this century” (Angola et al., 2023).

Countries are expected to adopt revised targets at an upcoming meeting in July 2023, but there has been little convergence on target levels (Smith & Shaw, 2023a).

Since the IMO has been charged to take care of international shipping emissions in 1997, policy action at the global level 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 evaluating 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, including CO₂, 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 GHG 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.

In light of the EU's regional approach to have a maritime ETS, if the IMO cannot agree on a global market-based measure, 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).

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.