International Shipping

Despite being a ‘hard to abate’ sector, many tools and know-how to decarbonise the shipping sector are becoming increasing more prevalent, but further development is needed in policy and finance to achieve the necessary enabling conditions to spearhead accelerated uptake in fuel production, port infrastructure and storage and on-board technologies (GMF, 2022).

To achieve full decarbonisation, the shipping sector will need to adopt alternative fuels, otherwise known as scalable zero emission fuels (SZEFs), to power vessels. This is the most important mitigation measure. To date, the main approach implemented to reduce GHG emissions has been around improving the energy efficiency of ships to reduce carbon intensity (OECD, 2018) – however this has not resulted in any meaningful emission reductions (Comer & Sathiamoorthy, 2022)

Some of the key measures are considered here.

To achieve full decarbonisation, the shipping sector will need to adopt alternative fuels, otherwise known as scalable zero emission fuels (SZEFs), to power vessels. As of 2022, the marine fuel mix has been made up almost entirely of fossil fuels, with some small introduction of biofuels (Boehm et al., 2022).

Scalable Zero Emissions fuels typically refer to hydrogen, ammonia, e-methanol and electric battery – they are considered zero emission fuels only if they are derived from renewable energy. In the case of methanol, some CO₂ is released in production process and therefore some CO₂ capture is required to make the fuel carbon neutral (Baresic, Rojon, et al., 2022). Currently, development of SZEF is still in its infancy. In order to decarbonise internationally shipping, the share of SZEF in the fuel mix will need to reach 5% by 2030, 27% by 2036 and 100% by 2050 (Osterkamp et al., 2021).

Unlocking the potential for the uptake of SZEF will require levering production of SZEF and Research and Development (R&D) for fuel technologies for the use of SZEF. On the production side, global traction for scaling up hydrogen, ammonia and methanol has been growing – however further action needs to be directed towards ensuring that production is sourced from renewable energy sources. Progress is being made in the number and diversity of pilot projects to scale up hydrogen, ammonia and methanol in on-board ship technology (121), bunkering infrastructure (36) and fuel production (81) (Baresic, Palmer, et al., 2022).

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 (Comer et al., 2018; Lloyd’s Register & UMAS, 2019).

LNG is not a transition fuel
In the shipping sector, LNG is often falsely presented as a transition fuel, and investments in LNG infrastructure are on the rise. As of 2022, the number of ships on order designed to run on LNG or LPG totalled 474 vessels, while the orders for hydrogen and methanol driven vessels were much lower at 3 and 5 respectively (DNV, 2022).

Studies have shown that LNG would actually exacerbate shipping’s climate impacts when taking in account all greenhouse gases (Pavlenko et al., 2020; Transport & Environment, 2019). LNG is simply not a viable option to mitigate international shipping’s climate impact (Pavlenko et al., 2020). 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., 2020; Transport & Environment, 2019).

HFO ban impacts are minimal without further action
In June 2021, the IMO approved a ban of HFO in the Arctic through amendments to MARPOL Annex; VI, however, the Arctic nations’ own ships are exempted from the ban for another five years (Roy & Comer, 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 low-carbon alternative fuels such as biofuels and fuel cells are considered, which could potentially serve as an alternative to HFO in the Arctic (Roy & Comer, 2017).

Market-based measures (MBMs) will be an important policy tool to influence the demand side uptake of scalable zero emissions fuels by applying a price of emissions and effectively making Scalable Zero Emission Fuels (SZEFs) cost competitive with fossil fuels. Several proposals have been put forward by IMO member states for different forms of MBMs. The main MBMs include a global GHG levy or global Emissions Trading Scheme (similar to that of the EU ETS) (Psaraftis et al., 2021). Carbon pricing measures taken at a global level under a full decarbonisation scenario could mobilise USD 40 to 80bn/yr or USD 1-2tn, cumulatively, by 2050 (Baresic, Palmer, et al., 2022).

Several variations of market-based approaches have been put forward by governments. The Marshall Islands, together with the Solomon Islands, have long been proponents for the imposition of a greenhouse gas levy on all shipping emissions, with at a fixed price of USD 100/tCO₂, ratcheted up every five years.

Following positive momentum at the IMO's MEPC79 Session (December 2022), it is likely that some form of a market-based measure will be agreed to and adopted at MEPC 80 in July 2023 (Smith & Shaw, 2023a). If and when a global market-based measures is adopted, then the EU maritime ETS regulation has a provision to establish a mechanism to make the EU maritime ETS compatible with whatever global MBM is adopted.

There are several operational and technological options to reduce emissions in existence. 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).