International Shipping

Critically Insufficient4°C+ World

NDCs with this rating fall well outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would exceed 4°C. For sectors, the rating indicates that the target is consistent with warming of greater than 4°C if all other sectors were to follow the same approach.

Highly insufficient< 4°C World

NDCs with this rating fall outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach between 3°C and 4°C. For sectors, the rating indicates that the target is consistent with warming between 3°C and 4°C if all other sectors were to follow the same approach.

Insufficient< 3°C World

NDCs with this rating are in the least stringent part of a country’s “fair share” range and not consistent with holding warming below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach over 2°C and up to 3°C. For sectors, the rating indicates that the target is consistent with warming over 2°C and up to 3°C if all other sectors were to follow the same approach.

2°C Compatible< 2°C World

NDCs with this rating are consistent with the 2009 Copenhagen 2°C goal and therefore fall within a country’s “fair share” range, but are not fully consistent with the Paris Agreement long term temperature goal. If all government NDCs were in this range, warming could be held below, but not well below, 2°C and still be too high to be consistent with the Paris Agreement 1.5°C limit. For sectors, the rating indicates that the target is consistent with holding warming below, but not well below, 2°C if all other sectors were to follow the same approach.

1.5°C Paris Agreement Compatible< 1.5°C World

This rating indicates that a government’s NDCs in the most stringent part of its “fair share” range: it is consistent with the Paris Agreement’s 1.5°C limit. For sectors, the rating indicates that the target is consistent with the Paris Agreement’s 1.5°C limit.

Role model<< 1.5°C World

This rating indicates that a government’s NDC is more ambitious than what is considered a “fair” contribution: it is more than consistent with the Paris Agreement’s 1.5°C limit. No “role model” rating has been developed for the sectors.

1.5°C Compatible< 1.5°C World

Overview

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.

Transitioning Marine Fuels

Scalable Zero Emissions Fuels
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, bunkering infrastructure and fuel production (Baresic & Palmer, 2022).

The 2023 Revised Strategy sets a target of 5%, striving for 10%, of zero and “near zero” emission fuels and technologies to be used in vessels by 2030. However, the inclusion of “near zero” fuels leaves the door open for fuels such as LNG to outpace zero emission alternatives. Most of the shipping industry are currently favouring LNG as a “transition fuel” given the commercial availability of the technology. While some zero emission alternatives are being manufactured further effort and finances are needed to scale up production. Continuing to push for LNG and other fossil fuels will further delay the necessary investments and scaling up of alternative zero emission fuels and technologies in shipping.

False Solutions: 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 because of the large amounts of methane that escapes into the atmosphere during the LNG combustion and storage process (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 instruments

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, 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.

Despite the positive momentum at the IMO's MEPC79 Session (December 2022), it was highly anticipated that some form of market-based measure would emerge from MEPC80 in July 2023 (Smith & Shaw, 2023). Disappointingly, this failed to materialise at MEPC80 and will instead be considered for future meetings scheduled for 2025, with likely entry into force in 2027. Delaying such a decision will make it harder for zero emission fuels to become cost competitive with fossil fuels. This further reduces the chances of achieving the already insufficient 2030 targets. When formulating its maritime ETS, the EU made a provision to make its system compatible with a global market-based measure if adopted at the IMO.

Operational and Technological Measures

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).