International Shipping

Overall, the IMO failed to set firm near and medium term 1.5°C compatible targets at its July 2023 (MEPC80) meeting. Governments only agreed to “indicative checkpoints” for 2030 and 2040 as part of a net zero target pathway. The 2030 checkpoint is not 1.5°C compatible and the net zero target is not quantifiable. Only the most ambitious end of the 2040 checkpoint falls in a 1.5°C range.

The 2030 checkpoint of at least 20% below 2008 levels (all GHGs), “striving for 30%”, is much lower than the most ambitious target proposed during negotiations early in the year (ISWG-GHG 14). Likewise, the 2040 checkpoint of at least 70% below 2008 (all GHGs), “striving for 80%”, is also not as strong as some of the proposals that were on the table. Governments did agree to a net zero target, an improvement on the previous 50% emissions reduction target, but the loose timeframe of “by or around, i.e. close to 2050” and the lack of clarity on residual emissions makes it difficult to assess.

The IMO’s 2023 Revised Strategy revoked the 2018 GHG Strategy but reaffirms the objective of peaking and declining GHG emissions as soon as possible (IMO, 2023a). While emissions are projected to plateau in the coming decade likely due to energy efficiency improvements, we see no evidence of a peak in sight, nor an eventual phase-out, as emissions are projected to continue growing to 2050.

Quantifying the IMO’s carbon intensity target is challenging as several methodological decisions remain outstanding (see 2030 targets subsection below). The choice of a 2008 baseline has the effect of making the existing targets appear more ambitious than they actually are. In that year, average ship speed and corresponding emissions were at an all-time high (ships are less efficient at faster speeds). In response to falling demand following the 2008 financial crisis, carriers reduced supply capacity by scrapping older vessels, cancelling orders for new ships and lowering ship speeds, to avoid freights rates reduction; all measures which drove emissions reductions before the IMO set its targets (Spero & Raval, 2019).

* Transport work is the amount of cargo transported and the distance sailed for a specific ship.

The Revised GHG Strategy contains two 2030 targets. It reconfirmed the carbon intensity reduction target of 40%, first agreed to in 2018, and introduced a new indicative checkpoint of at least 20%, striving for 30% emissions reductions below 2008 levels, as part of a pathway to net zero.

2030 carbon intensity target
The IMO has set a 2030 carbon intensity target of at least 40% below 2008 levels by 2030. However, it has still not agreed on how to define ‘carbon intensity’ in terms of transport work despite having this on its agenda since mid-2021. This lack of clarity makes quantifying the target challenging.

Methodology
There are two ways to define carbon intensity: based on either supply (Annual Efficiency Ratio – AER)^[1] or demand (Energy Efficiency Operational Indicator – EEOI).^[2] Analysis suggests that the supply-based (i.e. AER) approach would be more stringent and lead to fewer emissions in 2030 (ICCT, 2021). It is also more compatible with the IMO's current reporting structure: it would take years to develop and implement something capable of producing the necessary data for a demand side (EEOI) approach (ICCT, 2021). The supply side (AER) approach is widely used for most fleet calculations, while the EEOI is still voluntary.

The IMO’s adoption of a 2% yearly carbon intensity reduction between 2019 - 2039, is aligned with the supply based (AER) approach, yet an explicit decision on this definitional issue remains outstanding and will unlikely be addressed until the next IMO GHG Study. Regardless of the method adopted, quantifying emission levels is highly dependent on assumptions made about future demand in the sector.

In 2020, the IMO released its latest GHG inventory (the "Fourth GHG Study"). Two methodological approaches are presented for reporting historical emissions – one based on the type of vessel and the other on the voyage of the ship. Historically, the IMO used the vessel-based approach, but there is concern that this overestimates international shipping emissions. The voyage-based approach is more in line with IPCC guidelines. It is unclear which method the IMO would use to assess compliance with its targets.

Gas coverage
The 2030 carbon intensity target covers CO₂ emissions only and excludes methane emissions. This is problematic, as methane emissions are on the rise in the shipping sector due to a shift to LNG. The Fourth GHG Study estimated methane contributed to 3% of shippings GHG emissions, but between 2012 and 2018, emissions have risen by 150%, with the expansion of LNG vessels in fleets (IMO, 2020).

Quantification
We estimate the carbon intensity target equates to a 2030 emissions level of 583-603 MtCO₂. We adopted the voyage-based approach to ensure consistency with our country analysis, which is based on GHG emissions reporting using IPCC guidelines. For more detail on our methods, see the Assumptions tab.

2030 ‘Indicative Checkpoint’
The IMO established ‘indicative checkpoints’ for 2030 and 2040 as part of its net zero commitment. For 2030, it set an emission reduction goal of at least 20% below 2008 levels for all greenhouse gases, but will ‘strive for’ a 30% reduction.

We estimated this goal equates to about 637 MtCO₂e for the 20% reduction level and 557 MtCO₂e for the 30% target for all GHG emissions, using the voyage-based approach on a Tank-to-Wake basis. Applying the same reduction levels to CO₂ emissions only, we quantify the new 2030 emissions reduction goals to result in 543-621 MtCO₂.

Earlier proposals
In the negotiations leading up to MEPC80, proposals for stronger targets were put forward but governments ultimately adopted weaker ones. For 2030, some proposed an emissions reduction target, covering all GHGs, of 37% below 2008 levels. This target would have equated to an emissions level of 501 MtCO₂e for all GHGs or 489MtCO₂ for CO₂ only (assuming a uniform reduction level across all gases and a voyage-based approach). Other governments support no change in the 2030 target: an untenable position given the inadequacy of current ambition.

2030 Rating
The CAT rates the 2030 indicative checkpoint as ‘Insufficient’, indicating that the target is consistent with limiting warming to between 2°C and 3°C for 2030, if all other sectors were to follow the same approach as international shipping.

The 20% indicative checkpoint of 621 MtCO₂ is above our estimate for the carbon intensity target (583-603 MtCO₂). So while adopting this goal has reduced some uncertainty in the target quantification, it does nothing to drive further emission reductions beyond what was already agreed. Only the 30% indicative checkpoint will drive further emission cuts. CAT ratings are based on the top end of a target range and so in this case are based on the 20% checkpoint. The 30% reduction falls in the Almost sufficient rating range.

To reach 1.5°C compatibility, international shipping would need to reduce its CO₂ emissions by at least 47% below 2008 levels (our methods do not cover all GHG emissions).

The shipping sector is not on track to meet any of its 2030 targets. Current policies are projected to be well above the 20% checkpoint, let alone the IMO’s more ambitious goals.

[1] The amount of CO₂ per capacity of carriage (deadweight) per nautical mile (gCO₂/dwt-nm).
[2] The amount of CO₂ emitted per each tonne of goods per nautical mile (gCO₂/t-nm).

The IMO adopted an “indicative checkpoint” goal of reducing GHG emissions by at least 70% by 2040 compared to 2008 levels and “striving for 80%”. We estimate that these targets equate to about 239 MtCO₂e (70%) and 159 MtCO₂e (80%) for all GHG emissions, using the voyage-based approach. Assuming comparable cuts for CO₂ emissions only, it results in a CO₂ emissions level of 233 MtCO₂ (70%) and 155 MtCO₂ (80%). A 70% CO₂ reduction is ‘Almost Sufficient’, while the 80% reduction is consistent with our 1.5°C compatible range.

Several options were proposed at MEPC80, ranging from further delaying target setting for 2040 to emission reduction targets between 50% and 96% below 2008 levels for all GHG emissions. A reduction target of 96% would have been well within our 1.5°C range.

The IMO’s revised strategy now has a single long-term target: net zero GHG emissions “by or around, i.e. close to 2050” and pursing efforts to phasing GHG emissions.

We could not quantify the net zero GHG target due to limited information from the IMO on what residual emission are expected to remain by or beyond 2050. Quantification of the target is also hindered by the lack of a definition on the deadline “by or around” 2050, with no clarity as to when “around” may be. Any residual emissions from international shipping would need to be counterbalanced by actions in carbon dioxide removal (CDR).

Several target proposals were put forward at MEPC80, ranging from the stronger zero or phasing out of emissions by 2050 (which would mean 100% emission reduction) to net zero by 2050 and net zero between 2050 and 2100. The resulting outcome was a compromise between the latter two options.

In any event, the sector is far off track anything that resembles zero in 2050. Our current policy projection estimates that emissions will be 12-26% higher than today’s levels by that time.

Note: Our graphs display the CO₂ amounts only, as our rating system is based on CO₂ emissions only.

Previous targets only considered emissions based on a ‘Tank-to-Wake’ approach (meaning those emissions associated with the downstream combustion of fossil fuels to power the ship). Following agreement at MEPC80, the scope for targets and future measures has been expanded to cover lifecycle GHG emissions (Well-to-Wake) in line with the adopted Guidelines on Life Cycle GHG Intensity of Marine Fuels’ (Resolution MEPC.376(80)).

In other words, to also include emissions associated with the upstream production of fossil fuels (the ‘well’ portion) and not just combustion. The new targets include methane emissions, which is an improvement given previous efforts did not include methane emissions from LNG-fueled transports. These are quite substantial, as some of the LNG evaporates and is vented during the voyage.

While the targets will now cover a full Well-to-Wake life cycle and GHG scope (which should ensure that such methane emissions are covered), it is still uncertain how this will be implemented. For the time being only the monitoring and reporting of GHG emissions previously not recorded by the Data Collection System (DCS) will commence, while measures to effectively cut life cycle GHG emissions by measures of an “economic instrument” and a global fuel standard are expected to come into effect by 2027.

To keep the Paris Agreement temperature goal within reach, it is imperative that governments take responsibility for emissions from international shipping by elevating ambition at the IMO to achieve global consensus on emission reduction regulations.

Governments need to complement these efforts domestically, to actively work to bring their domestic - and indirectly international - shipping emissions to zero. Currently, only one of the 40 countries plus the EU that the CAT analyses explicitly includes international emissions in its national net zero target.

Domestic action is important where first-movers, such as the EU, can create the enabling conditions (such as public and private finance, R&D, fuel production etc) that will have positive spillover implications for international shipping and third countries – but domestic policies would need to be designed appropriately to also consider an equitable transition.

A key point here is that domestic action is required – especially for first movers to pave the way for advancing the development of new technological solutions – but should not jeopardise action at global level through the IMO by risking creating a patchwork of incompatible regional regulatory mechanisms. This limits the full scope of addressing 100% of international shipping emissions and risks leaving vulnerable countries (including SIDS and LDCs) out of the decarbonisation discussion and access to finance.

For countries that the CAT analyses, we track whether international shipping has been included in their net zero targets. This information is available on individual country pages.