Can shipping surpass the IMO’s GHG reduction targets?

Author Erik Hoffmann, Market Reporter; George Henry, Reporter

In the wake of the UN Climate Summit and worldwide protests, rapid action is needed to tackle the growing climate and ecological emergency.

Teenage activist Greta Thunberg says it is necessary to transform anger into action over climate change, and with calls for action getting ever louder, the shipping industry is looking to see if it can cut greenhouse gas (GHG) emissions by more than half by 2050.

But will the shipping industry be able to reduce such emissions substantially over the coming decades? And how will investments be made in zero emissions vessels (ZEVs), given the fragile economics that sometimes affect the shipping sector? Some shipowners possess loan-to-value ratios in excess of 100pc, discouraging banks from funding future investments.

Cutting sulphur emissions is the current focus for many involved in the world of international shipping, with the limit of 3.5pc sulphur content in marine fuel being burned moving to 0.5pc from January 2020, as agreed by the International Maritime Organisation (IMO).

But it is GHG emissions and their effect on climate change that grab most of the headlines, and once the sulphur cap is in force this is likely to be where most of the focus on shipping emission cuts is likely to be.

Shipping currently contributes 2.8pc of GHG emissions, and this is growing. The IMO has agreed to reduce emissions by 50pc by 2050, but concrete proposals to achieve this remain thin on the ground.

The IMO in April 2018 set out a vision to phase out all GHG emissions by the end of the century, with its approach being to reduce the carbon intensity of ships through an Energy Efficiency Design Index (EEDI) for new ships. The aim is to reduce the carbon intensity of international shipping, by reducing CO2 emissions on average by at least 40pc by 2030 and 70pc by 2050. But shipping emissions of CO2 are currently unregulated.

Others, such as the International Chamber of Shipping, want to go further and faster than the IMO’s agreed ambition.

A coalition of 88 companies — endorsed by 13 countries, including the UK, Denmark and South Korea — has committed to creating commercially viable ZEVs by 2030. The Getting to Zero Coalition has set the goal of ZEVs coming into service by 2030, with the endgame of decarbonising shipping.

According to the Intergovernmental Panel on Climate Change (IPCC), full decarbonisation is needed by 2050, requiring a switch to low and eventually zero-carbon fuel.

The Getting to Zero Coalition has identified the first step, researching new technologies and innovating existing practices in order to operate ZEVs as soon as possible. The end goal is to make commercially viable ZEVs — capable of travelling along deep-sea trade routes — by 2030.

Other ways to start reducing emissions have also been proposed. Shipping association Bimco proposed that limits should be placed on a ship’s engine power, in an effort to reduce GHG emissions.

Maersk fully supported the proposal, stating that power limits will “help deliver on the CO2 reduction targets set by the IMO” and incentivise innovation to “truly decarbonise the shipping industry”.

While there have been many ideas on what can be done to reduce GHGs in shipping, there have been few suggestions on how these ideas can be applied and how they will be paid for.

To combat this, the Getting to Zero Coalition has created a roadmap to the year 2023 that operates in two phases. From 2019-20 the coalition will seek new members, and gather expert advice on technologies, economics, financing and policies to then pass on to its members. From 2021-23, coalition partners will work together to create technology solutions, the supply chains to maintain them and policies to enable the “testing, demonstration and [eventual] scaling” of ZEVs or other zero-carbon solutions.

The most pressing challenge the Getting to Zero Coalition faces lies on the land, not at sea. Even if ZEVs become technologically and commercially viable, if there is no infrastructure to support them — or policies to encourage them — it would be impossible to roll out this policy across the industry. But the coalition expects that by 2027 policies will have changed, which would encourage the use of ZEVs and further investment in them.

With the next climate summit due to meet in Glasgow next year, there is very little time to enact the types of policies needed internationally to encourage ZEVs and other zero-carbon solutions. Although the Getting to Zero Coalition’s ambitions have been described as a “moonshot” by some, perhaps this type of thinking may be required by world leaders if they want to help ensure a zero-carbon shipping industry.

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