Bioblends are the best short-term option for ships to comply with International Maritime Organization (IMO) regulations set to be approved in October, according to Andrea Lucchesi, professor at the University of Sao Paulo and an expert on the impact of maritime regulations. Lucchesi, who presented research on the potential economic impacts of the IMO-approved carbon pricing mechanism at the Marine Environment Protection Committee (MEPC) 83 in April, spoke to Argus about the recent IMO agreement and the future of decarbonization in shipping. Edited highlights follow.
Under the current IMO carbon pricing mechanism, which fuel emerges as the main solution for decarbonization?
New studies are being conducted in this regard. As the details of the mechanism will still be defined in October, there is no clarity regarding the next bunker fuels, especially because we cannot just consider the decarbonization potential, but also the cost of port infrastructure and vessel adaptation. Also, the ports will adapt very slowly.
What I can say is that the first fuel to be adopted in the transition phase will be the marine biofuel blends, because of their economic viability, emissions reduction potential and supply availability.
Is the agreement, as it progressed in MEPC 83, economically and environmentally successful?
The agreement approved on 11 April is historic. It is the result of more than seven years of negotiation and is the first to regulate an entire sector of the economy at the international level.
Therefore, we consider the agreement a success, even though it has been modified from its initial design, and it is sufficient to achieve the goal of decarbonizing the maritime sector by 2050.
Have the GHG reduction targets been made too flexible over the many years of debate?
The study I conducted for the IMO aimed to measure the impact of this pricing mechanism, because if we try to accelerate decarbonization beyond market capacity, we will see very strong consequences, especially in developing countries. A more rigid goal is not appropriate.
Do you believe the agreement will be approved in October as it was designed, despite the US opposing the measure?
Yes. The US will try to influence the matter, but there is considerable support for the measures. They have already been widely debated in recent years.
Is the mechanism, as it progressed in the April meetings, economically viable for the entire maritime chain to adapt?
The agreement will impact countries very differently. We were careful to assess the impacts on food inflation and the potential impact on malnutrition in developing countries. There will be socioeconomic impacts, so the measures needed to be gradual, as they will be.
For example, there needs to be time for ships to be retrofitted, investment in technical measures to increase efficiency, and fuel replacement. Another point is that port technology needs to be adapted.
Therefore, the mechanism should begin pricing in 2028, with reduction targets ranging from a modest 4-17pc for the first year. In any case, the sector will have to adapt, because the agreement will be effective in punishing those who do not comply. This agreement will work. The IMO is an institution with the capacity to effectively monitor and punish, and there are mechanisms in place to do so.
How much is expected to be raised from the carbon pricing?
The revenue generation potential, as it stands today, is $1bn/yr in the initial years, with a growth trend in subsequent years.
This revenue is intended to mitigate the socioeconomic impacts of the mechanism on small island nations and developing countries.
