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Opening of the 80th Session of the Marine Environment Protection Committee (MEPC) at IMO headquarters in London, July 3, 2023. Photo courtesy IMO

Nations Haggle Over Targets to Cut Shipping’s Emissions

Bloomberg
Total Views: 885
July 3, 2023

By Jack Wittels (Bloomberg) —

In a grey, squat building overlooking the Thames River in London, high-level talks began Monday on how to clean up an industry that carries more than 80% of world trade — and spews more carbon dioxide into the Earth’s atmosphere each year than Germany.

Shipping’s climate impact rarely gets the same attention as planes or cars. But it’s still a major polluter, responsible for almost 3% of manmade CO2 emissions. Seaborne trade is expected to get even bigger between now and 2050, making the industry’s energy transition — or lack of — all the more important.

Run by the London-based International Maritime Organization, the global regulator, this week’s talks are part of a long and slow-moving series of international meetings about what green goalsthe industry should aim for, and how it might get there.

By the end of this week there should be a major new target, though exactly how that’s phrased is yet to be decided. A draft document seen by Bloomberg News on Friday had the industry agreeing to try and reach net zero “around” 2050.

That’s because aligning with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels isn’t just about when shipping needs to hit zero, it’s also about the emissions it racks up along the way. Last week’s draft did include “indicative checkpoints” for 2030 and 2040, but they fell short of similar proposals from the US, UK and Canada, as well as European Union nations.

That said, any kind of net zero by 2050 goal would be a step forward: international shipping’s current emissions cutting goal is only 50% by then, well short of aligning with the Paris treaty.

In the end, a target is only a target. It’s not, in itself, binding. If the industry is to actually cut back on its carbon emissions, it ultimately needs to burn less of the oil-derived fuels it relies on today. There’re lots of ways forward, the most obvious being using low or zero carbon alternatives, like green methanol. But it’s not all about new fuels: ships can also be designed more efficiently, use wind to help them move through the water, or even capture their CO2 onboard.

Transition at this scale is far from easy. The industry uses hundreds of millions of tons of fuel each year. Producing that much replacement product — or, in fact, potentially a lot more given oil’s relatively high energy density — is a massive challenge. It also has to be made available pretty much everywhere in the world. And ships have to be able to run on them.

One potential way to drive that kind of change is enforcing some kind of charge, or “levy,” on emissions. More than 20 countries backed the basic idea last month at a global finance summit in Paris — although China and the US, the world’s two largest economies, were notably absent from the list of supporters. Other nations have also previously supported the concept, as has commodity trading titan Trafigura Group, as well as the International Chamber of Shipping, a trade association which represents more than 80% of the merchant fleet.

“It looks like IMO is about to adopt some very ambitious GHG reduction targets,” said Simon Bennett, deputy secretary general at ICS. “But it’s not yet certain that governments also have the appetite to rapidly develop the radical measures, such as the levy-based Fund and Reward systemproposed by shipowners, that will be necessary to make such high levels of ambition plausible.”

Another potential approach is to start limiting the amount of greenhouse gas emissions relative to energy used on ships. EU countries have submitted documents to the IMO proposing such a measure, arguing it would give the predictability shipping companies and fuel suppliers need to invest in decarbonization.

These ideas are very much on the IMO’s table. And while no final decisions are expected at this week’s meeting, eventually the organization must take action —  or risk becoming irrelevant as others move forward. 

Large shipping companies are already making moves. A.P. Moller-Maersk A/S has ordered 25 vessels that are able to run on green methanol. Rival container shipper CMA CGM is expecting 24 bio-methanol-powered, e-methanol ready vessels to be delivered by 2027. Last year, for the first time, the majority of ships ordered (by gross tonnage) were capable of running on alternative fuel — including liquefied natural gas.

The EU has also already come up with its own rules: shipping will be included in its emissions trading scheme from next year and it’s also developed the FuelEU Maritime regulation, which requires greenhouse gas reductions relative to energy use. 

If other authorities follow the EU’s lead and create their own requirements, shipping could face a patchwork of varying regulations around the world, a potential nightmare for such a globalized industry.

That highlights the central contradiction at the heart of this week’s IMO talks. As the global regulator, it alone can create sweeping, universal rules for cleaning up shipping’s emissions. But with so many member states — and conflicting interests — agreeing on those rules is also the major challenge.

Still, the organization’s Secretary-General Kitack Lim made clear last week that the time has come to find a solution. “2023 is IMO’s year of decisive climate action,” he said.

© 2023 Bloomberg L.P

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