Shipping's new net zero ambitions: Update on MEPC 80

Published 11 August 2023

On 7 July 2023, the IMO member states agreed to revise the IMO's original greenhouse gas strategy to significantly strengthen the shipping industry's ambitions on reaching net-zero.  In this article we look at the revisions made and their likely impact.

The Initial IMO GHG Strategy

As discussed in our previous articles (The Route To Net Zero For The Road Transport Industry and ESG Decarbonisation In The Shipping Industry) , the transport industry is facing ongoing calls to move away from fossil fuels to more sustainable energy sources. The shipping industry is no exception. In recognition of the need for the industry to decarbonise, in 2018 the IMO member states agreed the "Initial IMO Strategy on Reduction of GHG Emissions from Ships" (the Initial IMO GHG Strategy).  This set out an ambition for a 50% reduction in GHG emissions by 2050 from 2008 levels. It also included short terms measures aimed at increasing fuel efficiency and reducing carbon intensity of shipping operations, such as the CII and EEXI. These measures remain in force but will be subject to review by 2026.

The Initial Strategy included a commitment to revise the strategy within 2023.  In the intervening period, the IMO and the shipping industry has come under increasing pressure to adopt a policy that is aligned with the Paris Agreement, including the adoption of a binding commitment to reach net-zero by 2050.

The 2023 IMO GHG Strategy

In the MEPC 80 meeting in early July 2023, the IMO member states agreed to upgrade the Initial IMO GHG Strategy and to adopt the 2023 IMO GHG Strategy[1] (the 2023 Strategy).  The central plank of the 2023 Strategy is an ambition to reach net-zero by or around 2050 taking into account different national circumstances. In order to achieve this goal, and to act as way markers on the path to decarbonisation, the 2023 Strategy also includes two indicative checkpoints.  These require total well-to-wake GHG emissions to be reduced from 2008 levels by:

• 20% (striving for 30%) by 2030
• 70% (striving for 80%) by 2040

In order to incentivise the production and use of alternative fuels, and recognising that the accelerated adoption of these new fuels is essential to the achievement of the decarbonisation trajectory, the 2023 Strategy includes a new fuel mandate which requires that, by 2030, zero or near-zero emissions technologies, fuels or energy sources are to represent at least 5% (striving for 10%) of energy used by international shipping.

Further complementary policies were also adopted, including:

1. An agreement that a basket of mid-term measures is to be adopted by 2025 and to enter into force in 2027, and is to include both:
   a. A technical element, namely a marine fuel standard that provides for a phased reduction of marine fuel's GHG intensity; and
   b. An economic element, namely a maritime GHG emissions pricing mechanism.

2. Guidelines on life cycle GHG intensity of marine fuels (the LCA Guidelines). These set out methods for calculating well-to-tank and tank-to-wake GHG emissions, ensuring that the "green" credentials of new fuels are assessed not only by the emissions produced in their consumption, but also by the emissions produced in their production.

The details of the mid-term measures are subject to impact analyses and further discussion and are expected to enter into force in mid-2027. However, the proposals made by participants to the MEPC 80 meeting in relation to candidate mid-term measures included a proposal for a maritime sustainability fund and reward scheme (from the International Chamber of Shipping), a feebate mechanism (from Japan), an emissions cap and trade scheme (by Norway) and a GHG levy (by the Marshall Islands and Solomon Islands)[2].    

It is noteworthy that the 2023 Strategy also emphasises, for the first time, the need for a just and equitable transition taking into account effects on crew and on small island states, and the safety of new fuels and technologies.

Impact of the 2023 Strategy

The 2023 Strategy sends a clear signal to the whole shipping value chain that decarbonisation, and the move away from an almost exclusive reliance on fossil fuels, is a long term and unwavering commitment for the IMO.  That signal should act as an alert to those potential suppliers and purchasers of alternative zero-emissions fuels, and those who provide the infrastructure for such supply, that the time has now come to take action on investment and procurement decisions. 

Many of the targets which have been adopted, and the timelines for the adoption of further measures, have a deadline on or before 2030. 2030 is just over six years away, leaving little room for a "wait and see" approach, and requiring proactive consideration of the possible available means of achieving the required accelerated reduction in GHG emissions.  Shipowners and operators will need to consider both ways of using less fuel (i.e., fuel efficiency and operational measures such as slow steaming, application of specialised hull coatings, air lubrication, just-in-time berthing etc.) and ways of using alternative fuels or energy sources (e.g., via dual fuel engines or wind-assisted propulsion) in order to meet the checkpoints.  Increasingly, meeting the IMO's ambitions will dovetail with shipping companies' own emissions targets, and the emissions targets of their customers, giving companies a regulatory and a commercial incentive to push ahead with decarbonisation initiatives.

That is not to say that doing so will be an easy task.  The 2023 Strategy is in addition to, and not a replacement for, the bundle of measures which the EU has taken in relation to the regulation of emissions from shipping, including the FuelEUMaritime initiative (which imposes progressively more stringent requirements on reductions of GHG emissions intensity for ships operating within the EU from 2025) and the inclusion of the shipping sector in the EU Emissions Trading Scheme from 2024.  It also comes on top of national measures to control shipping emissions, including the recent announcement by the UK Government that domestic shipping will be included in the UK's emissions trading scheme from 2026. This means that ships operating in the EU and the UK will be subject to layers of regulation and will need to be able to prove compliance to all relevant authorities.

Further work will also be required at the IMO to fill in the gaps in the regulatory and safety framework surrounding alternative fuels, particularly in relation to ammonia and hydrogen, as identified by the Low Carbon GIA's recent report on regulatory mapping of marine fuels[3].

Conclusion

The 2023 Strategy represents a significant move forward in shipping's green ambitions.  It acts as both a roadmap and a signal for the industry and energy suppliers as to what is required in the near and long term in order for the industry to adopt and adapt to a zero-emissions future.  Further work is required on all sides to ensure the transition is safe and equitable, and those shipowners who have already implemented decarbonisation programmes based on the Initial Strategy will now need to revisit and revise those to ensure they are aligned with the 2023 Strategy.

We will continue to monitor developments at the IMO, and regionally, and will provide further updates on issues of note.  If you wish to receive these alerts directly, please contact the authors and we will add you to our mailing list.

[1] Resolution MEPC.377(80), available here.

[2] Further details can be found in MEPC 80 /INF.39/Add.1, UNCTAD's preliminary expert review of the technical and economic elements, and their possible combinations, of the proposals for candidate mid-term GHG reduction measures

[3] See further here