Three years after confirming a greenhouse gas (GHG) emissions reduction strategy, IMO has adopted its first mandatory measures to back up that plan by requiring cuts in the carbon intensity of ships.
The IMO-approved guidelines set a carbon intensity reduction of 2% each year between 2023 and 2026. Performance against this target is used to provide each ship its rating, A to E, with ‘A’ being the best. The annual target is to be reviewed by IMO no later than 1 January 2026. This suggests that the real work on emissions will be done in the second half of the decade and beyond.
While IMO Secretary-General Kitack Lim said the new measures would “lead shipping on the right path towards decarbonisation,” they don’t appear to take shipping very far on the journey. In fact, IMO has kicked the can down the road on decarbonisation.
To meet IMO’s targets of a 40% reduction in GHG emissions by 2030 and a 50% reduction by 2050 as compared with 2008 levels, a stronger approach similar to the IMO 2020 0.50% global sulphur cap would have been welcomed. Despite misgivings by many, the shipping industry has done quite well in complying with the sulphur cap, investing in exhaust gas cleaning system technology, burning VLSFO or opting for LNG as a fuel.
Among those pushing for stronger action by IMO were the US and EU, which wanted carbon intensity reductions set at a reported 22% by 2026 compared to 2019, and for specific targets between 2027 and 2030.
From the shipowner’s perspective, GHG emissions reductions and regulations in general are best handled on an international level by IMO, instead of locally or regionally, to keep a level playing field. The reality, however, is that this is not the case – just think of the US regulations developed for ballast water management or the unilateral action taken by the US Congress following the catastrophic oil spill by Exxon Valdez. The Oil Pollution Act of 1990 pushed requirements for double-hulls on tankers, something that was not taken up by IMO until Marpol, Annex I was amended in 1992.
“Among those pushing for stronger action by IMO were the US and EU, which wanted carbon intensity reductions set at a reported 22%”
Shipowners can expect more aggressive action on GHG emissions reductions to come out of the EU this July, when legislators meet in Brussels to consider including shipping in its carbon emissions trading system (ETS).
In the EU ETS, ships operating within Europe would be required to pay for their carbon emissions. These proceeds would be used to support the development of the infrastructure for cleaner alternative fuels.
Created in 2005, the EU ETS works on the ’cap and trade’ principle, which sets the total amount of GHG emissions that can be emitted by the power sector, manufacturing, airlines and others covered by the scheme. Over time, the cap is reduced, lowering total emissions.
Within the cap, organisations can buy and trade emissions allowances to cover their emissions. Because there are a limited number of allowances, the more one pollutes the more expensive it is. If your allowances do not meet your emissions levels, your organisation is fined.
Conversely, those organisations that are able to reduce their emissions to below their allowances are rewarded, since they can keep or sell them.
Given the Biden Administration’s commitment to cut GHG emissions by 50% by 2030 as compared with 2005 levels, it’s not hard to imagine the US joining the EU in taking a tougher stance on international shipping emissions. Shipowners need to get out in front on GHG emissions, and it’s good to see the unprecedented level of collaborative efforts among a broad coalition of marine industry stakeholders. The only way shipping is going to meet the challenge of decarbonisation is together.