IMO must encourage shipping to adopt zero-emission fuels within this decade – GMF

The IMO's "basket of mid-term measures" must prioritise early adoption of zero-emission fuels to achieve a shipping sector-wide transition by 2040, a Global Maritime Forum (GMF) report notes.

PHOTO: Street view of International Maritime Organization building in Lambeth, London, England. Getty Images

A new report by GMF's Getting to Zero Coalition has analysed the mid-term measures that will be discussed at the 81st session of the IMO’s Marine Environment Protection Committee (MEPC 81). The IMO should focus on a “two-speed energy transition” by incentivising shipping to gradually move towards zero-emission fuels within this decade, the authors suggest.

“The two-speed transition allows for a more gradual ramp-up of SZEF [scalable zero-emission fuels] use, which has the potential to use the learnings from early adopters to help reduce costs, develop skills and labour force, and incrementally develop the new energy supply chains and infrastructure,” the report says.

“It would also potentially reduce the risk of widely-used but short-lived transition technologies later leading to stranded assets.”

The IMO is expected to adopt a GHG fuel standard and a carbon levy as part of its mid-term measures in 2025, with implementation likely in 2027. The authors have now recommended strengthening these mid-term measures by adding:

• Well-to-wake GHG intensity limits (emissions per unit of energy used) through a GHG fuel standard
• GHG pricing combined with revenue disbursement

Revenues from GHG pricing could subsidise early uptake of fuels with zero-emission potential, the organisation says.

“In the early stage of the transition, when only a small volume of SZEF is in use and therefore the total revenue needed to subsidise its use is small, prices of around $40 per tonne [$40/mt] of GHG emissions may be sufficient. However, to increase uptake towards 2040, even with reductions in SZEF production costs, the GHG price will need to increase to create sufficient incentives, particularly in combination with subsidies and falling SZEF prices,” GMF says.

It argues that mechanisms such as "flexible compliance units" and "remedial units" in the GHG fuel standard design, and a pooling mechanism, will only serve to complicate the regulatory regime. These mechanisms could inadvertently risk slowing down the adoption of zero-emission fuels.

“The mechanisms do not in themselves create an incentive for early SZEF adoption, promote a two-speed energy transition, or remove the need for this to be provided elsewhere in the ‘basket of measures’,” GMF argues.

The EU bloc has proposed including "flexible compliance units" and "remedial units" as part of the IMO’s GHG fuel standard:

• An over-compliant ship will get flexible compliance units from an IMO registry, while an under-compliant ship will have to buy these units
• If there are not enough units (a risk in the early days), an under-compliant ship will be able to buy backup units called remedial units

A pooling mechanism has been proposed by the International Chamber of Shipping (ICS), World Shipping Council (WCS) and International Bunker Industry Association (IBIA):

• Pooling allows under-compliant ships to be pooled together with one or more over-compliant ship(s). This would work either within fleets or between fleets 

“Flexibility and pooling may be useful for managing an uneven geographical energy transition, e.g. for different availability or competitiveness of fuels in different parts of the world. However, this upside needs to be carefully considered against the downside of added complexity and uncertainty of the zero-emission business case,” GMF writes in the report.

By Konica Bhatt

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