Feb-2022

Progressing decarbonisation discussions at the IMO

IMO plans to incorporate short, mid- and long-term measures in its GHG reduction strategy by 2023, including certification for low and zero carbon marine fuels.

Eddy Van Bouwel
EvBo Consult

Article Summary

At COP26 there was quite a bit of discussion on GHG emissions from international shipping. Demand for shipping has increased substantially since the turn of the century, leading to concerns of ever increasing emissions in the absence of ambitious regulations (see Figure 1) (Jasper Faber, 2020).

However, emissions from international shipping — like international aviation — are not covered by the Paris Agreement and are thus not included in the Nationally Determined Contributions (NDCs) developed by the Parties to the Paris Agreement. Emissions from international shipping are regulated by the International Maritime Organization (IMO), a United Nations body, headquartered in London, which currently has 175 member countries. GHG emissions are dealt with under Annex VI of the MARPOL Convention (The International Convention for Prevention of Pollution from ships). Boxout 1 provides some further details on IMO conventions.

What has been done already?
MARPOL Annex VI already includes several instruments that regulate energy efficiency of shipping, put in place specifically with the objective to limit GHG emissions. As a first step, in 2011, a dedicated chapter was added to Annex VI with mandatory technical and operational energy efficiency measures. The Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) requirements entered into force in January 2013. The EEDI has been most impactful, as it requires that new ships meet a minimum energy efficiency level. Reference lines have been established for different ship types and sizes based on the average efficiency of ships built between 2000 and 2010. With phase 1 starting in 2015, new ships in general had to be 10% more efficient than the reference line, with this target increasing a further 10% every five years until 2025 (see Figure 2) (IMO, 2016). Shipbuilders have been successful at developing more efficient designs, as well as using lower design speeds, such that for some sectors the 2025 target date for a 30% reduction versus the reference line has been brought forward to 2022. Figure 3 illustrates this with attained EEDI data for container vessels (IMO, 2018).

In 2016, the Marine Environment Protection Committee of the IMO agreed to the establishment of a Data Collection System (DCS) for fuel oil consumption of ships, requiring all ships above 5000 gross tonnage to collect and report fuel consumption data for each type of fuel oil they use. Some additional data has to be reported, including a proxy for transport work. This data collection process allows IMO to obtain more accurate data on fuel consumption and carbon intensity of shipping. It also may provide a solid basis for future Market Based Measures, such as a CO2 tax, an emissions trading system, or a fuel carbon standard.

As IMO’s work on GHG emissions progressed, it became clear that improving ship efficiency would not be enough to reduce emissions from international shipping sufficiently to be consistent with the UNFCCC’s target established by the Paris Agreement. Therefore, IMO embarked on the development of a comprehensive GHG reduction strategy. An initial strategy was adopted in 2018, setting three specific objectives (see Boxout 2), and laying out a plan to firm up the strategy, including short- mid- and long-term measures by 2023.

Most recently, existing ships were targeted by new requirements: the Energy Efficiency Existing Ships Index (EEXI) and the Carbon Intensity Indicator (CII). EEXI may require retrofitting energy efficiency measures and may lead to derating of a ship’s design power, in case other measures would not be sufficient. Under the CII regulation, ships will be rated in classes from A to E, with an action plan needed for ships in the lowest performance classes. Moreover, the criteria classes will follow a downward trajectory, consistent with the Initial GHG Strategy’s 40% carbon intensity reduction target by 2030.

Looking again at Figure 1 (blue line, CO2 emissions), it is clear that IMO’s actions so far already have had a significant effect on shipping emissions. Up to 2008, there was a direct correlation between global trade and shipping emissions. Since then, demand for seaborne global trade has continued to grow, while emissions remained roughly at the same level.

Current IMO discussions
At the COP26 meeting in Glasgow, observers noted a growing momentum to increase the ambition of the IMO target for international shipping towards achieving net zero by 2050. Major shipping industry organisations such as the International Chamber of Shipping are explicitly supporting the 2050 net-zero target and many expressed the hope that the momentum of COP26 would continue at IMO’s MEPC, which was held in the third week of November 2021. Carbon neutrality by 2050 was effectively discussed at the meeting, but IMO’s Member Countries have not yet reached a decision on this. However, importantly, the Committee explicitly recognised the need to strengthen the ambition of the Initial IMO GHG Strategy during its revision process and formally agreed to initiate the revision of the Initial IMO Strategy in line with the original 2023 timeline. Terms of Reference for this work have been agreed.

Life cycle approach for low and zero carbon fuels
While this outcome has been seen as a disappointment by several countries and observers following the ‘momentum’ that was generated around shipping at COP26, in my view MEPC 77 has made meaningful progress. Adjusting the 2050 target and sharpening ambition is one thing, but even more important is to work on the near-term actions that will facilitate the introduction of low and zero carbon (LC and ZC) fuels. In fact, several delegations noted during the MEPC meeting that it was more important to now focus on concrete measures than on a new resolution concerning the 2050 target.

LC and ZC fuels will be more expensive than today’s conventional fuels. As a result, there is a growing consensus that some form of Market Based Measure (MBM) establishing a carbon price will be needed to create the business case for LC and ZC technologies and make their use economically attractive compared to conventional high carbon footprint fuels.

Regardless of which MBM will eventually be selected, a sound methodology for assessing the well-to-propeller GHG footprint of fuels will be required. MEPC has already started work on this topic. The methodology should include default values for different fuels and their manufacturing pathways, covering today’s conventional fossil fuels as well as LC and ZC fuels. In addition, there should be an option to establish a fuel’s GHG footprint on the basis of certified actual data. This would be a strong incentive for the development of new, innovative fuel production pathways that truly deliver substantial ‘life cycle’ GHG savings. The discussions were progressed at the November MEPC meeting and further work for the coming months has been defined, including the development of criteria for fuel certification schemes and the mechanisms for regular review of default upstream and downstream emission values.

Certification process for low and zero carbon marine fuels
A certification process will be critical to ensure consistent use of the methodology and to create confidence in the numbers provided. The sooner this process can be finalised, the better. This will allow it to be introduced gradually as new LC and ZC fuels come to the market. Where conventional fuels are concerned, independent verification using default GHG footprint values should be straightforward. But having internationally recognised and independently verified carbon footprint data would be a key element in providing regulatory certainty for the developers and buyers of LC and ZC fuels.

The next step will be to modify the format of the Bunker Delivery Note (BDN) to include GHG footprint information of the fuel supplied. I believe this work should be started now, to make sure the updated format will be available at the time the GHG footprint calculation methodology will be finalised. This will allow experience to be gained with the GHG footprint assessment methodology and the verification process. Adding GHG footprint data to the BDN could initially be done on a voluntary basis and then become mandatory by the date that a MBM will be implemented.