A roadmap to ship decarbonisation
In April 2018, The IMO’s greenhouse gas (GHG) reduction targets were adopted by the Marine Environment Protection Committee (MEPC).
Initial targets aim to reduce CO2 emissions across international shipping by at least 40% by 2030, followed by 70% in 2050 (compared to 2008 levels). It also committed "as soon as possible" to pursue a 50% reduction of all GHGs by 2050. In addition, the MEPC has also devised a strategy (2017-2023) to reduce GHG emissions, which is supported by CO2 emissions data collected in 2019.
The targets adopted by the IMO have left many Shipowners with an enormous task of achieving compliance. Shipowners may have to review operational efficiencies such as voyage optimisation, technological advancements in ship design, voyage speeds and alternative fuels with a lower carbon footprint.
The focus on air emissions started in 1997 with the eventual introduction of regulations through MARPOL Annex VI in 2005. This focused on pollutants such as nitrogen oxide (NOx), sulphur oxide (SOx), volatile organic compounds, polychlorinated biphenyls and chlorofluorocarbons. The reduction of SOx emissions has been phased, with the most recent regulations requiring fuel sulphur content to be 0.5% or less from 1 January 2020. NOx reduction targets were achieved by optimisation of the combustion process in diesel engines or by installing dedicated NOx emission control technologies.
Reducing carbon emissions - a new challenge
Measures to reduce carbon dioxide (CO2) and greenhouse gases (GHG) brings a different set of challenges. IMO’s first major step to reduce carbon emissions was first announced in 2011 and by 2013 the industry saw the introduction of two new terms:
- Engine Efficiency Design Index (EEDI) to improve the design efficiency of ships
- Shipboard Energy Efficiency and Management Plan (SEEMP) to improve operational efficiency
Targets to improve design efficiency (EEDI) of new build ships commenced in 2015. The next phase of design efficiency targets (30%) comes into force from 2022. It is worth noting that although vessels are required to carry a SEEMP on board, there are currently no mandatory operational efficiency reduction targets in place.
For existing ships above 5,000 GT, CO2 emission monitoring was introduced by the European Union and IMO, to measure the amount of fuel consumed. The European Union Monitoring, Reporting and Verification (EU MRV) was introduced in July 2015 with data collection taking place from 2018. Similarly IMO introduced data collection (IMO DCS) in 2019. This monitoring will provide the background and foundation for any future measures.
As a vessel is expected to have a lifespan of approximately 25 years, new builds entering the market will not only be expected to comply with greater efficiency requirements as per EEDI targets, but they will also have to consider available alternative fuel options to meet IMO’s GHG reduction goals.
How will it work?
Based on the IMO’s 2030 CO2 reduction targets and the measurements achieved from IMO DCS, a baseline will be created for each vessel and yearly CO2 reduction targets will be specified to ultimately achieve the 2030 target. Existing vessels may have to change their operations to reduce CO2 emissions. This will lead to some vessels being forced to reduce speed, and inevitably some will have to be scrapped. By establishing a ship/fleet baseline, comparrisons can then be made with trajectories under different scenarios established under the Poseidon Principles. The Poseidon Principles1, launched in New York on 18 June 2019, are an agreement reached between the finance sector and the shipping industry to integrate the IMO’s climate related policies into ship finance decision making processes. Specifically, signatories to the Principles have to ensure that their ship finance portfolios are aligned with the goals set out in the IMO’s Initial GHG Strategy introduced in April 2018.
The IMO’s future GHG strategy is also being closely monitored by the EU Commission (“EU”). Should the EU not be satisfied that any new goals adopted at the IMO’s Revised Strategy in 2023 would deliver meaningful greenhouse gas reductions from ships, and are in full alignment to achieve the Paris Agreement’s goal, it may decide to include shipping in the EU Emissions Trading System(“ETS”)2. The IMO has thus far been pushing back on such a suggestion3.
2 The European Union Emissions Trading System (EU ETS), was the first large greenhouse gas emissions trading scheme in the world, and remains the biggest. It was launched in 2005 to fight global warming and is a major pillar of EU energy policy. For more information, click here.
3 IMO Cautions Against Extending EU-ETS to Shipping, click here
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