Reducing CO2 - An Initial IMO Strategy for 2018

IMO needs to come forward with some ambitious CO2 reduction objectives on behalf of the international shipping sector

Shipping is by far the most carbon efficient form of commercial transport, and has a good story to tell when it comes to reducing CO2 emissions and playing its part in the prevention of dangerous climate change. Fuel is by far a ship operator’s greatest cost, so cutting CO2 emissions is enlightened self interest. 

As a result of fuel efficiency measures, the total CO2 emissions from the sector are considerably lower than they were in 2008, despite increased maritime trade, while CO2 emissions from the rest of the world economy are projected to continue increasing until the 2030s. However, the industry recognises that shipping needs to do even more and is determined to step up to the challenge, notwithstanding the considerable technical and political difficulties. 

In June 2017, IMO Member States will begin the development of a Road Map to reduce CO2 emissions from the international shipping sector, in line with the ambitious spirit of the Paris Agreement, adopted by Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. The intention is for IMO to agree an initial strategy for this Road Map in 2018. 

This important decision by the IMO Marine Environment Protection Committee (MEPC) in October 2016 was at the direct request of ICS and other international shipping associations, which called on IMO to act as soon as possible in order to prevent the serious threat of unilateral or regional action by governments. 

As reported elsewhere in this Annual Review, the European Union is currently giving consideration to a recommendation from its Parliament that international shipping – including non-EU flag ships – should be incorporated in the EU Emissions Trading System. This would destroy the level playing in shipping and greatly damage the authority of IMO, while doing little to help further reduce shipping’s CO2 emissions which can only be achieved meaningfully with a global solution. But the danger of unilateral action also exists elsewhere, including Canada and California – and even China – which have already introduced carbon pricing at local level and could potentially decide to extend this to shipping.

ICS is confident that IMO can adopt an ambitious strategy by 2018 matching the ambition of the Paris Agreement. However, ICS members have concluded that to be consistent with the spirit of the Paris Agreement, IMO needs to agree a baseline year for peak CO2 emissions from shipping, as well as some serious long term aspirations to dramatically cut the sector’s total CO2

ICS also believes that IMO should adopt aspirational objectives for the sector as a whole, rather than set targets for individual ships, in the same way that governments have already agreed CO2 commitments for their national economies under the Paris Agreement. But IMO also needs to agree measures for delivery which ICS would like to see in place by 2023 (when UNFCCC will be conducting a major global stocktaking exercise of progress towards holding global temperature increases to below two degrees higher than pre-industrial levels). 

IMO has made real progress to address CO2 emissions from shipping, having adopted the Energy Efficiency Design Index (EEDI) in 2011, as a result of which ships built in 2025 will be at least 30% more efficient than most of those constructed before 2013. The impact of the mandatory IMO requirement for existing ships to develop and utilise Ship Energy Efficiency Management Plans (SEEMP) should also not be overlooked. With the introduction of additional technical and operational measures, ICS is confident that shipping can reduce its CO2 emissions per tonne-km, as an average across the sector, by at least 50% by 2050 compared to 2008. 

In spite of this progress, it is clear that society at large, as well as many governments, now expects IMO to deliver even more. Shipping and aviation, being international transport sectors, are not covered by the Intended Nationally Determined Contributions (INDCs) to which governments have committed as part of the Paris Agreement, and IMO has the mandate for addressing CO2 emissions from international shipping.

However, IMO is vulnerable to the charge that shipping is now the only sector of the world economy which has not yet established goals with years and dates, however provisional, for when CO2 emissions attributed to the sector might peak and then subsequently start being reduced. In theory at least, this has now been done for land based sectors via the INDCs committed by governments under the Paris Agreement. The International Civil Aviation Organisation (ICAO) has also done the same for international aviation. 

The aviation sector, as a result of an agreement reached by ICAO Member States in November 2016, is committed to holding its total CO2 emissions at 2020 levels, and has set an ‘aspirational goal’ of cutting the sector’s total CO2 emissions by 50% by 2050. 

It is not entirely clear how this ambitious goal will be achieved by the aviation industry and, unlike IMO, ICAO has not yet established a global system for monitoring and reporting CO2 emissions from aircraft or adopted an efficiency measure comparable to the EEDI. However, ICAO’s objective of holding CO2 emissions at 2020 levels will be delivered using a Market Based Measure (MBM) which will involve the use of CO2 reduction credits to be obtained from outside the aviation sector. 

The shipping and aviation sectors have very different characteristics for which different responses will be required. However, the deal reached by ICAO in 2016 can be expected to place additional pressure on IMO Member States to agree some comparable objectives that are appropriate for international shipping. 

Importantly, in October 2016, IMO adopted a global CO2 data collection system for ships which, as a mandatory requirement, will provide IMO with far more accurate fuel consumption data by 2019. Consistent with the ‘three step process’ which has been agreed by IMO Member States (data collection, analysis and consideration of additional measures) this data will be able to inform the development of measures for the delivery of any CO2 reduction objectives agreed in 2018 when the IMO Road Map is finalised in 2023. 

It is possible that IMO Member States could conclude that any objectives agreed will not be achievable in the immediate future through technical and operational measures alone. Accordingly, if IMO Member States should decide to develop an MBM for international shipping, the clear preference of the industry is for a global bunker fuel levy charged per tonne of fuel purchased for consumption. 

However, in the event that IMO should decide to develop an MBM, any money collected from the industry must result with a reduction in the CO2 emissions attributed to the sector, and a significant proportion must be used for research into the development of alternative fuels that will allow shipping to drastically reduce its future CO2 emissions. 

IMO needs to establish CO2 reduction goals that will be sufficiently ambitious to allow shipping to play its part in achieving the United Nations ‘2 degree’ climate change target, but ICS believes these goals should also be realistic. Any MBM adopted must only be seen as an interim measure. Ambitious CO2 reduction objectives will only be achievable with alternative (fossil free) marine fuels which do not yet exist, although ICS expects these will be available in the not too distant future. 

Widespread availability of alternative fuels (such as hydrogen or fuel cells) and the associated infrastructure is probably not expected for at least another 20 or 30 years. The sector’s total CO2 reduced by more than 10% between 2007 and 2012. But projections for trade growth – over which the industry has no control, due to population growth and improved global living standards – suggest that dramatic reductions in the sector’s total CO2 emissions will be very difficult to achieve until these alternative marine fuels become widely available on a global basis. 

In the meantime, ICS will argue that any CO2 reduction goals agreed by IMO must also address the legitimate and valid concerns of developing nations about the potential impacts on trade and sustainable development. According to the United Nations (UNCTAD), 60% of maritime trade now serves developing nations. 

The challenges involved in developing a package of additional CO2 reduction measures are technically and politically complex. Developing nations continue to argue that under the terms of the Paris Agreement they still have less responsibility for reducing CO2 than richer nations. In shipping, however, any measures adopted by IMO must apply to all ships equally regardless of the flag state, in order to maintain a level playing and to avoid ‘carbon leakage’. 

In view of the complexity of these issues, the development of a global industry consensus on the best way to proceed has not been an easy process. However, ICS hopes to achieve a consensus, acceptable to all of its member national shipowners’ associations. The intention of ICS is then to come forward during 2017 with some serious ideas about how IMO Member States should develop the Road Map for CO2 reduction. 

ICS believes that IMO should adopt an initial strategy in 2018 which can reconcile the need for ambitious long term objectives with the industry’s current dependence on fossil fuels, while also taking full account of shipping’s important role in moving about 90% of global trade which will be vital for the continuing and sustainable development of the world economy.

  • International Chamber of Shipping
  • 38 St Mary Axe, London
  • EC3A 8BH