Implications of the 2023 IMO GHG Strategy for the Shipping Industry
The International Maritime Organization’s (IMO) Marine Environmental Protection Committee held its 80th session (MEPC 80) from 3 to 7 July 2023. During this session, all 175 Member States of the IMO unanimously supported the adoption of the 2023 IMO Strategy on Reduction of GHG Emissions from Ships (2023 IMO GHG Strategy). As the name suggests, the aim of this strategy is to reduce greenhouse gas (GHG) emissions from international shipping. The strategy revised the target of net-zero emissions set in the initial strategy adopted in 2018 and accepted that the industry should reach net-zero GHG emissions around 2050. Implementing this strategy will lead to the greatest acceleration of decarbonization in shipping seen so far.
The IMO set out indicative checkpoints for the shipping industry to meet in 2030 and 2040 to ensure that the industry is headed in the right direction to achieve the goal of net-zero emissions by 2050. It would seem from the strategy that, if the industry achieves the two ambition levels for 2030 (uptake of zero or near-zero GHG energy and decrease in carbon intensity of shipping), then GHG emissions would have been sufficiently reduced by 2030 to get the industry to its checkpoint of reducing absolute emissions by 20-30% compared to 2008. However, this is not the case.
Our calculations show that if the IMO Member States focus only on these levels of ambition and draft initiatives around them, then they will be unable to reach the 2030 indicative checkpoint, thereby falling behind on the 2040 indicative checkpoint and 2050 target as well. Hence, it is crucial for IMO Member States to set their eyes on the end goal and on all the items (including short-term GHG reduction measures, mid-term GHG reduction measures, carbon intensity indicator, and life cycle analysis guidelines) in the complete strategy, rather than on individual items in the strategy. The first part of this paper explains our calculations in more detail.
According to our projection, the cost of producing the alternative fuels needed to reduce GHG emissions could require an investment of 200-300 billion USD by 2030. Investing in energy efficiency on board vessels can substantially reduce the costs of transitioning from conventional vessels to green vessels. If the energy efficiency on board vessels is improved, then each vessel would require less fuel, thereby reducing the demand for alternative fuel, and, in turn, lowering the cost of producing these alternative fuels. Our analysis indicates that enabling investments that reduce energy consumption could towards 2030 result in fuel production cost savings that are up to a factor 10 higher than the cost of implementing energy efficiency.
The 2023 IMO GHG Strategy has given the international shipping industry a compelling reason to put decarbonization at the center of its business strategy. The shipping industry needs to steer itself quickly away from fossil fuels and towards sustainable alternatives, as the cost of not doing so can prove to be high for both the industry and the planet.