10 July, 2023

What the new IMO climate targets mean for shipping emissions

Michael Petroni, MJ Mace and Maheen Haq

The International Maritime Organization has agreed new 2030 and 2050 climate targets for the shipping sector. We take a look at what this means for shipping emissions.

Cargo ship

After a week of meetings in London – and years of inaction – parties to the IMO have finally agreed a climate strategy. The new targets announced last week, although an improvement, are not as ambitious as they need to be. We take a look at what they mean for future shipping emissions.

Disappointing targets for 2030, 2040 and 2050

Shipping accounts for 3% of global emissions – roughly the same as aviation. The average cargo ship has a lifetime of around 30 years, so the regulations adopted on Friday will shape shipping emissions for decades to come.

The IMO’s previous target of halving shipping emissions by 2050 was woefully inadequate – the Climate Action Tracker finds that if all sectors showed this level of ambition, the world would be up to 4°C warmer by the end of the century.

Overall, the targets have been made stronger – including the setting of 2030 and 2040 emission reduction targets for the first time and a commitment to reach net zero by “close to” 2050. But the choice of language is concerning – it’s unclear how legally binding “indicative checkpoints” are, or when exactly “close to” 2050 is. And the targets still fall short on ambition.

For this critical decade, the IMO set a target of 20% emissions cuts by 2030, adding non-binding wording on “striving for 30%”. But to limit warming to 1.5°C, global emissions need to halve by the end of the decade, and our analysis under the Climate Action Tracker further shows that CO2 emissions from all shipping need to fall 47% below 2008 levels by 2030.

The strategy also includes a 70% emissions reduction target, “striving for” 80% by 2040, and a net-zero target “by or around” 2050 that allows for “different national circumstances,” reflecting divisions between developed and developing countries. Some developing countries have previously opposed a 2050 net zero target due to the impact this could have on their economies.

Counting the full lifecycle of fuels in shipping emissions

Decarbonisation measures in shipping have so far focused on energy efficiency and a shift to scalable zero emission fuels (SZEFs) like green hydrogen. The new IMO climate strategy says these fuels should reach around 5% of demand from shipping by 2030 (striving for 10%) – currently the share is zero.

UMAS estimates that around 10% of fuels used in shipping could be transitioned to SZEFs this decade. Market-based measures and fuel standards could help increase demand by making them cost competitive with fossil fuels.

But worryingly, this new target also allows for ‘near zero’ emission fuels, which would likely result in the uptake of Liquefied Natural Gas (LNG) or ‘zero emissions’ fuels not derived from renewable energy. The use of such fuels would not be consistent with a rapid transition to net zero.

Another pressing issue to agree is how to calculate emissions from maritime fuels. The tank-to-wake approach measures emissions from fuels burned on ships, while the well-to-wake approach looks at the entire lifecycle of a fuel. The second method picks up emissions used in the production of fuels that could otherwise be classed as zero emissions by the first method.

A just and equitable transition for the shipping industry

Small islands, among the most climate-vulnerable parties to the IMO, have been pushing for more ambition. These countries want the IMO to adopt just climate policies, for example, using revenues from emissions taxes to support the energy transition in small island developing states and least developed countries.

But the IMO pushed back the decision on this highly anticipated shipping levy to 2025, even though it’s clear a levy would be an effective and equitable way forward.

Pacific Island nations have also pointed out that the Green Shipping Corridors adopted at COP26 in 2021 only connect developed countries and major economic players in international shipping. Cutting small islands out of the international shipping market in this way would not be a fair outcome. Measures should be taken to support country-driven initiatives that strengthen small island developing states’ economies and infrastructure as they work to decarbonise.

What about EU climate laws on shipping?

The EU’s new FuelEU Maritime regulation requires shipping emissions to decline 80% by 2050 and includes penalties for shipping companies that don’t comply with limits on fuel carbon intensity and onshore electricity usage.

However, restrictions can be avoided by using LNG or biofuels, despite these fuels still being emissions intensive and damaging to the environment. Financial penalties are a step in the right direction, but loopholes and low costs may make them too weak to incentivise compliance.

When the EU Emissions Trading System (ETS) expands into the maritime sector next year, ships will have to pay for their emissions if they sail to or from an EU port. The scheme will also expand beyond carbon dioxide to cover nitrogen oxide and methane as of 2026. Critically, a portion of maritime ETS revenues will be reinvested back into efforts to decarbonise shipping in Europe.

While this represents progress, our recent paper finds that the EU should consider the impact its regulations have on non-EU countries, mainly neighbouring states as well as vulnerable developing countries. Equitable transition considerations should be part of the discussion moving forward, especially in terms of finance, technology transfer and other support for impacted countries.

Following last week’s strategy, the IMO is unlikely to update its climate targets for years to come. Attention should now turn to what it can do to ensure these new targets are used as a springboard to drive even more ambitious action across the sector. What’s more, it urgently needs to set out the policies and measures necessary not only to effectively meet these targets, but to ensure we do so in an equitable way.