Amid pressure from NGOs and governments, shipping could be moving towards net zero by 2050, instead of the initial goal set of a 50% emission reduction. In its latest weekly report, shipbroker Gibson said that “last Friday saw the close of the much-anticipated Marine Environmental Protection Committee (MEPC 78) meeting at the IMO. The main focus was to progress IMO policy to build an effective greenhouse gas emissions (GHG) reduction strategy to be approved at MEPC 80 in 2023. Whilst the meeting was never intended to be a decision-making event, it did signal that sufficient momentum and support exists among most member states for the IMO to begin setting more ambitious targets and policy that will be centre stage at upcoming IMO meetings. However, environmental and industry groups have been critical of the MEPC for failing to achieve unanimous support amongst all members. They highlight the relative pace of decarbonisation proposed by the IMO and the ability of shipping to remain aligned to the 1.5C target agreed in the Paris Climate Agreement. This will only add to the pressure of subsequent IMO meetings to secure a plan for achieving adequate decarbonisation whilst ensuring an equitable transition process that can achieve broad member state support”.
According to Gibson, “in terms of what was achieved, two points stand out. Firstly, there appears to be support for achieving zero carbon emissions by 2050 instead of just a 50% reduction in emissions. The technical guides for EEXI, CII and SEEMP regulations have been finalised and adopted for future implementation. This will be crucial for setting the trajectory of industry emissions out to 2050. Several environmental groups are advocating bringing forward the trajectory for achieving net zero emissions by 2040 and halving emissions by 2030; although this does not seem to be on the IMO’s agenda at present given the challenges of achieving such reductions and the lack of support from some member states. Therefore, it appears these measures will be approved at MEPC 80 where lifecycle emissions guidelines are also likely to be agreed”.
The shipbroker added that “secondly, the proposal to establish a Sulphur Emission Control Area (SECA) in the Mediterranean Sea was approved for adoption at MEPC 79 in December 2022. This would require the use of bunker fuel with a sulphur content no greater than 0.1% such as low sulphur MGO or a scrubber system for vessels trading in or passing through the Mediterranean. If there are no delays, the Mediterranean SECA could be implemented as early as 2025. It is also worth noting that the likely inclusion of shipping into the EU ETS from 2023 will add an extra layer of complexity and cost on top of already highly elevated bunker prices”.
Gibson also noted that “another notable aspect of MEPC 78 was the rejection of a proposal by the International Chamber of Shipping (ICS) for a $5bn decarbonisation research and development fund that would have provided a market-based approach to reducing shipping’s carbon emissions. The plan focused on a mandatory levy of $2/tonne on bunker fuel that would have financed zero emission technology and had the backing of most major shipping bodies. This would have helped facilitate the application of new technologies at scale, although its rejection signals a reluctance by the IMO to be responsible for managing and supervising such a scheme. Any future proposed market solutions will likely have to be operated at the industry level instead of seeking official approval and implementation at the IMO if such proposals are to have any role in decarbonising shipping”.
“As the market looks ahead to MEPC 79-80, many will now be finalising their plans to achieve compliance with the proposed IMO regulations, especially in terms of CII and EEXI. MEPC 78 gives owners an indication that the IMO is now more committed to reducing the industry carbon emissions to net zero by 2050 and are unlikely to be watered down by some member states, given the broad support that exists both inside and outside shipping for concrete action”, the shipbroker concluded.