Mark Lutes is senior advisor for global climate policy at WWF. He specialises in UNFCCC climate negotiations, shipping decarbonisation and carbon finance.
If all goes well, on April 11, the International Maritime Organization (IMO) will announce that governments have reached a deal to put the global shipping sector on course to net-zero emissions by 2050. Countries must not miss this opportunity to secure this landmark agreement.
Despite the shipping business accounting for around 3% of global emissions, the Paris Agreement on climate change does not contain mechanisms to control planet-heating emissions from shipping or aviation. So this deal has the potential to be a significant moment that finally aligns this critical industry with global climate targets. It would in fact be even stronger than the largely voluntary Paris accord, with mandatory enforcement of targets.
Final steps for global shipping decarbonisation
In July 2023, the IMO reached agreement on a substantially strengthened greenhouse gas (GHG) emissions strategy that contained the targets the IMO is now discussing how to achieve. These included 20% emission reductions from 2008 levels by 2030 – but striving for 30% – and achieving net-zero emissions “by or around, i.e. close to” 2050.
If countries agree on measures to achieve these targets at talks next week, it will require shipping companies to transition to using zero or near-zero fuels or alternative power sources over the next 25 years – essentially a fossil fuel phase-out in the sector. This is both necessary and possible, bringing both environmental benefits and long-term certainty and sustainability to the industry.
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The IMO strategy also calls for shipping companies to strive for 10% zero or near-zero emissions fuels and energy sources for ships by 2030. This wording is important because it excludes liquefied natural gas (LNG) which proponents hail as a ‘transition fuel’ but has modest emission reductions at best and a risk of lock-in.
Energy efficiency measures are also a key part of the proposed strategy. The implementation of a Carbon Intensity Indicator has begun but is now undergoing a review. Successful energy efficiency measures are vital for reducing energy demand and also delivering important environmental co-benefits, including lower speeds which reduce underwater noise and whale strikes.
However, the most important measures for meeting the sector’s net zero targets relate to the energy that powers the ships. This is why negotiations have been focused so far on two measures: a Global Fuel Standard and an economic measure such as a carbon price or levy.
A global fuel standard for ships
A Global Fuel Standard would set a target or limit on the amount of GHG emissions per unit of energy for fuels. There is broad agreement on the need for a standard, but many key technical details remain to be worked out. These details can determine whether the “striving” targets will be met, what fuels and energy sources are incentivised, and whether new fuels will be sustainable and whether full life-cycle (well-to-wake) emissions of fuels are taken into account.
A well-designed standard should provide strong incentives for the development and deployment of zero or near-zero fuels – principally e-fuels produced using renewable energy, and limit the use of LNG and biofuels with high life-cycle emissions. Strong environmental safeguards are also vital to ensure these new fuels do not result in deforestation and other negative land use impacts.
Financing the transition
The most politically challenging issue for negotiators has been the economic measure or carbon price for the shipping sector.
There is broad agreement that revenue is needed for two main purposes – first, to invest in new zero emission fuel sources, especially e-fuels produced using renewable electricity, and to close the price gap between these fuels and other more polluting fuels; and second, to ensure a just transition to a zero-emissions shipping sector, by helping those countries most affected by rising shipping prices resulting from higher-cost fuels, especially prices of food and other essential goods for remote islands and least developed countries. Some also want the funds to be used to support broader activities, like adapting to climate impacts.
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The majority of countries participating in the talks, and many shipping sector bodies and environmental observer groups, have supported a broad-based carbon price on shipping emissions, although there are a wide range of views on the amount of the levy, ranging from around $18 to $150 per tonne of CO2e emissions. Other countries, especially some large developing economies that depend on shipping for exports of basic commodities, are strongly opposed to a universal levy, but are open to designing the fuel standard in a way that can generate some amount of revenue.
Agreement on financing mechanism is essential
Whatever the final design, it is vital that the agreed measures generate sufficient and predictable financing to ensure a just transition in the sector and to accelerate the production of zero and near-zero GHG emission fuels, especially e-fuels. Some form of levy is likely to be agreed as part of the Global Fuel Standard mechanism, if not as a stand-alone carbon price.
The IMO’s ability to reach an agreement by April 11 will likely hinge on a resolution of this contentious issue. Success here would not only be a step forward for shipping, but could also send a strong signal about the enduring power of multilateralism. This high-stakes negotiation comes at a very sensitive time for the international community with cooperation seemingly at a low ebb.
In this context, an agreement to decarbonise a key global sector would send a positive signal to countries now developing their national climate plans under the Paris Agreement, and to COP30 in November in Brazil, where key decisions must be made on the next steps for global efforts to combat climate change.