MEPC79 – Key outcomes from a commercial perspective

The IMO, acting as a global regulator, can steer the industry towards decarbonisation provided it acts quickly and precisely. So far, the industry has been moving faster than the IMO both with regards to setting higher ambitions, but also taking initiatives towards the development of zero-carbon fuels and infrastructure.

Let’s take a look at what has happened and what we can expect going forward.

Revision of the Initial Strategy

The IMO Initial Strategy in 2018 set out “to peak GHG emissions from international shipping as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008 whilst pursuing efforts towards phasing them out as called for in the Vision as a point on a pathway of CO2 emissions reduction consistent with the Paris Agreement temperature goals.”

Recent science publications on climate change stressed that urgent action is needed to achieve the Paris Agreement temperature goals. The IMO target of 50% emissions reductions by 2050 is not ambitious enough to meet the Paris agreement goals and revision of the strategy is now essential.

The majority of IMO nations seemed to support the revision of the Initial Strategy and showed support towards measures and initiatives targeting zero emissions from ships by 2050. Specifically, discussions focused on strengthening the 2030 ambition, deployment of low and zero carbon fuels as soon as possible, investments in human resources along the value chain to kick-start the decarbonisation process as well as the inclusion of green corridors in the revised IMO strategy.

In addition, several studies highlighted that delays in the start of emissions reductions in shipping could add to the total cost of shipping decarbonisation. The United Kingdom’s review of evidence on emission reduction pathways´ estimated delays could lead up to an additional $100 billion in total costs, while DNV’s ‘Maritime Forecast to 2050’ advised annual fuel infrastructure costs range between $28-90 billion. The ´Science based target setting guidance for the maritime transport sector’ report pointed out that in an industry with long-life assets where investments can be extremely costly, it is imperative to create an environment where stakeholders feel safe to take action towards a concrete ambition, rather than one which could potentially be obsolete in a few years. Whilst setting up short term goals can help break down the decarbonisation process, it is important that they are set out in line to achieve zero emissions by 2050.

The final revision of the Initial Strategy is expected at MEPC80 in summer 2023.  

Mid-and-long-term measures

The IMO has considered various proposals for mid-and-long term measures and following discussions, it seems member states are leaning towards a global GHG levy system and a GHG Fuel standard in an effort to combine economic and technical features in their approach.  

1. Global GHG levy: This is a system where each tonne of CO2 or GHGs emitted will be priced at an agreed specified cost. All revenue will be paid to a central fund and will be used towards the decarbonisation of the sector via R&D, infrastructure investments and any other initiatives that could accelerate the decarbonisation process. As mentioned, several nations expressed support for this system because it can easily be applied at a global scale and forces industry players to reduce emissions to limit their exposure. Importantly, however, the carbon tax will have to be universally agreed which can prove challenging. It is essential that the levy is high enough to incentivise players to cut their emissions and fund the decarbonisation process. A low carbon levy can prove counter-productive, and it is, therefore, important to keep this in mind if the IMO chooses to proceed with a global GHG levy.  

2. GHG Fuel standard (GFS): This is a system which will specify how much carbon or GHG equivalent can be present in marine fuels at a given period and which will be continuously reduced. A standard methodology will have to be developed to measure well to tank and tank to wake emissions for marine fuels. While it is argued that this will directly tackle emissions, it is also understood that large investments in fuel technology and infrastructure are required in order to ensure that the supply of low and zero-carbon marine fuels will be present to accommodate the targets set out under this system.

Discussions will take place next year and a final decision on which measure to proceed with will be taken at MEPC80 in 2023.

‍