Participants in the maritime sector have welcomed the International Maritime Organisation's (IMO) revised greenhouse gas (GHG) strategy as a starting point, but nonetheless stressed the need for industry and governments to take proactive roles in enacting change following the decision.
The International Bunkering Industry Association (Ibia) described the IMO's revised GHG strategy as a "starting signal" for the maritime sector to transition towards phasing out GHG emissions around 2050, in line with the Paris climate agreement.
This view has been echoed by several leading figures in the industry. Shipping giant Hapag-Lloyd told Argus the IMO strategy would "push decarbonisation efforts all the more forward," while Bunker Holding chief executive Keld Demant called it "an important step in the right direction".
Simon Bergulf — head of energy transition and operations at AP Moller–Maersk — described the decision as a call to action, adding that the "time for investment is now."
Following the decision, participants found consensus around the notion that the onus now falls on the industry itself and governments to work towards decarbonisation targets, responding to Argus for comment on the IMO's revised strategy.
For example, market participants pointed to the yet to be decided pricing mechanism and fuels standard, which are due to come into force in 2027 at the earliest. That would give the industry just three years before the strategy's first checkpoint to meet the significant first 20-30pc target cut, prompting some to suggest that industry may need to begin acting sooner.
Participants also highlighted the need for regional or national governments to create legislation to support the IMO's decisions — given its limitations in enforcing regulations as an inter-governmental organisation — to ensure industry participation. The IMO operates through multi-lateral processes and negotiations can be drawn out. Participants cited the EU and UK's emissions trading schemes (ETS) as examples.
This could help address what some market participants view as the need for a "level playing field," with regards to the need for incentives and regulations to ensure equal global participation in meeting decarbonisation goals. Voluntary measures can impede the market competitiveness of participating nations, some noted.
Lifecycle Assessment: well-to-wake
The IMO's decision to calculate emissions on a ‘well-to-wake' — or life-cycle assessment (LCA) — basis has been supported as the most effective way to meet net-zero targets in shipping, but will require significant research and investment from the industry.
Biofuels and alternative fuels may not have as much impact on emissions reduction if considered on this basis, as many fuels with zero or near-zero emissions during combustion may have considerable emissions further upstream in their life cycle.
Pointing to ammonia, bunker fuels supplier Titan said that even if ammonia produced no CO2 when burned on a vessel, its production at a plant would emit 47pc more CO2 than conventional fossil-based bunker fuels.
There is also concern about the expense of these alternative fuels if considered on an LCA basis.
According to Argus data, the average price of delivered ammonia in northwest Europe in June was $738.76/t as a VLSFO equivalent. The average cost of an EU emissions trading scheme credit in June was $85.85/t, and according to the Ammonia Energy Association, the amount of CO2 emitted for every tonne of ammonia burnt is 2.7t, so it would cost $971/t to burn ammonia. By contrast, delivered VLSFO bunker prices in Amsterdam-Rotterdam-Antwerp (ARA) were assessed by Argus at $542.50/t on 13 July.
The IMO's revised GHG strategy also includes a target 5-10pc uptake of zero or near-zero emissions technologies and fuels by 2030 to reach their ambition.
The shipping industry may also encounter increased competition for biofuels and their feedstocks from other sectors — from power generation to agriculture. Industry participants also raised questions about the scalability and expense of these alternative fuels. Titan told Argus that it would "take time and incentive to develop this to the scale required for the maritime market".
