Compliance with the International Maritime Organization's (IMO) newly agreed global greenhouse gas (GHG) two-tier pricing mechanism will require LNG-powered ships to transition to bio-LNG by 2029 under the encouraged 'direct compliance' tier, or by 2033 for the minimum 'base target' tier, or else potentially incur heavy costs.
The pricing mechanism was approved by IMO delegates on 11 April in London. Formal adoption will be decided in October, at the next Marine Environment Protection Committee (MEPC) meeting, when a two-thirds majority vote will be required.
The text says ships must reduce their fuel intensity by a "base target" of 4pc in 2028 (see table) against 93.3g CO2e/MJ, the latter representing the average GHG fuel intensity value of international shipping in 2008. This gradually tightens to 30pc by 2035. The text defines a "direct compliance target", that starts at 17pc for 2028 and grows to 43pc by 2035.
Well-to-wake emissions for LNG diesel-type engines at dual fuel slow speed are equal to 76.08g CO2e/MJ, an 18.4pc emission reduction from the IMO's 2008 benchmark. In theory, this means the average LNG-vessel is compliant with the IMO's scheme until 2029 under both maximum and minimum tiers, or until 2033 under the base target.
Waste-based bio-LNG carries a GHG intensity of between 30 and -100g CO2e/MJ depending on feedstock and production, which translates to between 68.09-206.4pc GHG emissions savings, making it compliant across all tiers.
However, the uptake of bio-LNG may be capped. Many LNG-capable vessels run on dual-fuel engines, meaning ship-owners may be more inclined to adopt biodiesel, ammonia or other diesel-engine applicable fuels, depending on price levels and other real-world drawbacks.
The pricing mechanism establishes a levy for excessive emissions at $380 per tonne of CO2 equivalent (tCO2e) for ships compliant with the 'base' target, called Tier 2. For ships in Tier 1 — those compliant with the base target but that still have emission levels higher than the direct compliance target — the price was set at $100/tCO2e.
Instead of physically transitioning to a greener fuel, ships could meet targets using 'surplus units', which will be allocated to over-compliant vessels equal to their positive compliance balance, expressed in tCO2e, and valid for two years after emission. Ships then will be able to use the surplus units in the following reporting periods, transfer to other vessels as a credit, or voluntarily cancel as a mitigation contribution. This could give rise to an entirely new ticket market or emissions trading scheme (ETS) common in many European markets for other transport fuel sectors.
LNG vessels accounted for more than 2pc of the active global shipping fleet as of October last year, according to energy industry coalition SEA-LNG, but make up the majority of new-build alternative marine vessel orders over the next 10 years.
| IMO GHG reduction targets | ||
| Year | Base Target | Direct Compliance Target |
| 2028 | 4% | 17% |
| 2029 | 6% | 19% |
| 2030 | 8% | 21% |
| 2031 | 12% | 25% |
| 2032 | 17% | 30% |
| 2033 | 21% | 34% |
| 2034 | 26% | 39% |
| 2035 | 30% | 43% |
| Source: IMO | ||
