IMO adopts revised GHG strategy – What can the industry expect?

What has been decided?

The IMO has adopted a revised greenhouse gas emissions reduction strategy for international shipping. After several years of negotiations, all member states agreed in the final voting round on reaching net-zero emissions “by, or close to 2050”. This significantly strengthens the previous targets of halving the emissions of 50% until 2050.

The strategy aims at phasing out GHG emissions “as soon as possible”, with indicative checkpoints of a 40% reduction in 2030, and a 70% reduction in 2040, compared to 2008 levels. Ultimately, the enhanced targets aim at phasing out all GHG emissions by 2050. As realising these targets largely depends on the use of zero or near zero emissions technologies and fuels, the strategy also includes the ambition to reach a minimum 5% of clean energy used by 2030.

Major achievement?

Despite some criticism from NGO’s, Bergulf and Philipsen consider the agreement a breakthrough on IMO level, where decisions are being made via consensus voting from all member states. “There has been a lot of criticism that the IMO has been very slow to act, and we wanted them to be faster. So, this is a major achievement.” According to Bergulf and Philipsen, the strategy is a strong signal for the industry and will have significant impact on investment decisions in the coming years bringing increased confidence in profitability of investments in the entire chain of alternative fuels.

“We need to start now, and we need to build up the renewables now."

For European shipowners, some elements of the IMO strategy may not come as a surprise, as the target of reaching a Global Fuel Standard in 2025 has similarities with the FuelEU Maritime legislation. The FuelEU Maritime, which was agreed in early 2023, aims at having 6% of green fuels in the fuel mix by 2030, compared to a target of 5% set by the IMO. On the realisation of these targets, Bergulf states that the production and availability of the green fuels remains the biggest challenge for shipowners. Approximately 800,000 tonnes of methanol are needed alone for Maersk’s dual-engine container vessels, and the production requires increased investments as well as facilitated processes from the legislator’s side. “We need to start now, and we need to build up the renewables now.”

However, Philipsen points out the importance of having both measures, the green fuels push and an operational energy efficiency push, which encourages considerations on improving efficiency in how vessels are being operated. On EU level, the EU ETS (read more about the EU ETS here), will come into effect in 2024 and a similar system will seemingly be developed on IMO level, implementing a carbon emission pricing mechanism on a global scale in the years to come. All member states agreed on the introduction of a carbon levy, which Bergulf also considers as a major achievement, as many member states have, prior to this meeting, been opposed to such a system.

What can the industry expect now?

The industry will experience substantial changes in the coming years, with the EU ETS in 2024 and the FuelEU Maritime coming into effect in 2025, and the targets of the IMO on the horizon. Questions on the costs and benefits will require strategic considerations from shipowners, operators, and charterers. Bergulf and Philipsen further state the inevitable fact that the legislation will also come with additional costs, which will ultimately be passed on to the consumer.'

" It is not a reduction game, we anticipate a complete transition to new technologies."