- The shipping industry accounts for around 2% of global greenhouse gas emissions, which is pivotal in the push for net-zero emissions by 2050.
- Despite ambitious emission reduction targets set by the International Maritime Organization (IMO) and other global bodies, shipping companies face significant financial challenges in meeting these goals.
- The costs associated with alternative energy carriers and carbon capture technologies in shipping are high, potentially making paying fines a more cost-effective option in the short term.
International shipping is a significant contributor to global greenhouse gas emissions, accounting for approximately 2% of the world’s total emissions. As part of the global effort to achieve net-zero emissions and limit global warming to 1.5 degrees Celsius, the shipping industry must address its environmental impact. Organizations such as the International Maritime Organization (IMO), the Poseidon Principles, and the European Commission’s Fit for 55 initiative have introduced various regulations and targets to guide the industry’s transition towards sustainability. Despite these efforts, challenges persist, including high costs and the choice between paying fines or investing in cleaner technologies.
IMO’s 2023 Strategy and Emissions Targets
In 2023, the IMO set ambitious targets for reducing emissions within the shipping sector. The goal is to reduce global greenhouse gas emissions from international shipping by at least 20% by 2030, aiming for a 30% reduction compared to 2008 levels. By 2040, this reduction target is set to increase to 70%, with a further push to achieve net-zero emissions by 2050. The IMO’s strategy aligns closely with the International Energy Agency’s net-zero pathway, relying on technological innovations, new fuels, and energy sources to achieve these goals.
The MEPC83 Session and Proposed Policy Measures
In April 2024, the IMO’s Marine Environment Protection Committee (MEPC) convened to discuss and finalize policy measures aimed at meeting the IMO’s emission targets. The committee approved mandatory emissions limits and greenhouse gas (GHG) pricing mechanisms across the sector. Key measures include a global fuel standard and an economic measure that incentivizes ships using near-zero-emission technologies while imposing penalties on those exceeding emission thresholds. These regulations are expected to be adopted in an extraordinary MEPC session in October 2025 and enforced from March 2027.
Short-Term Measures for Emission Reduction
In addition to long-term strategies, the IMO has introduced short-term measures to improve energy efficiency and reduce carbon emissions from ships. These measures include the Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII), which aim to optimize ship operations through measures such as speed adjustments, route planning, and ballast optimization. While the initial phase of these measures has been successful, a second phase starting in 2026 will address any remaining challenges and expand the scope of emissions reductions.
Onboard Carbon Capture and Future Technologies
In addition to fuel efficiency measures, the IMO is exploring onboard carbon capture and storage (OCCS) technologies. These systems aim to capture and store carbon emissions directly from ship engines, potentially offering an alternative to using low-emission fuels. However, the technology is still in the early stages, with ongoing research needed to prove its effectiveness and commercial viability. The IMO plans to create regulatory frameworks for OCCS by 2028.
Fuel Intensity Targets and Economic Implications
The IMO also plans to tighten fuel intensity rules, requiring ships to gradually reduce their carbon emissions per unit of energy used. Starting in 2028, new targets will be set, with further reductions expected by 2035. Ships using low-emission fuels will be rewarded financially, but meeting these targets will incur significant costs, particularly for fuels with lower energy content. As these costs remain high, the industry faces a dilemma: to comply with emissions regulations or pay penalties for exceeding limits. One of the key challenges facing the shipping industry is the high cost of transitioning to cleaner energy sources. In 2035, using alternative fuels will be more expensive than paying fines for exceeding emissions limits. This financial disparity poses a significant barrier to adopting cleaner technologies, with shipping companies potentially opting to pay fines instead of investing in emissions-reducing technologies.
Overcoming Barriers to a Sustainable Shipping Future
The shipping industry faces substantial hurdles in achieving the IMO’s ambitious emissions reduction targets. High costs associated with alternative fuels and technologies make compliance a difficult task. While the financial incentives for adopting cleaner technologies may become more attractive by 2050, the short-term financial burden remains a significant challenge. The outcome of these efforts will determine whether the shipping sector can significantly reduce its greenhouse gas emissions and contribute to the global goal of achieving net-zero emissions by 2050.
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Source: ABN AMRO Bank
