Tag: imo decarbonization

Global Regulations

The IMO, a United Nations agency responsible for regulating shipping, sets global standards for the safety, security, and environmental performance of international shipping. The IMO has set targets aimed at achieving net-zero greenhouse gas emissions (GHG) by 2050, establishing a timeline with essential milestones. Using 2008 levels as the baseline, the organization aims to achieve a 40% reduction in greenhouse gas emissions by 2030.

To meet these ambitious goals, the IMO’s 2023 strategy outlines a timeline for implementation. However, a 2023 IMO study indicates that the current policy measures might not sufficiently reach the 2030 goal. The study suggests the need for increased policy ambition, stating that policies effective by 2025 are necessary to achieve the targets. Consequently, to maintain the set timeline, the implementation of further policies may be needed, suggesting that further policies and restrictions are in development.

Starting from January 1, 2023, all ships are mandated to calculate their attained energy efficiency Existing Ship Index (EEXI) to measure their energy efficiency. Simultaneously, they are required to begin data collection for reporting their annual operational carbon intensity indicator (CII), assessing a ship’s annual reduction factor necessary for improving operational carbon intensity. Ships will receive ratings (A, B, C, D, or E) based on their CII performance levels. Ships consistently underperforming (rated D for three years or E for one year) will need to submit corrective performance plans. Later, as mid-term measures are adopted in 2025, a fuel standard and GHG pricing mechanism will be introduced. The combination of these measures is essential to create demand certainty for new fuels and incentivize the green transition.

Regional Regulations

In addition to the global IMO system, the European Union’s Emission Trading System (EU-ETS) will expand to include the maritime sector. The cap-and-trade system is the cornerstone of the EU’s strategy, ensuring the EU’s climate objectives become binding (GHG domestic reduction target of at least 55% compared to 1990 levels by 2030). Following the recent enactment of the Monitoring, Reporting, and Verification Regulation for maritime transport, maritime activities are now included in this trading system, mandating emissions from specific ship types to be computed. 

The implementation of the regulation will follow a phased timeline, initially focusing on monitoring procedures. Subsequently, a carbon trading system will be introduced. The rollout schedule will vary based on emission type and ship characteristics. Initially monitoring CO2 emissions, as they constitute the majority of greenhouse gas emissions from maritime transport. CO2 emissions will be included in the EU-ETS in 2024, followed by the monitoring of methane (CH4) and nitrous oxide (N2O) emissions. From 2026 onwards, methane and nitrous oxide will be included in the EU-ETS. Initially, the regulation applies to cargo or passenger ships of 5,000 GT and above, later extending coverage to offshore vessels of more than 5000 GT and smaller ships between 400-5000 GT from January 1, 2025. The initial monitoring will be extended to the EU-ETS in 2024 (for cargo/passenger ships of 5,000+ GT), and in 2027 (offshore and general cargo ships 400-5000 GT).

Companies are obligated to report aggregated emissions data at the company level to the relevant authority and the EU Commission by March 31 each year. Compliance responsibility rests with the shipping company, requiring them to surrender European Union allowances (EUAs) and bear the associated costs. The shipping company is responsible for defining the monitoring plan for fuel consumption calculation for each vessel under its purview. Similar to the IMO regulations, entities involved in shipping operations are responsible for compliance. Ship owners, operators, and manufacturers must invest in emission reduction technologies, transition to alternative fuels, and adhere to the IMO’s emission reduction targets. Consequently, ship owners face a complex set of challenges and opportunities due to the proposed amendments aiming for zero-emission shipping. Adapting to these changes will necessitate significant investments, adherence to new regulations, operational adjustments, and proactive engagement in long-term planning and collaborations.