The case for optimism on decarbonisation post-MEPC83
- Uncertain regulation means any switch to zero-carbon fuels will take longer — but it’s still possible
- Shipowners should push for robust IMO guidelines on what is and is not green
- GMF says MEPC83 carbon price doesn’t align with 2050 IMO targets, but over time it pushes in the right direction
Shipowners may have plenty of reasons to sit on their hands, and plenty of bigger problems to care about. But the Global Maritime Forum believes there is still cause for hope that a truly green future is possible
THE new International Maritime Organization green framework’s complexity and uncertainty may well lead some shipowners to dither and wait for more information. But the Global Maritime Forum makes a case for why they shouldn’t.
Those who would make or use future fuels can’t plug in all the numbers they need to sign deals until they know how the IMO will classify the different options, and what carrots and sticks will be used.
Green shipping advocates such as the GMF have welcomed news of the net zero framework, while trying to hide their disappointment it isn’t simpler and more effective.
Meanwhile, president Trump is rolling back the US’ green policies, while trade disruptions and geopolitics imperil free trade.
But ING Bank shipping finance head Stephen Fewster said the early criticism of the deal — that it wasn’t ambitious enough — was unfair. Evoking Winston Churchill, Fewster said the MEPC83 marked not the beginning of the end, but “the end of the beginning”.
“What it’s done is set us on a path,” Fewster told a GMF briefing on Thursday.
The IMO did not show how to get there, but it set the direction. “I think this is actually a really good sign for the industry,” he said.
“It will send demand signals for zero-carbon fuel, because doing nothing now is probably the most expensive option.”
GMF decarbonisation director Jesse Fahnestock said the net zero framework’s GHG reduction targets did not match those needed under the IMO’s 2023 GHG strategy.
But looking at the different paths that could plausibly meet those targets, synthetic fuels would still dominate.
“I think that it’s tough to draw any other conclusion, really,” Fahnestock said.
“There is more work to be done. But I expect the positions of the shipowners will firm up over the next year.
“The more you look at it, the more you see that what we were expecting for a transition is what we got.”
Fahnestock said the IMO result was bad for producers of hydrogen-based e-fuels, the priciest but greenest forms of synthetic ammonia, methanol and methane. How the IMO decides what qualifies as zero- or near-zero carbon (ZNZ) fuels, and how to reward them, was therefore crucial.
“The question is will the rewards be designed in a way that still allows them to make a business case, so that reward money isn’t wasted on biofuels that don’t need it,” he said.
The IMO carbon price is too low to close the cost gap with fossil fuels. But Fahnestock said barring a revolution in nuclear or batteries, e-fuels were the only way to get to the final IMO target.
“It’s just a question of how long will we wait to start building them,” he said.
But on the bright side: “If [the regulation is] not perfectly optimised, what it means is delays and bottlenecks and cost. It doesn’t mean it’s not going to happen.”
But Fewster said uncertainty over the cost of remedial units beyond 2030, and the rewards for fuels, made investments difficult. Shipowners had to try to cut costs in the short term with drop-in biofuels, while working on a longer-term fuel strategy at the same time.
Fewster said some shipowners were still hesitant to share information about how to decarbonise because they believed it would mean giving up a commercial advantage.
“If we really want to push the industry forward, we need to share knowledge,” he said.
The carbon price was projected to raise some $11bn a year; this had to be channelled into green R&D and subsidies.
GMF chief executive Johannah Christensen said national governments had to help the industry work out the practical problems, such as trialling new fuels.
“There’s so much experimentation that still needs to go on,” she said.
“There’s an enormous role for national governments and other actors in this intervening period, where we can create a tremendous amount of progress in figuring out the applications of a lot of the solutions; working out the kinks, so to speak.”
Fahnestock said if any of the competing IMO goals was likely to fail, it would be that of a “just and equitable transition” — ensuring the benefits don’t all go to rich countries, and the costs to poor ones.
“Inevitably in these kinds of situations where there are trade-offs to be made, the least powerful get the worst deal,” he said.
He added that this would divide the world’s ship and fuel types, which would be a problem for the industry.
Fewster said reducing capital requirements on banks would help them offer borrowers green incentives in loan terms. Governments could also offer export credit and public-private finance to channel support where it was needed.
