Responding to the 2023 IMO GHG Strategy

Responding to the 2023 IMO GHG Strategy

by Wolfgang Lehmacher, Mikael Lind and Robert Ward

Illustration: Sandra Haraldson, RISE

7 July 2023 marked a historic day for the shipping sector when the International Maritime Organization (IMO) adopted its 2023 IMO Strategy on Reduction of GHG Emissions from Ships (2023 Strategy).

The 2023 Strategy envisions a Just and Equitable transition, meaning that the transition to a low-carbon economy is fair and inclusive, leaving no one behind. This had been a concept absent in the IMO’s Initial GHG Strategy, or Ambition, set in 2018. The 2023 Strategy sets expectations on the development of future policy measures to strive for 30% GHG reductions by 2030, 80% GHG reductions by 2040, both relative to 2008 levels, and an overall level of ambition of reaching net-zero emissions as close to 2050 as possible.

The levels of reduction associated with the 2030 and 2040 indicative checkpoints do still not align the sector with a pathway that limits global warming to 1.5°C. This means that further consideration will be required when the Strategy is next revised by the IMO in 2028.

Key recommendations and take-aways

The forthcoming book Maritime Decarbonisation – Practical Tools, Case Studies and Decarbonisation Enablers, edited by Mikael Lind, Wolfgang Lehmacher and Robert Ward due to be published in autumn 2023 presents inputs from over 70 experts and delivers the following 15 key recommendations for private and public sector decision-makers to achieve the 2023 Strategy.

1. Use a ‘five decarbonisation lever’ framework to develop a road map for decarbonisation.

• The framework covers:
• freight traffic intensity
• choice of freight transport mode
• capacity utilisation
• energy efficiency
• switching to low carbon energy

There is no “silver bullet” instead a bundle of decarbonisation enablers needs to be activated.

2. Set environmental targets that reflect concrete decarbonisation outcomes.

As a general rule, shipowners and operators should set decarbonisation targets, prioritise transparency, and use clear and comparable environmental, social, and governance reporting.

3. Understand the global shipping fleet as a key area for decarbonisation.

The age profile both by number of ships or by tonnage shows that the world fleet is relatively young (average age is 16 years).

This is relevant, and important information because it has an impact on how quickly ships with new propulsion solutions are likely to come into service and when.

4. Use a four-step model to guide decarbonisation efforts.

The ‘4-step model’ can help to structure decarbonisation efforts. The four concepts are scenario analysis (context), value chain mapping (scope), enabler prioritisation (focus), and partnership selection (synergies) (Figure 1).
Exceeding the 2023 Strategy and thereby increasing the chances of reaching the Paris Climate Agreement Goals needs a holistic and inclusive approach that is reflected in the model.

5. Develop scenarios to build context for decarbonisation strategies.

While not predictable in detail, neither is the future completely random. It is, therefore, possible to explore plausible futures in a systematic way to identify both critical uncertainties and relatively settled trends.

Stakeholders should use scenario analysis to reflect on the probable context of decarbonisation.

6. Adopt a value-chain focus to tackle decarbonisation.
Taking a value chain perspective is critical to understanding decarbonisation enablers. The following three interrelated value chains are playing a critical role in decarbonizing shipping: marine fuel and direct propulsion technologies, shipbuilding, and the maritime operational value chain.

Actors should consider inter-industry collaboration to decarbonize multiple intertwined chains.

7. Identify and activate relevant decarbonisation enablers.

Some of the following enabler categories contribute to only one of the three value chains, whereas others may contribute to two or all value chains:

• shipboard energy efficiency technology
• operational and commercial practices
• digital technology
• zero-carbon fuels and technology
• energy conversion and shipbuilding technology
• policies and regulations
• financing and incentives

Actors need to select those enablers that are relevant for their business model and situation.

8. Select and contribute to decarbonisation partnerships.

Collaboration between multiple actors is required to activate the full range of enablers.

Actors should:

• select partnerships to gradually establish a portfolio of collaborations
• ensure sufficient partnership management capabilities are developed
• establish cross-value chain coordination, e.g., across zero-emissions networks
• coordinate wider stakeholder engagement and interaction.

Considering the limited resources of smaller players, larger actors should include them in their efforts. The public sector and international regulators can support these efforts by crafting conducive policies and programmes.

9. With respect to outcomes, balance economic value with societal value by adopting a cdes mindset.

All industries should place greater emphasis on the interrelationship between collaboration (c) and digitalisation (d), as this powerful duo impacts economic (e) and societal (s) success.

A conscious, holistic approach addressing all four components of the cdes formula, a concept we developed in 2022 to ensure long-lasting financial returns and durable wealth and well-being for humanity.

10. Place a strong focus on people.

Governments, employers, workers, and all stakeholder groups need to work together to create positive change. Social dialogue and training of the workforce is key.

Businesses should support a Just Transition through their own policies, strategies and plans.

11. Ensure global alignment of regulations related to decarbonisation.

Collaboration towards effective global regulations and climate ambitions is critical. Participants should:

• provide input into regulatory development at IMO by engaging directly with the Member Governments, or through NGOs with consultative status at the IMO
• provide input to regional regulatory development by engaging with Governments and NGOs
• support a well-to-wake approach and life cycle assessment (LCA) methodology in emission regulations
• adopt a dual-term GHG accounting standard (20-years global warming potentials (GWPs) alongside the accepted 100-years GWPs), as ships are 20 to 30 years assets and environmental and climate tipping points are likely to be
• reached within a 20 years scope
• call for the removal of subsidies for fossil fuels (direct and indirect)
• support the use of actual cargo carried in the calculation of the Carbon Intensity Index.

12. Leverage circular economy principles as a driver for systemic change.

There are several ‘semi-circular’ business models in the existing maritime industry such as sharing equipment in container logistics, chartering, reselling ships, and ship demolition.

The maritime industry should embrace circular economy principles across the board to capture the full source of GHG emissions reduction potential. Of importance are e.g., modularisation and the minimisation of toxicity of materials.

13. Boost global research in maritime decarbonisation.

The global research communities play an important role by identifying and developing technologies and strategies that can reduce greenhouse gas emissions. This can include the development of low-carbon (transitional) but more importantly zero emission fuels, and propulsion technologies, as well as the identification of policies and regulatory measures. Open source is a way to spread the benefits of these technologies.

Research, regulation and experimentation should be driven in parallel because it is the trio of academia, governments and business that form the key pillars of decarbonisation.

14. Adjust to finance requirements in a more sustainable age.

Sustainable finance refers to financial products, services and activities that demonstrate a positive impact on the environment and/or on societal matters. It encompasses a wide range of financial instruments (such as sustainability-linked bonds, sustainability-linked loans, green bonds, green loans and sustainable bonds) and practices that support the transition to a more sustainable (and in some cases also a more equitable) society.

Some maritime companies have issued Green and Sustainability linked Bonds and/or have taken out sustainability-linked loans with and many more should follow.

15. Be an early-mover: even if you choose not to be a single pioneer, be prepared to be an early adopter.

Without private sector pioneers, little may happen in maritime decarbonisation. Pioneer protection is therefore critical. Decarbonisation also needs a nurturing space where inventors and innovators thrive, with an iterative process of development and learning in place. A space where they can also meet incumbents seeking innovation partnerships.

Companies should learn from others that drive innovation; policy-makers should do the same.

A message of hope and urgency

In the book, the 15 key recommendations are supported by numerous case studies demonstrating progress.

We close with a message of urgency delivered by Christiana Figueres, former Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC) and quoted in the forthcoming book on maritime decarbonisation. ‘We will move to a low- carbon world because nature will force us, or because policy will guide us. If we wait until nature forces us, the cost will be astronomical.’