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Green Shipping Outlook for 2023

Views: 18     Author: Site Editor     Publish Time: 2023-01-09      Origin: Site

Green Shipping Outlook for 2023


1. How will the IMO’s emission reduction targets for international shipping be revised?

On April 13, 2018, the International Maritime Organization (IMO) MEPC 72 meeting adopted an initial strategy on reducing greenhouse gas emissions from ships (resolution MEPC.304(72)). The initial strategy envisages for the first time the reduction of total greenhouse gas emissions from international shipping and sets the following goals: by 2030, the carbon intensity of international shipping (CO2 emissions per unit of transport volume) will be reduced by 40% compared to 2008 levels, and by 70% by 2050; By 2050, the total annual greenhouse gas emissions from international shipping will be reduced by at least 50% compared with 2008 levels.


In the past two years, international shipping companies have actively or passively expressed their views on decarbonization strategies. Leading shipping companies have set goals for greenhouse gas emission reduction and carbon neutrality, and planned decarbonization and emission reduction paths. The debate on the timing of carbon neutrality has never ceased.


At present, the carbon neutrality goal of international mainstream shipping companies is set intentionally or unintentionally in 2050, which is consistent with the carbon neutrality commitment of western developed countries. Some climate-aggressive companies have pushed this goal forward, such as Hapag-Lloyd's 2045 climate neutrality, Maersk's 2040 net-zero greenhouse gas emissions, and even Berge Bulk's target of 2025 annual carbon neutrality. Since China proposed the 3060 strategy in 2020, China's major shipping companies COSCO Shipping and China Merchants have also announced their 2060 carbon neutral goals in 2022.


Different goals represent different interests, and the ultimate binding goals are still in the hands of IMO. At present, most international shipping players in the West generally criticize IMO's initial strategy for being too conservative. A considerable number of IMO member states hope to raise the target to carbon neutrality by 2050 as well. The revision of the initial strategic goals will be carried out at the MEPC 80 meeting in July 2023!


However, it is not difficult to see that the decarbonization target of the shipping industry is highly related to the overall decarbonization target of the country in which it is located. As is generally understood in China, the right to carbon emission is the right to development. Developing countries usually set the goal of carbon neutrality at a later time, and the main purpose is to leave more room for the industrial development of their own country. Such as China's 2060 carbon neutrality, India's 2070 carbon neutrality.


Whether to agree to require the international shipping industry to achieve carbon neutrality by 2050 is an issue that most developing countries that are members of the IMO are facing. What will be the impact of carbon neutrality in international shipping in 2050? At present, it can be estimated that if the goal of carbon neutrality is adjusted to 2050, starting from 2026, the annual target reduction of the ship operation carbon intensity index CII will be more stringent, from the current 2% per year to more than 6%!


In addition, the production of alternative fuels, the R&D and application of green ship technology, the replacement of fleets and the increase in operating costs will all be factors of inequality that may arise in an overly aggressive shipping emission reduction campaign, and the gap between developed and developing countries It may be pulled apart again because of this.


Therefore, the revision of IMO's emission reduction target will be an important node that will affect the international shipping industry in the next few decades, and the negotiations and debates will become more intense in the first half of this year. It remains to be seen how the negotiation process and final results will be!


2. The number of alternative fuel ships is growing rapidly.


Green Shipping Outlook for 2023-2

DNV AFI platform data


Throughout 2022, alternative fuel ship orders and construction plans have dominated the headlines of shipping news again and again. According to data from clarkson research, about 39.6% of the 1,535 ship newbuilding orders in 2022 have alternative fuel types (including ready type and battery power). And this figure is only 23.0% in 2021 and 21.3% in 2020.


Not surprisingly, 2023 will be the peak year for deliveries of alternative fuel ships. According to the Alternative Fuel Vessel Growth Chart from the DNV AFI database, the growth rate for alternative fuel vessels in 2023 will be the highest in recent years. Among them, the main growth of alternative fuel type is still liquefied natural gas (LNG) fuel, which will increase by 188 ships, and the growth rate will reach 53.0%. The number of LPG fueled ships has increased by 57, almost doubling, but all LPG fueled ships are currently LPG carriers, and LPG has not yet achieved "breaking the circle". Methanol is one of the most popular alternative fuels for ships in 2022, but the main methanol fueled ships will not be delivered until 2024, and the six methanol fueled ships to be delivered in 2023 are also methanol fueled carriers.


3. The application and management of CII face huge challenges

On January 1, the annual operational carbon intensity index (CII) began to be fully implemented. Data collection related to this will take place throughout 2023. Although the final rating will not be officially announced until April 2024, the urgency of CII management has been put on the table. Within the scope of operability, shipping companies, especially shipowners, should try their best to ensure the CII rating of their own fleets The higher the better, avoiding more ships falling into a D or E rating.


At present, it is unrealistic to upgrade the CII rating in the short term and rely on alternative fuels. It will take at least 3-5 years for ship construction and fleet renewal. Relying on ship energy-saving renovation seems to be too hasty in terms of time. From decision to design to docking and refitting, at least half a year will pass. The only thing that can produce immediate results without time constraints is to make a fuss about operations management.


This requires the shipowner to first manage the CII rating of the fleet. Although the CII rating is based on the operation performance of the whole year, it is completed by voyage by voyage throughout the year. If the shipowner can estimate the CII performance at each voyage planning stage, he can adjust and optimize the execution of the voyage as needed, and finally reach the desired CII rating.


On this basis, ship owners and ship operators need to conduct more refined management of voyage execution. Specific approaches include training of operational teams, smarter air guidance services for voyage optimization, and coordinated berthing schedule management for just-in-time arrival (JIT). In general, it is to choose the correct route and the correct ship speed to achieve the lowest level of fuel consumption and emissions during the voyage.


Shipowners who consciously and proactively upgrade the CII rating, if they do not operate the ship themselves, need to add CII clauses to the ship charter to constrain the actual operator of the ship to ensure the ship's emission performance when formulating the voyage plan.


Of course, at present, more and more shipowners still focus on CII data collection, complete contract performance duties according to the requirements of classification societies or ship registry supervision departments, and do not realize the importance of CII, or have not established fleet CII management optimization system, which itself is one of the important challenges in the coming years.


As the first shipping emission reduction system design plan proposed by China and developed by developing countries, the completion of CII is the difficult negotiation of Chinese representatives at IMO, which delayed the radical emission reduction plan proposed by the European Union and provided the transformation of China's shipping industry. enough space. Next, China’s proposed incentive mechanism tied to CII will also strive for the final plan of medium-term measures at IMO. The Chinese shipping industry should pay more attention to supporting CII and rely on the CII system to ensure that it will not be passive on the road of global shipping decarbonization transformation.


Before the further revision of CII regulations in 2026, what problems will the application and management of CII face? What benefits will CII bring to the international shipping industry? What criticisms and revision suggestions will CII make? 2023 will be a big year to unlock these issues.


4. Will the full life cycle guidelines for shipping fuel be published?

There is no doubt that decarbonizing shipping will require new low/zero carbon fuels. But the only ones that can truly achieve zero carbon emissions are ammonia fuel and hydrogen fuel (the chemical formula of these two fuels does not contain carbon elements), and these two fuels are still technically unable to be efficiently applied to ocean-going ships. Combustion of other fuels such as LNG, methanol or LPG still produces CO2 emissions.


But can LNG and methanol not be used as the ultimate decarbonization fuel? The answer is no. If carbon dioxide captured from the atmosphere is used as raw material and produced through green energy, even if there is still carbon dioxide in the final fuel combustion, it still exists in the atmosphere. This is called carbon neutrality.


So how to calculate and certify the emission reduction potential of these fuels? The Life Cycle Greenhouse Gas/Carbon Intensity Guidelines (LCA Guidelines) play this role. The life cycle assessment (LCA) method also refers to the assessment of the greenhouse gas emissions of ships from fuel production to final use (Well-to-Wake).


It can be said that with this guideline, the green methanol contracted by Maersk will soon become a "zero-carbon fuel". Without this certification, IMO still regards methanol as a fuel with relatively high carbon emissions.


The formulation of the "LCA Guidelines" will start from September 15 to September 17, 2021, at the 9th Intersessional Working Group Meeting (ISWG-GHG 9) of the International Maritime Organization (IMO) on Reduction of Greenhouse Gas Emissions from Ships. In the past ISWG-GHG 13 meeting, the LCA communication working group submitted a mid-term report, which was reviewed at the MEPC 79 meeting. Although ISWG-GHG 13 agreed to allow time for the communication working group to submit its final report to MEPC 80. However, according to the feedback at the MEPC 79 meeting, the final report will most likely be submitted at the MEPC 80 meeting in July next year.


This is of great significance for the use of alternative fuels in the shipping industry, as well as the certification of alternative fuel producers and suppliers. The production, use and certification of green fuel/blue fuel will be more standardized. It is also more based and referenced for shipping companies to seek green fuels to decarbonize their fleets, and the supply of global green fuels will officially become the number one challenge facing the international shipping industry.


5. Is the shipping carbon tax coming?

Although the term "shipping carbon tax" is not accurate enough, it is more vivid and easy to understand. The accurate term is the market-based mechanism of shipping emission reduction measures (MBM), carbon tax and carbon trading system are one of them, and also include the market reward and punishment mechanism.


According to the time schedule of the work plan for the review of medium and long-term measures adopted by MEPC 76, the International Maritime Organization (IMO) formulates the policy of market mechanism measures (MBM) and is divided into three stages:


Phase 1: Preliminary Review of Measures and Proposals (2021-2022 Spring)


Phase 2: Selection and Evaluation of Measures (Spring 2022-Spring 2023)


Phase 3: Clarify the measures and implementation time


Discussions on Market Mechanism Measures (MBM) at the 12th Intersessional Working Group Meeting on Reduction of Greenhouse Gas Emissions from Ships (ISWG-GHG 12) in May 2022 yielded positive results. It was affirmed at the MEPC 78 meeting in June, and the second phase of work kicked off.


At ISWG-GHG 13 before the MEPC 79 meeting in December, the method for selection and evaluation of market mechanism measures (MBM) was determined, the revision of the "Assessment Procedure for the Impact of Candidate Measures on Countries" was completed, and the review work was officially launched. At present, it includes Emissions Cap and Trade System (ECTS), Greenhouse Gas Fuel Standard (GFS), Maritime Research and Development Fund (IMRB/IMRF), Zero Emission Shipping Incentive Scheme (ZESIS), Carbon Tax (Levy), International Maritime Sustainability Fund and Reward Mechanism (IMSF&R), etc. These results were also reviewed and approved at the MEPC 79 meeting.


Before next year's MEPC 80 meeting, there will be two important meetings to finalize the specific plans, and the evaluation and deliberation work will also reach the most important points, namely ISWG-GHG 14 (from March 20, 2023 to 24) and ISWG-GHG 15 (26-30 June 2023)


Ultimately, the MEPC 80 in July 2023 will agree on the priorities for medium-term measures. The priorities include both technical and economic (market mechanism measures), and may be a combination of multiple measures.


The impact of IMO medium-term measures to reduce greenhouse gas emissions from ships is particularly significant. Prior to this, neither EEXI, CII nor SEEMP had a significant impact on the actual operation of the shipping business, and many measures were still in the paper work stage. Even for the CII for operations, only ships are rated, and there are no essential punitive measures for the rating.


However, the arrival of medium-term measures means a cross-latitude upgrade of shipping emission reduction supervision. The shipping regulatory authority has the official right to "tax, fine or reward" the international shipping industry, and all participants, whether active or passive, have to pay real costs for the shipping industry to reduce emissions.


Of course, it is impossible to advance the procedure so quickly. Although some IMO member states hope that these medium and long-term measures will take effect in 2023-2025, according to the current progress, even if the priorities can be determined this year, the final plan will still take time discuss. The third phase did not give a clear time plan, and some professionals said that the confirmation of the final plan of these mid-term measures and the actual effective time will not be earlier than 2026.

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