Failing to agree a price mechanism for maritime emissions at IMO will risk a decarbonization delay that neither shipping nor the planet can afford.
A recent study shows how to get it right, writes WinGD CEO Dominik Schneiter .
As the eighty-fourth gathering of IMO’s Marine Environment Protection Committee (MEPC) approaches, a new report from two respected shipping and climate research institutions has highlighted exactly what is at stake.
From April 27 the committee will be considering alternative structures for IMO’s greenhouse gas (GHG) emissions reduction policy, following the shock adjournment ahead of a vote on the adoption of the Net Zero Framework (NZF) last October. Multiple structures have been proposed, many of which abandon core elements of the NZF. But according to the UCL Shipping and Oceans Research Group and the Rocky Mountain Institute, nothing short of a GHG pricing scheme will help to drive decarbonisation in global shipping.
This tallies entirely with WinGD’s perspective. We fully support the adopted goals of the IMO – namely to reach net-zero emissions from shipping by or around 2050 - and have developed the engine technology to help shipowners make an early transition to clean fuels. Without robust, effective incentives to drive this transition, we allow our industry to further endanger the climate and the planet. In that scenario, let us be clear – we all lose.
The analysis in the UCL and RMI study is particularly impressive for its modelling of how shipowners actually approach fuel choices; “cautiously, with limited foresight, and with one eye on their competitors,” as summarised by UCL Shipping and Oceans Research Group Senior Research Fellow Dr Marie Fricaudet. These behaviours are of course entirely rational given current uncertainty around ZNZ fuel availability – and exactly the factors that make strong policy essential if we are to accelerate the net-zero transition in line with IMO’s ambitions.
The study finds that 'only architectures combining a GHG price, a capped Surplus Unit market, and a reward mechanism for zero- and near-zero (ZNZ) fuels create the conditions for an investable transition’. This was perhaps one of the biggest flaws of the NZF as drafted. Although a ZNZ reward was considered, it was never specified. Yet this element is essential for allowing both fuel production scale-up and ship investment decisions. This time around, a ZNZ reward needs to be settled early enough - and at a high enough value - to bring the net cost of green fuels in line with fossil sources.
But it’s not just about giving bonuses to those who use specific fuels. There needs to be a realistic, verifiable approach to both measuring emissions reductions and rewarding them. The study argues that ‘failing to support early adopters in policy design carries significant transition risk’. WinGD would thoroughly agree. In the NZF drafting, default emission factors risked locking in mature technologies and stifling innovation in lower emission solutions. A prime example is our own low-pressure two-stroke LNG engine, which was given a default methane slip factor nearly twice as high as the slip achieved in our current, state-of-the-art technology.
Early adopters need to see the value in investing in new technologies. That is hindered by legacy default values that favour established solutions. When the MEPC meets, this issue should be addressed, not just as a correction in methane slip factors, but in a principle that treats all fuels and technologies fairly. The way to achieve that, in our view, is to replace emissions intensity estimates with actual measurement of emissions.
We have seen in our own portfolio how using emissions intensity as a basis for penalties can lead to irrational results. For example, a similar application using less fuel and generating lower emissions can be subject to higher penalties if the fuel-to-emissions ratio is less favourable. A focus on real, measured emissions would eliminate those injustices and prevent virtue-signalling selections of fuel and technology that, ultimately, reward higher emissions.
Whether or not the IMO will succeed this time around is an entirely different subject. The global politics that downed the NZF are still in play, and have possibly become even more strident in the interim. But for all those that believe in limiting and reversing climate change – not only as a matter of principle but one of material consequence for our and future generations – the UCL and RMI study highlights exactly what needs to be achieved.
Robban Assafina is now on WhatsApp channel. Click Here
