Four Strategies to Reduce Carbon Emissions in the Shipping Industry

By Pianpian Wang

4 Strategies to Reduce Carbon Emissions in the Shipping Industry

Ships are responsible for roughly 3% of global CO2 and GHG emissions (CO2-eq), emitting approximately 1 billion tonnes of CO2 and GHGs per year, according to the data from 2007 to 2012. Yet the total emissions from international shipping could go up due to the growth of the world maritime trade.

To mitigate the shipping industry’s carbon footprint, the International Maritime Organization (“IMO”), as the United Nations specialized agency with responsibility for the safety and security of shipping, first came up with Initial IMO Strategy on reduction of GHG emissions from ships in April 2018. The Initial IMO Strategy includes increasing ships’ energy efficiency, reducing the total annual GHG emissions by at least 50% by 2050 compared to 2008. As a step to further reduce GHG emissions, ships ( including cruise ships) are required by the IMO to reduce SO2 emissions by more than 80%, starting from January 1, 2020.

Are these measures adequate? In a recent survey conducted by Ship Technology, 785 of the 1,337 respondents (58.71%), thought the shipping industry was not doing enough to curb carbon emissions. Meanwhile, only 246 (18.40%) expressed confidence in the sector’s efforts, and the remaining 306 (22.89%) said they were uncertain. Overall, the survey reflects that the shipping industry has room for emission reductions and improvement.

This article identifies four aspects that the shipping industry should look into for long term opportunities to tackle carbon emission reduction and to pave a new business-normal to achieve sustainability.

The Agenda of Aviation Emission Reduction as a Reference

Previously, many critics had compared the aviation industry and shipping industry’s measures of carbon mitigation. The two sectors usually look to each other for reference when developing mitigation strategies, as they share similar fuel struggles and other challenges when combating emission.

Early this year, the International Civil Aviation Organization (ICAO) agreed on rules governing the eligibility of carbon offset programs for the initial pilot phase of the industry’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which runs from 2021 to 2023. Under the new set of rules, airlines can use carbon offsets generated from projects established after 2016, to make sure the quality of carbon offsets and project benefits get properly measured.

In this context, it is reasonable to assume that carbon offsets would play a certain role in the shipping industry’s mitigation efforts at the international level.

Countries’ NDCs as a Push

Technically speaking, the Paris Agreement does not mention anything related to the shipping industry directly. However, the Agreement gives countries the autonomy to develop their own ambitions or goals in the form of nationally determined contributions (“NDCs”) and approach(s) to limit a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels. In other words, countries have the power to regulate the shipping industry’s emissions as part of their NDCs and urge the sector to reduce carbon emissions.

For instance, the European Union Commission came up with a strategy towards reducing GHG emissions from the shipping industry in 2013, and the strategy is primarily to measure, monitor and report carbon emissions from large ships using EU ports. Furthermore, the strategy also includes market-based measures to reduce shipping emissions.

It is noted that carbon emissions from aviation have been included in the EU emissions trading system (EU ETS) since 2012. Another example is the Shanghai Emission Trading Scheme (“ETS”), one of China’s pilot carbon markets, expanded its coverage to include the shipping sector.

According to the IMO plan, countries have to come up with a specific roadmap to achieve the 2050 goal no later than 2023. In this context, countries’ NDCs and domestic market incentives could play a crucial role in assisting to reduce shipping emissions.

Industry Leaders’ Voluntary Moves

Shipping giants Hapag-Lloyd and Maersk have been taking voluntary proactive measures to reduce carbon emissions, and it seems like both companies have beaten the IMO’s industry target earlier than the scheduled time frame.

Currently, the maritime sector, including these shipping companies, have a primary focus on clean technologies to reduce Scope 1 emissions, including cleaner fuels (such as ammonia) and carbon capture for shipping. It is noted that the technology conversion is costly and requires policy and financial support from the governments.

Additionally, the shipping industry should utilize common proactive measures including developing carbon inventory and purchasing carbon offsets for future. Carbon inventory can allow companies to understand, monitor and report their carbon footprint through the whole supply chain, including the upstream and downstream emissions, so they can develop customized emission reduction plans more effectively. Plus, Scope 3 emissions of shipping companies (such as business operations) are usually neglected, but it could be an entry point for shipping companies to start with regarding establishing internal goals.

It is worth mentioning that businesses that require shipping services started incorporating carbon offsets in recent years to engage customers, such as UPS and Esty. These customer-facing businesses, as part of the downstream clients of the shipping industry, have been deemed essential during the COVID19 pandemic through delivering items to organizations, companies and households timely. In the post-COVID19 period, these delivery-related businesses could forge a new opportunity to indirectly help the shipping sector reduce carbon emissions.

Ports Mitigation Measures on Ships

While shipping companies have been the point of focus in showing concerns about carbon mitigation, seaports – equally important venues and players when it comes to facilitating ships – have been working towards carbon mitigation as well.

Some seaports such as Ports of Los Angeles and Long Beach have targeted the port-related sources that were identified in the emissions inventories since 2006 with establishing the Clean Air Action Plan. According to the latest report of the Plan issued in 2017, the Ports plan to reduce GHGs from port-related sources to 40% below 1990 levels by 2030 and 80% below 1990 levels by 2050.

Under the Plan, there are seven programs that focus on all the key aspects of port operations, such as ships, trucks, a Technology Advancement Program (to oversee general technology improvement), Cargo Handling Equipment, Harbor Craft, Rail (railroad transportation related to the Ports) and Baywide Standards (general standards for the Ports’ activities).

Regarding ships, the Ports, with funding support from the state of California and the USEPA, provide financial incentives for ships with the newest engines and for ships participating in a technology demonstration program.

Other than the Ports of Los Angeles and Long Beach, leading ports in Europe also have formed partnerships with banks, oil and shipping companies to have ships and marine fuels with zero carbon emissions on the high seas by 2030.

It is reasonable to assume that more and more ports will start taking actions on shipping emissions in ports within 3-5 years, which would present opportunities for shipping companies and seaports to work together to improve vessels and fuels.