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Sustainability and de-carbonisation in the international shipping sector: an overview

Posted: 31/10/2021

With the 26th UN Climate Change Conference (COP26) upon us, sustainability, de-carbonisation and “net zero” – where any new emissions added to the atmosphere are balanced by absorbing an equivalent amount from the atmosphere – are at the top of the global agenda.  Specifically, “coal, cars, cash and trees” are the areas that the UK Government has pledged to act on and it is true that, with regard to the international shipping sector, the main impact of COP26 is likely to be its influence on the International Maritime Organization’s meeting on de-carbonisation scheduled to take place later in November. But although the exact form that any further de-carbonisation measures will take and how far they will go towards achieving net zero for the international shipping sector is at present unknown, there can be no doubt that a greener, cleaner future for the sector lies firmly ahead.

In this article, we will take stock of where sustainability in the maritime sector is now by looking back at key milestones in the last fifty years. We will then set out what the course ahead to a greener future for international shipping could look like and the organisations, regulations and commercial pressures likely to shape it. 

A dirty business?

The international shipping sector and maritime transport emit around 940 million tonnes of CO2 annually. In addition, there are numerous other greenhouse gasses (GHGs) produced, most of which have a far greater heat-trapping effect, pound for pound, than CO2.  Methane is one such GHG whose emissions are projected to increase rapidly as the use of Liquefied Natural Gas (LNG) as a marine fuel increases. Shipping also causes the release of nitrogen oxides into the atmosphere, although Tier II and Tier III (Tier I being the most polluting, Tier III the least) engines entering global fleets have slowed the increase in such emissions.  Further, shipping is one of the world’s most polluting industries in respect of sulphur dioxide, nitrogen oxides and particulate matter, which not only contribute to climate change but can also be a danger to human health.

All the above means that the international shipping sector is responsible for about 2.5% of GHG emissions. To put that in perspective it is approximately the equivalent of the annual carbon emissions of Germany or Japan.

The clean up

In 1973, the IMO adopted the International Convention for the Prevention of Pollution from Ships (MARPOL). The initial aim of the MARPOL Convention was to prevent pollution of the marine environment by ships from operational or accidental causes but is has since expanded to cover a wider range of sources of pollution from ships including sewage, garbage and packaging. 

The first IMO regulation relating to emissions from ships came in 1997 when Annex VI “Prevention of Air Pollution from Ships”, was added to MARPOL. This Annex, which entered into force on 19 May 2005, set limits on sulphur oxide and nitrogen oxide emissions from ship exhausts.

Then, in 2011 the IMO adopted the first legally binding climate change treaty since the Kyoto Protocol. The amendments to MARPOL that followed were aimed at both increasing energy efficiency and reducing GHG emissions. The changes entered into force in January 2013 and are relevant to both existing ships and new tonnage:

Existing ships

Since 1 January 2013, all ships have been required to operate a Ship Energy Efficiency Management Plan (SEEMP). The SEEMP is a ship management tool that aims to improve the energy efficiency of ship in a cost-effective manner. The SEEMP is supported by an Energy Efficiency Operational Index (EEOI), which ship owners and operators can consult to gauge the potential impact of any management changes (such as improved voyage planning or waste heat recovery systems) and thus weigh up the options from a more informed position.

New ships

The Energy Efficiency Design Index (EEDI) for new ships aims to promote energy efficient and less polluting equipment and engines. The EEDI requires a minimum energy efficient level per capacity mile for different ship types and size; the smaller the EEDI the more energy efficient the ship design. Since 1 January 2013, new ship design needs to meet the reference level for that specific ship type. The level is to be tightened incrementally every five years and so the EEDI is expected to stimulate continued innovation and technical development of all the components influencing the fuel efficiency of a ship from its design phase. The first level required CO2 reductions of 10% (calculated from a reference line representing the average efficiency for ships built between 2000 and 2010) and this will have increased to 30% by 2025

NOx and SOx - Cutting Sulphur Oxide and Nitrogen Oxide Emissions

Before IMO 2020 came into force on 1 January 2020 most ships were burning heavy fuel oil.  Heavy fuel oil has a high sulphur content and sulphur would be emitted as a by-product after the bunkers had been used in the engine. IMO 2020 limits the sulphur content in the fuel oil used on board ships operating outside designated emission control areas to 0.50% m/m (mass by mass) - a significant reduction from the previous limit of 3.5%.

The IMO also seek to control engine NOx emissions through the issue of an International Air Pollution Prevention Certificate. These regulations apply to almost all ships built this century and ships are classified as Tier I, II or III depending on the amount of NOx emissions they produce.

Other pressures on the international shipping sector

Aside from the regulatory and political pressure, there are a multitude of other forces pushing and pulling the international shipping sector towards increased sustainability.

Ship finance

The Poseidon Principles are a private initiative by lenders, lessors and guarantors launched in June 2019 with the aim to provide a framework to align financial maritime portfolios with responsible environmental maritime practices. They are  a clear indication of the significant role that private finance will have in making shipping more sustainable in the future.

Commercial pressure

Some of the world’s major shippers including Amazon, Ikea, and Unilever have made a commitment to only use zero carbon shipping by 2040. The commitment was made at the Aspen Institute, a corporate decarbonisation group, under its newly formed Cargo Owners for Zero Emission Vessels group who have stated that they want governments to take action to decarbonise the shipping industry by 2040. Commercial pressure of this nature is only likely to increase.

Environmental pressure

Although we do not discuss it in further detail here, one need only look to the field of ship recycling to see the ever increasing scrutiny that ship owners are under from NGOs and the relevant authorities when dealing with their end-of-life ships. It is not difficult to imagine, as regulatory requirements in respect of sustainable shipping practices become ever more onerous, a similar level of scrutiny becoming the norm across sustainable shipping practices as a whole.

What does a cleaner, greener future look like?

The IMO’s voluntarily adopted initial strategy to reduce GHG emissions from ships gives the clearest indication of what is to come. It envisages, in particular, a reduction in carbon intensity of international shipping when compared to 2008 levels by at least 40% by 2030, pursuing efforts towards 70% by 2050.  Overall, the current aim of the initial strategy is that total annual GHG emissions from international shipping should be reduced by at least 50% by 2050 compared to 2008 levels.

But watch this space, as the UK and a coalition of 34 other nations and the European Commission have been increasingly vocal that progress is not being made fast enough and have called on the IMO to set the target of net zero in respect of carbon emissions by 2050.

What next?

The question of how to achieve sustainability in the international shipping sector does not have a simple or single answer. Instead it raises further questions such as: how will the required technologies and cleaner fuels be developed; who will provide the infrastructure to roll it out; where will this take place; what will the cost be and, perhaps most significant, who will pay for it? Add to the above the fact that, although there is broad support for change, there are many moving parts in the form of international bodies, regulators, governments, ports, yards, owners, charterers, shippers and more, each with their own political, environmental, logistical concerns and commercial self-interest.

To summarise then, the journey to sustainability in the international shipping sector began almost fifty years ago, but the pace of change has never been greater and it is this that will have ever-increasing implications for owners, charterers and commodity traders alike in the years to come.

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