Industry calls on IMO to bridge fuel price gap

Major shipping companies and cargo owners, including MSC, Maersk, and Höegh Autoliners, have joined forces to urge immediate action on maritime decarbonisation during the 79th Session of the United Nations General Assembly in New York.

The United Nations Global Compact’s High Level Ocean for the Future Meeting on 23 September 2024 brought together business leaders, governments, NGOs, and multilateral organisations to discuss how ocean industries can address key challenges and support all 17 SDGs (Sustainable Development Goals) through a sustainable ocean economy. Participants included shipping companies, ports, cargo owners, energy suppliers, and other key stakeholders.

The parties issued a joint statement, calling for a global regulatory framework to accelerate the adoption of zero and near-zero greenhouse gas (GHG) fuels. As pressure mounts for the shipping industry to reduce its environmental impact, the statement highlights the need for mid-term measures to address the price gap between conventional and green fuels, ensuring fair competition across the sector.

“Today, the industry is at a tipping point with ambitious environmental goals and a keen focus on ensuring a just transition for all stakeholders while continuing to secure efficient global trade. To reach our targets, a strong and global regulatory framework with effective mid-term measures to bridge the price gap is urgently needed to ensure a level and competitive playing field,” the statement reads.

“We encourage all UN Member States to work together towards innovative policies and financial mechanisms to level the playing field between fossil and zero and near-zero GHG marine fuels. It is critical to speed up and scale up the production capacity of such marine fuels and the necessary infrastructure to support it in order to accelerate the green transition of the global supply chain.”

Maersk is advocating for a maritime fuel standard and a pricing mechanism to ensure price parity between fossil fuels and alternative fuels.

“Shipping lines, through the World Shipping Council, have proposed a Green Balance Mechanism (GBM), which we support. Based on the life cycle analysis of the fuel, it proportionally rewards the use of green fuels and disincentivises fossil fuels, closing the price gap from the outset without causing major inflationary disruptions,” Maersk CEO, Vincent Clerc, said recently in a LinkedIn post.

“Additionally, the GBM establishes a fund to support a just transition, particularly benefiting developing nations by facilitating their energy transition without disproportionate burdens. This approach fosters a global leap towards sustainable maritime energy use. Governments at the IMO have only 6 months to a reach consensus on effective measures that will make green energy projects bankable in the short term, and we urge them to make tangible progress at MEPC82 meeting taking place in just a few days. By doing so, they will enable cargo owners to reduce scope 3 emissions on time and move the sector forward. It is crucial that these measures will be finally adopted in 2025.”

Key IMO meetings

The call comes ahead of this week’s IMO’s Intersessional Working Group on Reduction of GHG Emissions from Ships (IWSG-GHG-17) and MEPC 82 meeting in October 2024, when the member states will review the impact of the proposed basket of technical and economic mid-term measures to support energy transition on Member States. These two IMO gatherings will be the first time that all three critical elements of the IMO’s implementation of its GHG Strategy – the Carbon Intensity Indicator (CII) revision, Global Fuel Standard (GFS) and a greenhouse gas (GHG) levy will be on the table at the same meeting.

The Clean Shipping Coalition has called on the IMO to recognise wind propulsion as an essential tool in achieving the sector’s decarbonisation goals.

“These two weeks present a unique moment for the IMO to demonstrate that it is serious about meeting its own new IMO GHG Strategy targets – which means taking action on all three of these fronts,” said Clean Shipping Coalition President Delaine McCullough.

“To complete the energy transition, the IMO should ensure that any fuel standard drives the use of wind and new fuels that are genuinely zero-emission, safe, scalable and sustainable,” said Constance Dijkstra, IMO Policy Manager at Transport & Environment. “We should avoid at all costs a measure that will encourage the use of biofuels, which are not scalable and would delay investments in true solutions.”

“Recent analyses of the impact of the various carbon pricing measures on the table show that a universal levy on all shipping’s life-cycle GHG emissions is the simplest and most cost-effective way to deliver the transition to zero-emission shipping,” said Bastien Bonnet-Catalloube, Expert on decarbonisation of aviation and shipping, Carbon Market Watch.

“A levy of US$ 150/ton of GHG emissions, as proposed by a group of Pacific Island and Caribbean states, would discourage the consumption of polluting fuels and generate revenues that can ensure that shipping’s climate transition is just and equitable. It would also reinforce the CII and the GFS, by driving early investments in energy efficiency and wind technologies and spur the development and deployment of zero-emission fuels.”

Industry bodies create a joint front

INTERCARGO, representing 30% of the global bulk carrier fleet, called for a simplified approach to the IMO mid-term GHG reduction strategy. The association backed several key measures, including a simplified pricing mechanism and a well-to-wake emissions accounting system.

In addition, industry bodies including BIMCO, Interferry, Intertanko, World Shipping Council, International Chamber of Shipping, CLIA and International Parcel Tankers Association (IPTA) said in a separate statement that the IMO member states must adopt workable regulatory measures while minimising the risk of unintended consequences.

Accordingly, the measures should:

• On a pathway to net zero, achieve immediate and demonstrable net reductions in GHG emissions as a priority.
• Use a realistic, goal-based approach that is data-driven and fuel and technology neutral.
• Minimise administrative burdens while ensuring effective compliance enforcement.
• Incorporate flexible compliance mechanisms to allow investments where the most benefits can be realised.
• Take into account the GHG-intensity of fuels on a lifecycle/well-to-wake basis consistent with LCA Guidelines/IPPC principles/shoreside certifications.
• Allow the broader shipping industry access to collected funds for the direct development of technology, fuels, and measures to support decarbonisation efforts.
• Send a clear signal and provide incentives to shipping companies, energy producers, marine fuel suppliers and technology manufacturers to help de-risk investment decisions, support early adopters and protect them from penalisation, and enhance cost certainty to ship owners and charterers.
• Reduce or close the cost gap between zero and near-zero GHG fuels and traditional (fossil) fuels while minimising disproportionate negative impacts on trade, recognising that technological retrofits and the uptake of energy sources and less GHG-intense fuels available now are crucial to decarbonising the existing fleet.
• Ensure there is no double counting of emissions or payment for emissions into more than one system, and regional or national programs are avoided or are sunset/harmonised with IMO requirements.
• Identify timelines for periodic assessments of fuels and technologies, with realistic phase-in/out periods and set timelines for review and consideration of future cost increases.