Expert opinion Fit for 55

Already in 2008 the international shipping has achieved the so-called decoupling. Since 2008, emissions from maritime transport in relation to tonne-kilometers transported have decreased slightly, although tonne-kilometers have continued to increase (IMO 2020). This has largely been done through operational solutions, such as slowing down at sea while streamlining port operations.

Expert opinion 6.4.2022 Finnish Parliamentary Committee on Transport and Communications / Negotiations in the International Maritime Organization on economic instruments to reduce greenhouse gas emissions from international shipping

In June 2021, the International Maritime Organization (IMO) decided on measures to reduce the carbon intensity of shipping by 11% between 2019 and 2026 and to reduce total annual greenhouse gas emissions from international shipping by at least 50% by 2050 compared to 2008. (IMO 2021)

In addition, in July 2021, the European Commission presented the Fit for 55 package, which included proposals to include shipping in emissions trading, the carbon content of fuels, the abolition of duty-free treatment for bunkers and the distribution infrastructure for alternative fuels. In practice, these EU measures are more stringent than those decided by the IMO. (EU 2021)

These two legislative procedures cannot be considered separately. The IMO calculation system for maritime emissions is complex, based on computational formulas for ship design and operation. Unfortunately, these formulas do not always steer development in the right direction. For example, container vessels may have to reduce emissions by up to 50%, while the corresponding reduction requirement for ro-ro vessels is only 5%. This can lead to a shift in cargo in the “wrong direction”, ie to ship types with higher emissions per tonne transported. In addition, IMO regulations affect the size of a ship’s operational carbon index – the larger the ship, the lower the index, even if the carbon emissions and the amount of cargo carried are the same.

EU Fit for 55 measures, such as emissions trading and reducing the carbon content of fuels, are significantly better measures, as they mainly directly affect actual emissions, not capacity, for example. Unfortunately, EU regulations do not apply to the whole world, but only to transport within the EU, which can move cargo or routes outside the EU (so-called carbon leakage), increasing emissions.

In addition, both schemes mainly apply to vessels of more than 5 000 GT. The 5,000 GT is already a relatively large vessel (a bulk carrier of about one hundred meters). There is a high risk that cargo will be transferred to smaller vessels, and thus the benefits of economies of scale in maritime transport will be lost; and emissions are rising.

The most significant thing to consider is that already in 2008 international shipping has made the so-called decoupling. Since 2008, emissions from maritime transport in relation to tonne-kilometers transported have remained stable (decreased slightly), although tonne-kilometers have continued to increase (IMO 2020). This has largely been done through operational solutions, such as slowing down at sea while streamlining port operations. Since then, attention has been paid to ship design, as a result of which ships built today can consume up to 50% less fuel than those built 10 years ago.

There are three approaches to reducing emissions from shipping: (i) low carbon fuels, (ii) improved ship design and other technological solutions, and (iii) operational solutions, i.e. ship type selection and shipboard. Energy companies are currently discussing fuel solutions at an accelerating pace and ship designers about new technological solutions, but operational solutions can still bring the biggest emission reductions at low cost.

It is estimated that thousands of billions of euros will be needed to achieve carbon neutrality in shipping. This is calculated using the currently commercially available technology. The question for the maritime sector as a whole is – what technologies will be available for shipping in ten or twenty years’ time – and how can shipowners prepare for the new regulations that are coming?

The shipping industry has six important steps towards a carbon-free future (Tapaninen 2021). The first four measures concern shipowners, one for shippers and one for regulators.

1. First, shipowners should improve the energy efficiency of their newbuildings. The lifespan of a ship is practically more than 20 years, up to 30 years or more. It is therefore very important that the ship plans on the table are as energy efficient as possible. Improving ship designs has already significantly reduced shipowners’ emissions.

2. Secondly, shipowners should pilot various technical solutions to improve energy efficiency. These include rotor sails; intelligent IT solutions for maintenance, bunker consumption optimization and security; air lubrication systems; battery usage in ports and waterways; information on arrival in port, etc. Several solutions are being developed around the world for the energy efficiency of ships, and shipowners need to be active in order to make them available for everyday use. They may have a CO2-reducing effect of only a few percent, but they should always be tested at least.

3. Thirdly, shipping companies must reduce their speed and port companies must improve their operations. One of the most effective ways to reduce greenhouse gases is to reduce the speed of ships. On the fastest ships, dropping a few knots can reduce emissions by a third.

In many cases, improving information and cargo handling in ports saves time that can be spent at sea without increasing total transport time. Transferring cargo to traditional bulk or container vessels instead of high-speed passenger-car ferries would significantly reduce emissions from Finnish shipping.

4. Fourthly, shipowners should prepare for new low-carbon or zero-carbon fuels. We do not yet know what the fuel of tomorrow is – is it hydrogen, ammonia, biofuels, methanol or even electricity? Or all of them? However, some of them are coming and shipping companies should increase their knowledge of different alternative fuels to suit their own business models.

5. Fifth, a shipper cannot rely solely on the shipping industry to change their behavior. Shippers should also re-evaluate their entire transport chain. Is it possible to use slower vessels instead of high speeds, containers instead of trucks or rail instead of roads, or to carry more cargo at the same time or more accurate cargo tracking to get better estimates of the time of arrival? Should there really be more stock and not rely on fast shipments? These decisions must start with an analysis of the end customer’s needs, e.g. whether they really want high speed or just get products when needed. Different products have different needs, and the same transportation solutions are not best for all products.

6. Finally, public authorities and regulators need to put in place rules, support mechanisms and carbon taxes to help the shipping industry move towards carbon neutrality. It is very important that these rules and mechanisms treat shipowners fairly, that is, that they really focus on reducing CO2 and do not create unfair competition.

By following these six steps, the shipping industry has the potential to achieve carbon neutrality in a balanced way and to strengthen shipping companies in the future. It would be important for the Finnish government to support these existing developments by providing financial incentives for the transition to low emissions, ie in practice EU Fit For 55 measures. This not only supports the pioneering nature of our shipping companies, but also the transition of our maritime industry and fuel suppliers towards new solutions. In addition, in the current global political context, all efforts must be made to reduce dependence on fossil fuels.

However, Finland should use all its opportunities to prevent carbon leakage, ie the diversion of cargo outside the EU. In practice, this would mean harmonizing EU and IMO regulations.

Sources:

EU (2021). European Green Deal: Commission proposes transformation of EU economy and society to meet climate ambitions. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3541

IMO (2020). Fourth IMO GHG study 2020. International Maritime Organization. London.

IMO (2021). Initial IMO GHG Strategy. https://www.imo.org/en/MediaCentre/HotTopics/Pages/Reducing-greenhouse-gas-emissions-from-ships.aspx

Tapaninen U. (2021). Six steps to reach carbon-free shipping. in K. Liuhto (ed.) Baltic Rim Economies, Centrum Balticum Foundation, 5/2021

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