Analysis: Shipping Climate Plan Delay Could Sink Clean Fuel Projects

by Angeli Mehta ( Ethical Corporation Magazine/Reuters) Vote to delay agreed IMO climate plan means 100 ammonia and methanol projects now uncertain; Shipping GHG emissions could rise 50% by 2050 without action; IMO plan was expected to raise $11-12 billion annually for small island states; The EU's FuelEU Maritime regulation sets decreasing greenhouse gas limits for ships calling at EU ports

As the Trump administration dismantles climate action at home, it has demonstrated that it’s also prepared to try to derail global attempts to cut emissions.

There had been widespread optimism that members of the International Maritime Organisation (IMO) would sign off on an agreement for a global fuel standard and a global price on shipping emissions, which had been thrashed out in April.

But sustained U.S. threats of retaliatory measures, including sanctions, visa restrictions and commercial penalties, against nations supporting the proposed Net Zero Framework led to a vote to delay the decision for a year.

There is an urgency to decarbonise shipping: the industry uses dirty fuels and accounts for 3% of global emissions today, but that could rise by as much as 50% by 2050 without industry action. The challenge is exacerbated as political tensions force ships to reroute.

The IMO’s Net-Zero Framework, which has been years in the making, is intended to progressively lower permitted greenhouse gas emission intensity levels, so incentivising international shipping to switch to cleaner fuels, and adopt efficiency measures, such as speed optimisation or weather routings.

Rather than a flat levy on emissions (as many had advocated), the framework involves a ratcheting of fees for vessels that miss targets and rewards for those that adopt cleaner fuels.

Various analyses suggest the deal, which would have come into force in 2028 had it been ratified, would lead to a 10% reduction in emissions on 2008 levels by 2030, compared with the IMO’s target of “at least 20% – striving for 30%”.

In a statement following the collapse, the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping said “The case for a global framework is stronger than ever”, and urged member states to use the year to advance the guidelines for action.

The IMO delay has ripple effects throughout supply chains, as shipping is a potentially important off taker for green hydrogen-based fuels, with its demand helping to scale the hydrogen industry and cut costs.

Another shipping fuel is green ammonia, which also requires hydrogen to manufacture, and which could be boosted by global efforts to increase demand for low-carbon fertilisers.

The Mission Possible Partnership has been tracking announced projects for clean ammonia and methanol production. Its chief executive, Faustine Delasalle, says: “As more and more companies realised that the IMO regulations could very well be passed this October, it precipitated action on the project pipeline, and that's where, obviously, we'll have an impact in the coming months.”

Around 100 new ammonia and methanol projects have been announced since the summer, although the tracker doesn’t break down what they’ll be used for. However, Delasalle anticipates that the IMO delay will likely have an impact on financial sign-off on some projects this year.

For now, the only regulations in place to push the industry towards cleaner fuels are the EU’s emissions trading system, which expanded to embrace shipping last year, and the FuelEU Maritime Regulation. The UK’s ETS will be extended to include shipping in 2026.

But the EU regulation also stimulates LNG and biofuel, accelerating the risk of technology lock-in, suggests Smith of UCL.

With uncertainty surrounding the IMO framework, Jesse Fahnestock, director of decarbonisation at the Global Maritime Forum, suggests government subsidies are needed to help accelerate investments, including some “creative thinking” on ways to repurpose existing funding.

For example, Norway has begun to allocate a proportion of existing subsidies for hydrogen production projects aimed at the maritime sector, and announced it will do the same for ammonia.

Small island states are also affected by the delay, as the money raised from the IMO Net-Zero Framework fees is intended for a fund to support a just transition, including compensating developing nations for impacts such as the increased price of food because of higher shipping costs and to support early adoption of near-zero fuels. READ MORE