The phase-out of fossil fuels in the shipping industry is gaining momentum, but the measures set by the International Maritime Organization (IMO) may fall short of achieving desired greenhouse gas (GHG) reduction targets. The recently revised policies aim for a mere 10% absolute reduction in emissions by 2030 compared to 2008 figures, which falls significantly short of the IMO’s declared goals of at least 20% and striving for 30%. Dr. Marie Fricaudet from the UCL Energy Institute points out that while this adoption represents progress, the anticipated 10% reduction is inadequate for meeting the IMO’s ambitions or the critical 1.5°C climate goals. Revenue projections from the current policy, estimated at $11-12 billion per year, are insufficient to support the necessary transition to zero and near-zero (ZNZ) fuels through to 2035.
This financial shortfall might create competitive tensions between advancing ZNZ fuels and ensuring a just and equitable transition that accounts for the needs of developing countries. Dr. Annika Frosch emphasizes the importance of equity in the transition, stating that its success hinges on uplifting vulnerable populations. The current measures are unlikely to stimulate the robust and immediate investments required for sustainable fuel solutions by the 2040s. Without additional support and financing, countries with limited capital access may fall behind in adopting essential changes.
Dr. Tristan Smith warns that the traditional shipping business model may become unsustainable. The policy does signal a crucial shift away from further reliance on liquefied natural gas (LNG) towards hydrogen-derived fuels, marking an important turning point for the industry. While reaching a consensus on such a contentious policy within a multilateral framework is commendable, critical details will be hashed out in the forthcoming guidelines, expected to be finalized by 2028. Understanding the resulting investment risks and opportunities will be vital as the industry navigates this significant transition.