Sustainability in the maritime industry is constantly evolving, with global and regional efforts trying to keep pace with the market itself and ever-increasing climate concerns. While the IMO remains focused on the global outlook, the EU is leading by example on a regional level with the U.S. now also stepping up a gear with the introduction of two new bills. Here we outline the specifics of the global and regional initiatives in clean shipping and how Spinergie is helping vessel managers adapt and grow alongside these legislations.
In early July 2023, the Marine Environment Protection Committee 80 (MEPC 80) session was held in London where, among other items, an upgrade to the International Maritime Organization (IMO) greenhouse gas (GHG) strategy was introduced. This new deal builds on the plan to reach net zero by 2050. While clear deadlines and figures are yet to be announced, three main focus points include improving the Carbon Intensity Indicator (CII), reducing the carbon content of fuels and meeting net zero by 2050.
A number of indicative checkpoints to reach net-zero GHG emissions from international shipping have been set. These include reducing the total annual GHG emissions from international shipping by at least 20%. The aim is to reach a 30% reduction by 2030 compared with emission levels in 2008. The goal is to reduce the total annual GHG emissions from international shipping by at least 70%, striving for 80%, by 2040, when compared with 2008 levels.
Three steps, from short-term to long-term measures, will be key to meeting these ambitions:
- To strengthen and improve upon existing measures including the CII, which determines the annual reduction factor needed to ensure continuous improvement of a ship's operational carbon intensity within a specific rating level but is not yet suited to offshore vessels; Energy Efficiency Existing Ship Index (EEXI), which indicates the energy efficiency of ships of 400 GT and above compared to a baseline; and the Ship Energy Efficiency Management Plan (SEEMP). In the short term, the CII can be improved by excluding emissions while at port as this has a negative impact on the metric.
- Mid-term measures have two levers: economic and technical. The economic measure comes via a potential carbon tax while the technical measure is realized through new Life Cycle Assessment (LCA) guidelines. This would provide a better estimate of the GHG content of fuel throughout its life cycle: e.g. Well-To-Tank rather than Tank-to-Wake emissions.
- The long-term measure would be to review the initial 2023 strategy by 2028.
European Union setting the pace for emission reduction legislation
The IMO is focused on meeting international ambition, but there are regional movements which support the common goal. The European Union is leading the way by including the shipping industry in the EU Emissions Trading System (ETS) by 2024.
The European Union (EU) has taken the most steps of any regional body to meet carbon reduction goals in shipping. In a groundbreaking move, from 2024 shipping companies will be required to pay for emissions under the EU ETS. The EU Monitoring, Reporting and Verification (EU MRV) scheme, which was first enforced in 2015, will be used to account for ship emissions under the EU ETS.
An extension of the scope covers CO2 emissions from ships over 5,000 GT regardless of the flag they sail under. As such, the extension will include all emissions from ships calling at an EU port for voyages within the EU (intra-EU) as well as 50% of the emissions from journeys starting or ending outside of the EU (extra-EU). Finally, it will cover all emissions occurring when ships are at berth in EU ports.
In practice, companies will have to purchase and surrender EU emission allowances (EUA) for each tonne of reported CO2 emissions in the scope of the system. It is anticipated that this will generate substantial revenue that the EU and its member states can then reinvest in green technologies for ships such as hydrogen-based e-fuels.
A phasing-in period will be observed, however, and companies will have to surrender allowances for a portion of their emissions: 40% of verified emissions reported for 2024, and 70% of verified emissions reported for 2025 before finally hitting 100% of verified emissions reported for 2026 and each year after that.
The UK, which no longer falls under EU jurisdiction following Brexit, has a similar programme underway with shipping over 5,000 GT to be included from 2026 onwards. This scheme entails buying and selling emissions allowances which companies will obtain for every tonne of emissions they produce every year. If a company finds itself with an unused allowance it will be able to sell that portion to another company.
The USA prepares to introduce domestic emission reduction measures
It is true that the USA has not yet made as much progress as the EU in bringing in emission reduction policies, however, in June 2023, U.S. Senators Sheldon Whitehouse (Rhode Island) and Alex Padilla (California) introduced two bills to reduce pollution from the global shipping industry, as the market strives to catch up.
The first bill, the Clean Shipping Act, directs the Environmental Protection Agency (EPA) to set stricter carbon intensity standards for shipping fuel. Ultimately, the goal is to eliminate greenhouse gas emissions from ocean shipping companies by 2040. As such, the bill directs the EPA to establish progressively tighter carbon intensity standards for shipping fuel, leading to a gradual reduction in greenhouse gas emissions from ships.
Vessels which fall under the act include those with the purpose of transporting passengers or cargo for commercial purposes above 400 GT. Meanwhile, voyages included in the act are those between any ports of call under U.S. jurisdiction, and voyages including a port of call under U.S. jurisdiction and a foreign port.
The EPA will be crucial in developing and implementing the required standards. This is because the legislation if passed, would become an amendment to the U.S. Clear Air Act, which is already administered by the EPA.
In the second bill, the International Maritime Pollution Accountability Act, the aim is to cut emissions from ships over 10,000 GT offloading cargo at U.S. ports. It will promote cleaner maritime fuels and protect port communities from air pollutants (NOx, SOx). This will be achieved primarily through pollution fees and revenue allocation.
The bill proposes that pollution fees will be imposed on vessels over 10,000GT that offload cargo at U.S. ports by 2024. These fees are designed to incentivise the use and development of cleaner maritime fuels. Under the carbon emissions fee vessels would be charged $150 per ton of carbon emissions for the fuel burned on inbound trips. Fees would also apply to nitrogen oxides, sulfur dioxide, and ship particle pollution. However, most domestic shipping would be exempt from these fees, with larger international vessels as the initial target.
Pollution fees are estimated to generate around $250 billion over 10 years. The funds collected would be used for various initiatives such as modernising the Jones Act fleet with low-carbon vessels, revitalising U.S. shipbuilding, and addressing pollution in port communities and coastal areas. The bill has received support from environmental organisations like the Environmental Defense Fund, Ocean Conservancy, and Pacific Environment.
While these measures in the EU, the USA and elsewhere are essential in the global fight to reduce emissions, the offshore industry remains on the sidelines for now. This is because the offshore industry plays a smaller role in the GHG output of the wider maritime industry. That said, the offshore industry still has its part to play in emissions reductions and, while formal measures may not yet be implemented, they are on the horizon.
How Spinergie can help track and reduce fleet emissions
Spinergie is already working hard to ensure offshore players can adapt to the changing market. Our activity-based CII is just one example of how our solutions can better describe your ship or vessel’s efficiency metrics and take the key decisions that will support your next investment.
Spinergie’s CII adapts the CIIs already defined by the IMO and the International Marine Contractors Association (IMCA) to make it suitable for the offshore fleet. Calculating CII per activity undertaken by a vessel (in transit, DP, ashore, etc.) is more appropriate for the offshore sector. So, by calculating a CII by activity, it is possible to compare several vessels for performance during that specific activity and gauge which is the most efficient. This is developed further by adding suggested weightings for each activity, which can vary depending on the main purpose of a vessel. From there, an accurate overall indicator of emissions is generated.
Read More: How Spinergie’s carbon intensity and fuel consumption analysis is helping clients in their decarbonization journey
Fleet digitalization is an important first step vessel managers can take in ensuring they have the data and tools available to help them navigate emissions reduction criteria. Spinergie’s digital Daily Progress report creates user-friendly, automated processes to ensure that crucial data is never missing - including emissions data. This can be used in many internal and external reports such as ESG reports.
Read More: Spinergie’s SFM solution can help streamline your ESG processes ensuring consistency and accountability in reporting
As the whole fleet can be monitored in one solution it is simple to see where efficiencies can be achieved. Measuring your fleet performance during key activities, which the client can fully customize, means that all data can be compared and contrasted in one dashboard both giving the bigger picture and leaving less room for error.
Spinergie’s market intelligence solution also has a key part to play in helping with emission reductions. The dynamic enviro score is an ideal at-a-glance way of benchmarking vessels in terms of environmental performance. Using data such as vessel behavior alongside the presence of emission reduction technologies on board provides an overall score - the higher the score out of 100 the less emissions are generated by the vessel.
Contact Spinergie for a demo today to see how our Smart Fleet Management and Market Intelligence solutions can help you start making emissions reductions across your fleet.
While the result of the Marine Environment Protection Committee's 80th session was a welcome moment in the maritime industry's commitment to combat climate change, there is still a long way to go in including the full fleet of vessels in legislation. Regional movements, foremost in the EU, but with the USA now following suit, align with global ambitions and will be key in driving overall emission reductions. Spinergie is here to help vessel managers adapt to new legislation as they arise and ensure they have all the data and actionable insight needed to make positive and sustainable change.
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