An economics blogger I follow once wrote that it’s impossible to be a long-run market bull if you’re always a short-term market bear. The adage, which points out that it’s philosophically inconsistent to think that one can make money investing longer term while being consistently pessimistic about today’s market, is a useful warning against trying to time stock purchases and perpetually searching for bubbles. It’s also a useful lens to consider the slow, bureaucratic UN processes that I track in my work at ICCT’s marine and aviation programs.
Treated as a country, international shipping would be the sixth largest climate polluter, releasing more carbon dioxide (CO2) in 2015 than the German economy. All sectors will ultimately need to contribute to the climate goals codified under the Paris agreement. The smart money was always on the maritime shipping industry accepting its own climate target, but experience over the past years, with delays and detours aplenty, certainly favored the bearish.
Over the more than 10 years that we’ve been active at the International Maritime Organization (IMO), we’ve seen progress on controlling air pollution from ships, on energy efficiency standards for new ships, and in restricting black carbon emission and heavy fuel oil use in the Arctic. But progress in establishing a cap on greenhouse gas (GHG) emissions from international shipping has been slow going, despite some hopeful signs which we’ve written about several times. Short-term bearishness often paid off.
That may finally be changing. Last week, the IMO established the first global climate framework for international shipping. The resolution includes short-term operational efficiency targets, an absolute emissions reduction target for 2050, and the goal of complete decarbonization no later than 2100. The agreement brings the international shipping industry much closer to aligning with the Paris goal of constraining global temperature rise to well less than 2°C.
The meeting itself was an interesting one for me to attend. Emotions were high all around, with the Pacific island states hammering home that climate change was an existential threat to their countries but with many fearing that opposition from some larger developing states and the US would preclude a deal. Two full weeks of discussion culminated in consensus text that was overwhelmingly supported by plenary, with only Saudi Arabia, Brazil, and the US filing reservations against the resolution. In the end, the resolution passed, setting the shipping industry on a course toward real decarbonization. We at ICCT were pleased to contribute to the outcome by submitting papers summarizing our global shipping GHG inventory, our research on maritime black carbon emissions, plus work related to the importance of speed limits as a means to constrain shipping emissions growth.
But what does the agreement mean for GHG emissions from shipping? As always at ICCT, an illustrative graph is in order. The figure below shows CO2 emissions from international shipping through 2075 under three scenarios. The black line is a business-as-usual (BAU) projection of CO2 emissions using data from the United Nations Conference on Trade and Development, the International Transport Forum, our own in-house fleet turnover model, and global ship operations data. The blue and green dotted lines highlight the range of possible emissions trajectories under IMO’s resolution. The blue line is the minimum ambition implied by the strategy, while the green line is the maximum possible ambition.
IMO’s strategy will result in cumulative CO2 emissions of between 28 and 40 gigatonnes (Gt) from international shipping through 2075, compared to more than 100 Gt under BAU. While IMO’s agreement is an ambitious one, cutting emissions between 60% and 70% versus BAU, it is still short of the Paris Agreement temperature goals. For example, for international shipping to do its proportionate share to keep warming to no more than 1.75°C, cumulative emissions from 2015 through 2075 would need to be less than 17 Gt. The strategy’s emission reduction targets would allow international shipping to claim between 3.8% and 5.8% of the world’s remaining carbon budget under the Paris Agreement, compared to the 2.3% share of global CO2 emissions in 2015.
So, what does this mean going forward? IMO’s agreement is a significant development that will require the proverbial policy kitchen sink — tighter design and operational efficiency standards in the near-term, low and zero carbon fuels/propulsion in the long-term, carbon pricing in between, and more. First, there is an opportunity for IMO to tighten its new ship energy efficiency targets at its next Marine Environment Protection Committee meeting in October. Second, black carbon emissions, which we estimate to account for between 7% and 21% of shipping’s total climate impact, was left out of IMO’s emission target, so more work is needed to identify ways to control black carbon from marine engines, something we’re working on at IMO at the subcommittee level. Relatedly, international aviation will be back under the spotlight, with a second chance for the International Civil Aviation Organization (ICAO) to adopt a long-term decarbonization goal similar to IMO’s at ICAO's 40th Assembly next year (more on this next week). Finally, after keeping its position on IMO’s GHG strategy under review for more than a year, the US came out strongly against IMO’s GHG cap. That’s a big shift, an internationalization of the Trump Administration’s climate policy that we’ll be thinking more about for our future UN work.
We’ll be rolling up our sleeves here at the ICCT to ground the upcoming IMO policy debates in the best available science. No rest for the weary, but it looks like, for once, a bullish view on shipping climate policy is warranted.
More details on IMO’s agreement can be found here.