Major shipping firms raise alarm over IMO's ambitious net-zero goals

A clutch of shipping companies have lambasted the International Maritime Organization's already under-fire decarbonization plans, criticizing the planned pace of emissions reduction and the lack of clarity.

The letter was signed by companies accounting for more than 1,200 vessels and 150 million dwt; they include Saudi Arabia's Bahri, Cyprus' Frontline, South Korea's Hanwha Shipping and Greece's Centrofin and Maran Tankers.

"The proposed fuel-intensity trajectories are materially accelerated and steep, more than 10 years ahead of the current FuelEU framework," the signatories said in an open letter dated Sept. 18 and shared with the press Sept. 19.

They said it requires a certain amount of time for the global infrastructure and supply chains to adapt and for the maritime industry to design, test, build, retrofit, and deliver effective vessels, and the IMO road map does not serve this transition.

"Instead, it calls for an abrupt switch toward only rewarding emerging technologies that have not been fully developed, nor fully assessed on safety," the letter said.

The UN agency's member states are expected to vote on the adoption of Net-Zero Framework in an October meeting, and its passage remains highly uncertain, with the US signaling it may punish countries supporting the regulation with tariffs and port fees.

On what seems to be the other side of the coin from the Sept. 18 letter, senior maritime executives and officials said Sept. 17 during London International Shipping Week that a failure of the IMO to adopt new decarbonization rules will lead to fragmenting regulatory regimes across the globe, resulting in more regulatory burdens and unfair competition for shipping companies, that could be disastrous.

Fuels under discussion

"Failing to incentivize investment in known and available transition technologies with established standards, and focusing only on unproven ZNZ solutions, will result in the majority of shipping shifting towards pay-to-emit operations," the Sept. 18 letter said.

This will disproportionately burden small and medium-sized enterprises, especially those operating in the tramping segment, they added.

The monthly average delivered bunker price for 0.5% sulfur fuel oil, the most common bunker type, was $498.62/mt in Singapore in August, compared with $602.48/mtVLSFOe for LNG, $691.21/mtVLSFOe for B24 biobunker fuel with 24% used cooking oil methyl ester, and $1,891.99/mtVLSFOe for 100% sustainable methanol, according to the Platts bunker cost calculator.

Shipping today consumes 3% of global energy and the IMO's net zero framework means the industry alone will require more than 50 million mt/year of low-carbon hydrogen to meet targets by 2040, which is about 50% of the expected global production capacity intended to serve all industries, the letter said.

The global shipping industry currently faces a widening gap between the surging demand for green fuels needed to meet the IMO's net zero ambitions for 2050 and the limited supply and scalability of biofuels, the American Bureau of Shipping or ABS Chairman and CEO Christopher Wiernicki said at London International Shipping Week.

Analysts at S&P Global Commodity Insights expect alternative fuel as part of the overall bunker demand mix, excluding LNG and LPG, will rise from 0.6% in 2022 to 7.8% by 2030.

Looking to 2050, ammonia and hydrogen seem to be the companies' choices for now to meet CO2 targets.

The physical infrastructure could come from environmental, social and governance investors, who could provide the vast capital needed to meet the demand from shipowners and engine manufacturers working with the industries to build scalable products, the Commodity Insights analysts said.