E
INTERSESSIONAL MEETING OF THE
WORKING GROUP ON REDUCTION OF
GHG EMISSIONS FROM SHIPS
2nd session
Agenda item 2

ISWG-GHG 2/2/14
22 September 2017
ENGLISH ONLYFURTHER DEVELOPMENT OF THE STRUCTURE AND IDENTIFICATION OF CORE
ELEMENTS OF THE DRAFT INITIAL IMO STRATEGY ON REDUCTION OF GHG
EMISSIONS FROM SHIPSGHG emission scenario to reach a temperature target of 1.75°C and candidate
short-, mid- and long-term measures
Submitted by OECDSUMMARY
Executive summary:This document aims to provide an improved understanding of thelevel of ambition necessary for the shipping sector to meet thetargets set by the Paris Agreement. It does so building on a recent
report released by the International Energy Agency, framing theshipping results in the context of an assessment that looks at thechanges needed across the whole energy sector. Whereas
ISWG-GHG-2/ 2/12 outlines a pathway for reaching a temperaturetarget of 1.5°C, this document focuses on a 1.75°C target. The
document also proposes several short-, mid- and long-term
measures for consideration to be included in the initial IMO Strategy
on reduction of GHG emissions from ships.

Strategic direction:

7.3

High-level action:

7.3.2

Output:7.3.2.1

Action to be taken:

Paragraphs 24 and 25

Related documents:

MEPC 71/WP.5, MEPC 71/7, MEPC 71/7/12, MEPC 71/INF.35;
ISWG-GHG 1/2/3, ISWG-GHG 1/2/4, ISWG-GHG 1/2/10,
ISWG-GHG 1/2/11, ISWG-GHG 1/2/12, ISWG-GHG 1/2/13,
ISWG-GHG 1/2/14; ISWG-GHG 2/2 and ISWG-GHG 2/2/12

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Page 2Introduction
1
The ratification of the Paris Agreement and calls to implement the United Nations
Sustainable Development Goals show strong global support to address climate change andother environmental concerns. During ISWG-GHG 1 and MEPC 71, many delegations
expressed support for the initial Strategy to match the ambition of the Paris Agreement.
2
The 2017 edition of the Energy Technology Perspectives (ETP) report of theInternational Energy Agency (IEA) analyses the technology and policy implications of theachievement of the Paris Agreement for the global energy sector, outlining decarbonization
strategies on a sector-by-sector basis through the development of different scenarios.
3
The Reference Technology Scenario (RTS) of ETP provides a baseline that takes into
account existing energy- and climate-related commitments by countries, including Nationally
Determined Contributions (NDC) pledged under the Paris Agreement and IMO's EEDI. Despite
this, the RTS is not consistent with achieving global climate mitigation objectives of the Paris
Agreement.
4
The Beyond 2°C Scenario (B2DS) outlines the developments needed for a rapid
decarbonization, compatible with a CO2 emission budget of 750 gigatonnes (Gt) between 2015
and 2100, and a 50% chance of limiting average global temperature increase to 1.75°C. Thisrequires the global energy sector to reach net-zero GHG emissions by 2060. The B2DS has
the closest alignment with ambition of the Paris Agreement amongst all ETP scenarios.
Reaching the target set by the Paris Agreement across the energy system
5
The development of B2DS is built on two main pillars: i. the need to maximize the roleof mitigation strategies with the lowest cost; and ii. the need to enable the scale up of solutions
that, despite their higher short-term cost, have the capacity to enable the transition to azero-carbon energy system. In order to account for sustainability constraints, the global
availability of biomass for energy use is also limited to a maximum of 150 EJ by 2060.
6
Reaching B2DS targets requires transformations in all sectors at paces beyond
anything ever observed today. In the B2DS, power generation takes place with negative CO2
emissions, thanks to the widespread adoption of zero emission technologies, supplemented
by the use of biomass with Carbon Capture and Storage (CCS). By 2060, energy efficiency isfully maximized in all end-use sectors. CCS also becomes widespread in the industry sector,
while most buildings are converted to net-zero energy. In transport, two wheelers are entirely
electrified, and so are 90% of the cars. In addition to maximum efficiency improvements,
aviation is subject to major shifts to high-speed rail and relies largely on the use of biofuels.
The challenge is major in every sector, and the consequence of delaying action in shipping
would involve the need for even larger reduction efforts in other sectors.
7
On the policy side, the B2DS pathway implies unprecedented action as well as effort
and engagement from all stakeholders. The B2DS characterization helps understanding thelevel of ambition that is necessary for achieving a climate target of 1.75°C, the development ofadequate policy levers must follow. A price on carbon is essential. In B2DS, it exceeds
500 real USD 2017 per tonne by 2060. Economic and regulatory instruments fostering energy
efficiency therefore need to complement CO2 pricing. Measures enabling cost reductions
through technology learning and to help scale zero emission technologies are also needed.
Given the scale of the transition needed, the lack of adequate monitoring systems needs to be
swiftly addressed, and it should not be used as an instrument aiming to delay policy action.
Due to the need to reduce emission across the whole economy, offset mechanisms such as
those adopted in aviation have limited scope for application in the B2DS.
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Reaching Paris Agreement targets: technology needs
8
In the B2DS, GHG emissions from international shipping need to stabilize by 2030
compared to 2008, and need to be halved between 2050 and 2060. Achieving this requires
swift changes in three areas: i. the optimization of the use of available shipping capacity; ii. theexploitation of all available energy efficiency potential; and iii. the use of zero emission fuels.
9
Figure 1 below provides a visual representation of the solutions identified in the IEA
ETP model to reduce GHG emissions in international shipping to reach B2DS targets. The
selection of solutions focuses primarily on the improvement of the utilization of available
shipping capacity and the maximization of energy savings through improved energy efficiency.
It also considers the need to rely on low-carbon fuels, focusing primarily on advanced biofuels.
The long-term adoption of biofuels must be limited however, due to the constraints assumed
for the availability of sustainable biomass supply. Some emissions are also avoided as demandfor international shipping services is lower in the B2DS compared with the RTS.
1 800
RTS

1 600

Avoided fossil fuel demand

1 400
MtCO 2 -eq

Better capacity utilization
1 200

1 000

High efficiency: new ships

800

High efficiency: retrofits

600
400
B2DS

200
0
2010

Wind assistanceLow-carbon fuels
2020

2030

2040

2050

2060

Figure 1: Well-to-wheel GHG emission reduction in international shipping in the B2DS relative to the RTS
Source: IEA Energy Technology Perspectives 201710
The reduction in trade considered in B2DS is primarily the result of lower demand for
trade in fossil fuels, currently accounting for about one-third of global maritime trade by volume.
This decline is consistent with a scenario that sees the demand for fossil fuels falling rapidly
and relies heavily on low-carbon electricity. The decline in trade demand accounted for in
B2DS is not coupled with assumptions suggesting that maritime trade should overall be
reduced to meet the target of the Paris Agreement. All ETP scenarios use projections on theevolution of trade flows developed by the OECD Economic Directorate.
11
Improvements in the capacity utilization reflect a combination of increases in loadfactors and average ship size. This requires parallel development of port infrastructure and isconsistent with the investments already undertaken to adjust canal width and depth, enabling
the possibility to accommodate larger ships.
12.
Improved efficiency (including wind assistance) accounts for the largest share of GHG
abatement in the B2DS, exploiting the full energy saving potential available to the shipping
sector. The analysis is based on a list of efficiency improvement technologies that is much inline with those outlined in the annex to document ISWG-GHG 1/2/10. It reflects the assumptionthat energy efficiency improvements come at a significantly lower cost than changes in the
carbon content of fuels, or the reliance on the use of hydrogen as an energy carrier.

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Page 4.1

By 2030 all new ships entering the fleet must be at least 60% more efficient
relative to EEDI baselines (50% for container ships1).

.2

Due to the relatively long lifetime of ships, achieving the objectives of the
B2DS will also require that part of the fleet will be retrofitted withenergy-saving technologies. The contribution of retrofits is especially
important in the coming 10-25 years (see figure 1). B2DS results suggestthat today's ships that will still be in the fleet by 2030 must be nearly 20%
more efficient (about 15% for container ships) compared to EEDI baselines.
This means that either all ships in today's fleet set to remain in operation
until 2030 need to be retrofitted, or a smaller proportion is retrofitted more
ambitiously (i.e. with energy savings exceeding 20%).

13
The carbon intensity of marine fuels declines in the B2DS, primarily because of theintroduction of biomass-based low-carbon fuels, such as advanced biofuels.2.1

By 2030, the reduction of the well-to-wheel carbon intensity of the fuel used
in international shipping ranges between 5% and 10% in the B2DS.

.2

By 2050, the carbon intensity falls to nearly half of the value of 2015. This
reflects the need for a very significant penetration of low-carbon fuels in
B2DS.

14
Hydrogen use in shipping and power-to-fuel technologies could provide GHG
emissions reductions that are additional to the technologies used in the B2DS. The GHG
reductions presented in the B2DS may therefore represent a conservative boundary of thedecarbonization potential of international maritime transport. This suggests that the ETP
analysis in not conflicting with the level of ambition outlined in document ISWG-GHG 2/2/12.
Liquefied Natural Gas (LNG)
1800

WTW GHG emissions (Gt CO 2 -eq)

1600
1400
1200
RTS

1000
800

High LNG (50% LNG in 2060)

600

B2DS

400

200
0
2010

2020

2030

2040

2050

2060

Figure 2: Well-to-wheel GHG emission reduction with a high LNG fuel mix relative to the RTS and B2DS
Source: IEA Energy Technology Perspectives 20171

We consider that container ships are unfit to use sails and therefore have a lower efficiency improvement
potential.

2

The focus on biomass-based low-carbon fuels adopted in the B2DS is imputable to several factors. First,
limitations of electricity use as energy carrier in long distance applications, primarily due to high costs ofbatteries. Second, uncertainties on costs of technologies requiring the use of hydrogen as energy carrier.
Third, expectations for higher barriers for the widespread adoption of hydrogen across the energy system.

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LNG represents a limited fraction of the shipping fuel mix in the B2DS. The main
reasons for this choice are: i. its limited GHG abatement potential (shifting 50% of the global
fleet to LNG would reduce emissions only by about 10%, see figure 2); ii. its very limited uptake
today, coupled with the need to invest in a costly distribution infrastructure that may soon be
stranded; and iii. potential delays in the deployment of fuels having a greater capacity to reducethe carbon intensity of the shipping energy mix.
Reaching Paris Agreement targets: policy needs
16
Stimulating the market to adopt the technology levers outlined in figure 1 would not
be possible without substantive policy support from IMO. The following short-, medium- andlong-term measures are recommended in support of reaching Paris Agreement targets.
17

18

Candidate short-term measures (2018-2023):.1

acknowledge the need for a revision of the ambition of the current EEDI
framework and start working towards its implementation, aiming to apply it in
the 2023-2030 period;.2

fast track the development of an operational efficiency standard, stimulating
investments for retrofits and the adoption of efficient operational practices,
including slow steaming;.3

develop a mechanism enabling the adoption of a CO2 price for shipping fuel– including provisions for its revision over time, with the aim to match theambition of the low carbon pathway for international shipping – and adopt it
as soon as possible;.4

expand port-based incentives and smoother logistics networks (seeparagraphs 20 to 23);

.5

develop a policy framework aiming to reduce the overall carbon intensity ofshipping fuels over time, e.g. through low-carbon fuel standards or mandates
for low-carbon fuels, to stimulate cost reductions through technology learningand scale; and.6launch a stakeholder consultation group to identify the most promising
pathways for zero carbon shipping, and work towards the definition ofpolicies (such as low-carbon fuel standards or mandates). We commend the
proposal made by Japan in document ISWG 1/2/5 in this regard.

Candidate medium-term measures (2023-2030):.1

implement the revision of the EEDI with a level of ambition that matches thevalues discussed in paragraph 12.1;.2

implement and strengthen the operational efficiency standard to further
encourage retrofits, utilization and improvements, with a level of ambitionaligned with the values discussed in paragraph 12.2;.3

implement policies aiming to reduce the overall carbon intensity of shipping
fuels, such as low carbon fuel standards or mandates, reflecting the ambition
outlined in paragraph 13; and.4fully implement a GHG emission pricing mechanism.

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Possible long-term measures (>2030):.1

scale up the ambition of policies outlined in paragraph 18, adjusting to theneeds set out in the strategy for the reduction of GHG emissions from ships;
and.2revise and update the Strategy for the reduction of GHG emissions fromships as needed.

Squaring top-down and bottom-up approaches
20
Although this might not fall under the direct IMO jurisdiction, Member States could
adopt bottom-up initiatives at national and regional level, complementing a top-down approachto reducing shipping's GHG emissions, as indicated in document MEPC 71/7. These initiatives
could be involving all actors within the maritime logistics supply chain, including shippers, ports
and energy providers. Port-based incentives, as highlighted in document ISWG 1/2/11, andnational or regional carbon pricing and market-based mechanisms are the most relevant
instruments in this group.
21
Port-based incentives typically include port facilities (e.g. shore power, LNG
bunkering), environmentally differentiated port fees, green berthing policies. The forthcoming
ITF/OECD report Addressing greenhouse gas emissions from shipping: lessons from port
based incentives shows that, if widely applied, port incentives could affect a large number ofships, delivering large GHG emission reductions. Widening the differences in port fees forships based on their environmental performance (the gap between best and worse performers
is now mostly between 5% to 20% of port fees) would further strengthen this impact.
Port-based incentives have so far been voluntary for both shipowners and ports, but could win
in effectiveness if made mandatory, harmonized internationally, and linked with mechanisms
enabling both shippers and ports to communicate on the extent to which they are using orservicing environmentally friendly ships. A first step towards a less voluntary nature could be
agreeing global guidelines.
22
Various countries are already engaged in carbon pricing/market-based mechanisms
for shipping. Examples include Norway with its NOx fund and Shanghai with its inclusion ofdomestic shipping and ports in their emission trading scheme. A broader application of theseschemes could provide incentives to lower emissions in a national or regional context, withrevenues raised channelled into deployment of innovative solutions, without necessarily
distorting global level playing fields; and could also generate important lessons relevant to theintroduction of market-based mechanisms at the global level aimed at reducing GHG
emissions from shipping.
23
In addition to port incentives and carbon pricing/market-based mechanisms, smoothertransitions within the maritime logistics supply chain could help to reduce emissions. Examples
of such transitions include ship waiting time and unproductive terminal moves, which could beconsidered the result of lack of alignment between the main actors. This underlines theimportance of cooperation between actors of the supply chain and a possible role for IMO tostimulate and facilitate such cooperation.
Action requested of the Working Group24
The Working Group is invited to consider the scenario results and recommendations
outlined in this document to set the level of ambition for the initial Strategy.
25
The Working Group is also invited to consider the measures listed in paragraphs 17
to 19 to be included in the "List of candidate short-, mid- and long-term further measures withpossible timelines and their impacts on States" in the initial Strategy.
___________
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