Pathway to Zero-Emissionin International ShippingーUnderstanding the 2023 IMO GHG Strategy

ーOctober 2023
Nippon Kaiji Kyokai (ClassNK)Ⓒ 2023 NIPPON KAIJI KYOKAI

2023 IMO GHG Strategy
In July 2023, IMO GHG Strategy revised

Key points of the revision as follows:✓ Reach net-zero GHG emissions by or around 2050
✓ Consider not only onboard emissions, but also life cycle emissions, including fuel manufacturing, transportation,and storage to onboard use✓ Monitor the level of achievement of the targets in terms of total GHG emissions✓ Adopt a target of uptake of zero or near-zero GHG emissions technologies, fuels, and/or energy sources2

2023 IMO GHG Strategy
What is the significance of the numerical targets outlined in the 2023 IMO GHG Strategy?
Estimated1 the followings to achieve thenumerical targets for realizing net-zero GHG
emissions:• GHG emissions• Introduction amount of zero-emission
fuels• Introduction amount of zero-emission
ships
1

Estimations were made for shipsof 5,000 gross tonnage andabove engaged in international
voyages (ships subject to IMODCS).

✓ Visualizing the actions required by the 2023 IMO GHG Strategy in numerical form and encouraging broad
discussions among stakeholders to accelerate efforts towards achieving net-zero GHG emissions.
3”2023 IMO GHG Strategy” in figures
Allowable GHG emissions to achieve the indicative checkpoints for 2030/2040→ Estimated the upper limit for the allowable lifecycle GHG emissions in international shippingto achieve the indicative checkpoints for 2030/2040（Unit: million tons CO2eq）
2008(Base year)

GHG emissions

Life cycle GHG emissions(Well-to-Wake)(Breakdown) Well-to-Tank
Tank-to-Wake✓ GHG emissions in 2021
(Life cycle)

2021(Latest)2030
indicative
checkpoint2040
indicative
checkpoint(20% reductionfrom 2008)(70% reductionfrom 2008)

731

798

585

219

110
621

122676

88497

33
186

＞ GHG emissions in 2008
(Life cycle)→ Approximately a 27% reduction is required by 2030 compared to 2021 levels.
4

”2023 IMO GHG Strategy” in figures
Introduction amount of zero-emission fuels/ships to achieve the fuel introduction target for 2030
→ A minimum 5% introduction of zero or near-zero GHG emissions technologies, fuels, and/or energy sources2030 zero-emission fuelintroduction target achieved(5% zero-emission fuels)
Introduction amount ofzero-emission fuels

Introduction amount ofzero-emission ships

for Methanol1

21 mil. ton

for Ammonia1- 2026 (Orderbook)2027 - 2030
2031 - 2040
Total amountLife cycle GHG emissions (Well-to-Wake)

23 mil. ton

Current production scale
for all sectors
106 mil. ton/year（of which zero-emission fuels account for lessthan 1% of the total)

183 mil. ton/year（of which zero-emission fuels account for lessthan 1% of the total)

Newbuildings 12 mil. GTNewbuildings2 15 mil. GT/year

72 mil. GT
731 mil. ton CO2eq*585 mil. ton CO2eq for 2030 indicative checkpoint

1Methanol/ammonia with zero GHG emissions throughout their entire life cycle from manufacturing, transportation, and storage to onboard use

2

The world's current annual newbuilding deliveries are about 60 million GT per year.

-✓ Only a 5% introduction of zero-emission fuels in 2030 makes it difficult to achieve theindicative checkpoint for 2030.
5

”2023 IMO GHG Strategy” in figures
Introduction amount of zero-emission fuels/ships to achieve the indicative checkpoints for 2030/2040→ A minimum of 20%/70% reduction by 2030/2040 (compared to 2008)
2030 indicative
checkpoint achieved

2040 indicative
checkpoint achieved(25% zero-emission fuels) (72% zero-emission fuels)

Introduction
amount ofzero-emission
fuels
Introduction
amount ofzero-emission
ships

for Methanol1
for Ammonia1- 2026 (Orderbook)2027 - 2030
2031 - 2040
Total amount

106 mil. ton

311 mil. ton

114 mil. ton
Newbuildings

12 mil. GT
Newbuildings2 & Retrofits

85 mil. GT/year
352 mil. GT333 mil. ton

Current production
scale for all sectors
106 mil. ton/year（of which zero-emission fuels accountfor less than 1% of the total)

183 mil. ton/year（of which zero-emission fuels accountfor less than 1% of the total)←←
Newbuildings2 & Retrofits

77 mil. GT/year
1,122 mil. GT

1

Methanol/ammonia with zero GHG emissions throughout their entire life cycle from manufacturing, transportation, and storage to onboard use

2

The world's current annual newbuilding deliveries are about 60 million GT per year.

-✓ A 25%/72% introduction of zero-emission fuels at 2030/2040 is required to achieve theindicative checkpoints for 2030/2040.
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Pathway to Zero-Emission in International Shipping ー Understanding the 2023 IMO GHG Strategy ーDiscussion: achieving the numerical targets of the 2023 IMO GHG Strategy•A substantial amount of zero-emission fuels is required in international shipping to achieve theindicative checkpoints 2030/2040.

•Given the current scale of zero-emission fuel production, prompt investment promotion in themanufacturing and distribution of fuels, surpassing the pace of decarbonization in the overall energysector, will be necessary. Early adoption and implementation of a regulatory framework,
including effective carbon pricing, is essential to encourage these investment decisions.

•With regard to the newbuildings and retrofits of zero-emission fuel ships, there will not appear to bea significant bottleneck in supply capacity as long as a certain amount of zero-emission fuel ships
are built and retrofitted each year. It will be essential to secure newbuildings and retrofits
capacity in line with the pace of development of the zero-emission fuel production and distributioninfrastructure.

•Collective efforts from all stakeholders, including international organizations, national governments,
the maritime industry, the energy sector, shippers, and the financial sector are needed.
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Pathway to Zero-Emission in International Shipping ー Understanding the 2023 IMO GHG Strategy ー

Towards the immediate target and indicative checkpoint for 2030

• To be continuously
updated through dialogues
with stakeholders.
• ClassNK will continue tofocus on support services
for zero-emission efforts.

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Pathway to Zero-Emission in International Shipping ー Understanding the 2023 IMO GHG Strategy ー“Pathway to Zero-Emission in International Shipping” White Paper Table of Contents“Pathway to Zero-Emission in International Shipping” White Paper Table of Contents

Abbreviations
Introduction
Methodology(A) GHG emissions(B) Energy consumption of ships in 2021
(C) Marine transport volume(D) Energy efficiency of ships(E) Fuel’s GHG intensity
Scenarios for achieving the fuel introduction target for 2030
Scenario for achieving the indicative checkpoint for 2030

Scenario for achieving the indicative checkpoint for 2030

(Reference: For biodiesel)

Scenario for achieving the indicative checkpoint for 2040
Discussion: achieving the numerical targets of the 2023 IMO GHG StrategyAppendix
References9Pathway to Zero-Emission in International Shipping ー Understanding the 2023 IMO GHG Strategy ー【Reference】Assumptions and details of the estimation

10【Reference】Assumptions and details of the estimation
Study of scenarios to achieve the indicative checkpoints for 2030/2040
The scenarios were developed and visualized to determine how to achieve the indicative
checkpoints for 2030/2040. (Estimations were made for ships of 5,000 gross tonnage and above engaged in international voyages.)
Method
1. The amount of energy consumption of ships in 2030/2040 is estimated by converting the amount of fuel consumption of ships
in 2021 into the amount of energy consumption of ships and multiplying it by the rate of increase in marine transport volume
and the rate of improvement in energy efficiency of ships from 2021 to 2030/2040.
Energy consumption of ships in 20211 x Rate of increase in marine transport volume2 x Rate of improvement in energy efficiency of ships3
8.79 EJ4
x+25%/+39%
x-23%/-30%= Energy consumption of ships in 2030/2040
8.47 EJ/8.60 EJ1234

Calculated based on the breakdown of fuel consumption in 2021 (fuel oil 93% and LNG 7%)
Assumed an average increase based on the Fourth IMO GHG Study 2020 scenario of increased marine transport volume
In 2030, an assumption of 23% improvement compared to 2021 is made, assuming the achievement of the carbon intensity improvement target(40% improvement compared to 2008).
Exajoules (Exa is 10 to the power of 18.)

2. Regarding the energy consumption of ships in 2030/2040, scenarios were set up to allocate between conventional fuels andzero-emission fuels, comparing the "GHG emissions in these scenarios" with the "GHG emissions required to achieve theindicative checkpoints for 2030/2040." Examples of such scenarios that align are presented.

11【Reference】Assumptions and details of the estimation
Allowable GHG emissions to achieve the indicative checkpoints for 2030/2040（Unit: million tons CO2eq）

GHG emissions

2008(Base year)

Life cycle GHG emissions(Well-to-Wake)(Breakdown) Well-to-Tank
Tank-to-Wake

2021(Latest)2030
indicativecheckpoint2040
indicativecheckpoint(20% reduction
from 2008)(70% reduction
from 2008)

731

798

585

219

110
621

12267688497

33
186(Note) Well-to-Tank and Tank-to-Wake GHG emissions are estimated based on published fuel consumption data (IMO DCS data).
GHG emissions per unit energy value for Well-to-Tank andTank-to-Wake for typical fuels (GHG Intensity)

Image for Well-to-Tank and Tank-to-WakeEmission factors are based on theEU's FuelEU Maritime Regulation.

12【Reference】 Assumptions and details of the estimation
Study of an example scenario for achieving the fuel introduction target for 2030
→ Assumption: A 5% introduction of zero-emission fuels in 2030
→ Result of study: Only a 5% introduction of zero-emission fuels in 2030 makes it difficult to achieve the indicative checkpoint for2030.

Fuel oil7.20 EJ（85%）

Ship energy consumption
Life cycle GHG emissions（Well-to-Wake）

659 mil. ton CO2eq

LNG

Zero-emission fuel0.85 EJ
0.42 EJ（10%1）（5%）

71 mil. ton CO2eq

1 mil. ton CO2eq(Methanol/Ammonia)

Total amount
8.47 EJ（100%）
731 mil. ton CO2eq*585 mil. ton CO2eq for 2030
indicative checkpoint

1 The share of LNG fuel is assumed to increase to 10% in 2030, taking into account the actual share (7%) in 2021.

Fuel type

Current production scale
for all sectors

Introduction amount of zero-emission fuels(5% zero-emission fuel)for Methanol

21 mil. ton

for Ammonia

23 mil. ton
2021

Zero-emission ships
Entire fleet

Existing ships

0.75 mil. GT
1,250 mil. GT- 2026
Newbuildings

12 mil. GT
1,330 mil. GT

106 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

183 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

2027 - 2030
introduction amountof zero-emission ships

Newbuildings 60 mil. GT(15 mil. GT/year)-2030
72 mil. GT
1,430 mil. GT13【Reference】 Assumptions and details of the estimation
Study of an example scenario for achieving the indicative checkpoint for 2030
→ Assumption: Zero-emission fuels are introduced to achieve the indicative checkpoint for 2030 (a minimum of 20% reduction).
→ Result of study: Achieving the indicative checkpoint for 2030 is made possible by introducing 25% (approximately 110 million tons
per year) of zero-emission fuels. Considering current production levels, significant investments are required to expand theproduction and distribution of zero-emission fuels.

Fuel oil
5.50 EJ（65%）

Ship energy consumption
Life cycle GHG emissions（Well-to-Wake）
Fuel type

504 mil. ton CO2eq

LNG

Zero-emission fuel0.85 EJ
2.12 EJ
（10%）
（25%）

71 mil. ton CO2eq(25% zero-emission fuel)for Methanol

106 mil. tonfor Ammonia

114 mil. ton

Zero-emission ships
Entire fleet

Existing ships- 2026
Newbuildings

0.75 mil. GT

12 mil. GT

1,250 mil. GT

1,330 mil. GT(Methanol/Ammonia)*585 mil. ton CO2eq for 2030
indicative checkpoint

Current production scale
for all sectors

Introduction amount of zero-emission fuels

2021

5 mil. ton CO2eq

Total amount
8.47 EJ（100%）
580 mil. ton CO2eq

106 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

183 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

2027 - 2030
introduction amountof zero-emission ships

2030

Newbuildings & Retrofits

340 mil. GT(85 mil. GT/year)-352 mil. GT
1,430 mil. GT14

【Reference】 Assumptions and details of the estimation
Study of an example scenario for achieving the indicative checkpoint for 2030
(Reference: For biodiesel1)
1

Currently, biodiesel (mainly FAME) is recognized as low-emission fuels (its GHG intensity is assumed to be 15 gCO2eq /MJ, equivalent to waste cooking oilderived), which is an 84% reduction compared to fuel oil, and calculations for biodiesel have been conducted for reference. It should be noted that themajority of currently produced biodiesel is consumed on land-based sectors.

→ Assumption: Biodiesel is introduced to achieve the indicative checkpoint for 2030 (a minimum of 20% reduction).
→ Result of study: Achieving the indicative checkpoint for 2030 is made possible by introducing 29% (66 million tons per year) ofbiodiesel. Considering current production levels (42 million tons per year, mainly for land-based sectors), further expansion of thecurrent production and distribution is required.

Ship energy consumption
Life cycle GHG emissions（Well-to-Wake）
Fuel typefor Biodiesel

Fuel oil
5.16 EJ（61%）
473 mil. ton CO2eq

LNG

0.85 EJ（10%）

Biodiesel
2.46 EJ（29%）

71 mil. ton CO2eq

37 mil. ton CO2eq

Introduction amount of biodiesel(29% biodiesel)

66 mil. ton

Total amount
8.47 EJ（100%）
581 mil. ton CO2eq*585 mil. ton CO2eq for 2030
indicative checkpoint

Current production scale
for all sectors
42 mil. ton/year15

【Reference】 Assumptions and details of the estimation
Study of an example scenario for achieving the indicative checkpoint for 2040
→ Assumption: Zero-emission fuels are introduced to achieve the indicative checkpoint for 2040 (a minimum of 70% reduction).
→ Result of study: Achieving the indicative checkpoint for 2040 is made possible by introducing 72% (approximately 320 million tonsper year) of zero-emission fuels. 77 million GT of zero-emission ships per year will be required over the 10-year period of 2031 2040.

Ship energy consumption
Life cycle GHG emissions（Well-to-Wake）
Fuel type

Fuel oil1.55 EJ（18%）
142 mil. ton CO2eq

LNG

Zero-emission fuel0.86 EJ
6.19 EJ（10%）（72%）
0 mil. ton CO2eq

72 mil. ton CO2eq(Methanol/Ammonia)(72% zero-emission fuel)311 mil. ton

for Ammonia

333 mil. ton
2030*219 mil. ton CO2eq for 2040
indicative checkpoint

Current production scale
for all sectors

Introduction amount of zero-emission fuelsfor Methanol

Total amount8.60 EJ（100%）
214 mil. ton CO2eq

106 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

183 mil. ton/year（of which zero-emission fuels account for less than 1% of the total)

2031 - 2040
introduction amountof zero-emission ships

2040

Newbuildings & Retrofits

Zero-emission ships
Entire fleet

352 mil. GT
1,430 mil. GT

770 mil. GT(77 mil. GT/year)-1,122 mil. GT
1,550 mil. GT
16Pathway to Zero-Emission in International Shipping ー Understanding the 2023 IMO GHG Strategy ーContact Us
NIPPON KAIJI KYOKAI Zero-Emission Transition Center
4-7, Kioi-Cho, Chiyoda-ku, Tokyo 102-8567
Administration Center
TEL：+81-3-5226-2031

FAX：+81-3-5226-2039

E-mail： zxc@classnk.or.jp

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