Study Shows Risks and Opportunities in Shipping’s Energy Transition

Pressure for the International Maritime Organization (IMO) to put a levy on GHG emissions continues. In the latest contribution to the debate, a new study from UCL Energy Institute Shipping and Oceans Research Group and UMAS sees “significant risk” in some of the options (including a GHG levy) that IMO is considering for enabling shipping’s energy transition. The analysis comes as IMO prepares for key negotiations in February and April 2025 to finalize the mid-term measures for reducing GHG emissions.

Key Findings of the Study

The study uses the total cost of ownership (TCO) approach to model a 14,000 TEU container vessel with different technology and fuel options. It evaluates the effects of policy combinations currently under discussion at the IMO, such as a GHG Fuel Intensity (GFI) requirement, flexibility mechanism, and a levy and subsidy/reward mechanism. The analysis shows how fuel prices and technology costs determine optimal outcomes and how adjustments to these assumptions can drive different results. Ammonia and e-fuels emerge as key choices for the industry’s energy transition.

Importance of Policy Measures

The study suggests that targeted incentives for e-fuels, such as subsidies derived from a GHG price or levy, are crucial for bridging the gap between early compliance options and long-term decarbonization goals. Without such measures, the industry risks becoming locked into alternatives that could hinder the transition to sustainable fuels. GHG pricing starting at $150 per tonne of CO2e is seen as sufficient to support the energy transition and ensure equity.

Implications for the Industry

The analysis highlights the urgency of the IMO’s mid-term measures in enabling the transition to e-fuels. A clear signal from these measures can unlock investment, stabilize returns, and pave the way for a just and equitable transition. The study underscores the need for proactive policies to drive the industry towards sustainable practices.