Transport decarbonisation – plotting a maritime course to net zero 

On 14 July 2021, the UK Department for Transport (“DfT”) published a wide-reaching policy plan on decarbonising transport and the targets and ambitions required to meet the UK’s net-zero target by 2050 (the “Decarbonisation Plan”).

CMS has commented on the proposals for rail (passenger and freight transport), EV charging and hydrogen fuelling and aviation. Another area of focus is on maritime transport. The main elements of the Decarbonisation Plan as applied to the maritime sector are set out below and provide investors and operators with some visibility of future measures.

However, given the release this week of the IPCC’s Sixth Assessment Report on the physical science basis of climate change, we query whether there will be an appetite to bring forward some of the timings of the suggested measures. For example, in what has been termed by the UN as the decisive decade, net zero targets starting from 2030, and considering the status of the IMO’s review on GHG emissions reductions in 2023, when at the same time operators in the EU will be subject to carbon pricing, these proposals seem less ambitious than initially thought.

Given the recognition of the scale of change which is needed and the leadership required, all businesses in the value chain should be aware of not only cost impacts but also opportunities for technological solutions, low carbon fuels, shore side infrastructure, ship recycling and increased scrutiny of the carbon proposition of vessels by funders (and in turn scrutiny on funders).

Also, as shipping emissions will be scope 3 emissions for many businesses setting net zero targets, understanding the associated footprint and what actions are being taken to reduce it will become increasingly important for cost, reputational and risk management reasons.

International maritime transport accounts for a significant majority of global freight transport: ships are said to carry around 80% world trade by volume and around 70% by value. Despite referring to shipping as being one of the more carbon efficient methods of transporting freight, the Decarbonisation Plan notes that in 2019 the UK domestic sector emitted more Greenhouse Gases (“GHG”) than the UK rail and bus transport sectors combined. The Decarbonisation Plan is nonetheless optimistic that carbon net zero within the maritime sector may be achieved in the 2040s.

Early suggestions to enable UK fleetwide emissions reductions include a transition to alternative fuel powered vessels using energy from low or zero emission sources such as ammonia produced from low-carbon hydrogen or battery storage technologies. Ports and harbours will also have to decarbonise for example by shifting to zero or low emission tug and pilot vessels and green port equipment.

Across each sector, the Decarbonisation Plan has 3 overarching principles – clear targets to achieve net zero; accelerating decarbonisation; and working internationally to deliver emissions reductions. Within these principles are eight commitments which include:

1. Carbon net zero “as early as feasible” with targets from 2030 – following a consultation in 2022, the DfT will plot a “Course to Zero” which will explore the technical operational and policy options available to achieve carbon net zero.
2. Consultation on planned phase out date for sale of new non-zero emission domestic vessels – the 2022 consultation will focus on vessel types where near-term technical solutions (such as electrification) are becoming available as well as the development of “advanced fuels” such as ammonia and hydrogen.
3. Assessing how economic instruments could be used to accelerate the decarbonisation of the domestic maritime sector – a continuation of work already undertaken e.g. in Maritime 2050 and the Clean Maritime Plan.
4. Accelerating the development of zero emission technology and infrastructure in the UK – to be done through the Clean Maritime Demonstration Competition, a £20 million funding package to support and accelerate research, design and development of carbon net zero solutions for the maritime sector. The DfT will also explore the establishment of a UK Shipping Office for Reducing Emissions which the Decarbonisation Plan states will transform the UK into a global leader in clean maritime technology.
5. Consultation on appropriate steps to support and, if needed, mandate the uptake of shore power in the UK – shore power has been identified as having the potential to quickly reduce GHGs and pollutant emissions from the ports and shipping sector. As with every sector the cost of the necessary infrastructure is significant. The DfT will consult in 2021 on how they can provide support in this area.
6. Extension of the Renewable Transport Fuel Obligation (RTFO) to support renewable fuels of non-biological origin used in shipping – The RTFO mandates that a certain proportion of road fuel must be from a sustainable renewable source. The DfT intends to extend this to maritime fuels. For further information about the RTFO please see our Law Now here.
7. The UK will press for greater ambition during the 2023 review of the International Maritime Organisation Initial Greenhouse Gas Strategy and urge accelerated decarbonisation – The UK intends to push international shipping, through the IMO strategy review, to play its part in delivering decarbonisation.
8. Ensuring the UK has the right information to regulate emissions, and to judge the effectiveness of the steps taken in the UK and at the IMO – this will involve a review and if necessary amendment of the operation of the UK’s existing monitoring, reporting and verification system for GHG shipping emissions.[1]

EU Proposals

At the same time as the publication of the Plan, on 14 July 2021 the European Commission launched its “Fit for 55” package, a collection of proposed legal measures intended to achieve the EU’s legal target of a 55% reduction in net GHG emissions by 2030 against 1990 levels. The package covers a range of important new proposals covering transportation, buildings, energy mix and infrastructure and land use, land use change and forestry. Importantly, there is a distinct plan to introduce shipping to the EU Emissions Trading Scheme (“ETS”) by 2023.

The addition of shipping to the ETS would require shipping companies to purchase CO2 allowances to cover CO2 emissions when delivering between EU Member State ports and also half of the CO2 emissions released when sailing to and from the EU. Previously the EU had relied upon global shipping GHG reduction initiatives but considered that international proposals were moving too slowly.

Comment

Within the Plan there are a number of statements and commitments but the Plan is light on the detail of how they will be achieved in practice and in particular how they will be funded. Investment commitment and collaboration by government and the private sector will be essential.

An area for further exploration is how other activities and proposals could be harnessed to promote decarbonisation such as, for example, green public procurement and the suggested Scottish Green Ports Initiative.

Given the analysis already conducted as part of the Fit for 55 Package it is likely that the proposed measures for maritime (extension of the ETS and Alternative Fuels Infrastructure Regulation) at EU level will be monitored and considered as to their effectiveness. Due to the UK’s newly incepted ETS scheme, the same approach could be adopted in the future. The proposed consultations outlined in the Plan should be monitored together with developments at EU level to identify both challenges and opportunities.

[1] The Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) (Amendment) (EU Exit) Regulations 2018