Policy & Regulation

Policy and regulation will impact the business cases of all stakeholders in the shipping sector. It is the key to unlocking finance and investment as well as protecting our planet for future generations. 

The following is a selection of current, upcoming and proposed GHG related regulations that will impact global shipping.

ZESTAs Achieve Major Milestone with First Submission to International Maritime Organisation

ZESTAs is committed to driving innovation in the shipping industry. In doing so, we are about to reach a major milestone by submitting a detailed white paper to the International Maritime Organisation (IMO) for the first time. This groundbreaking submission, ISWG-GHG 15/INF.2, provides the latest information concerning demonstrated zero emission shipping technologies and the extent of their commercialisation.

The white paper, contributed to by our members and partners and prepared by ZESTAs’ team of experts, focuses on the advancements and capabilities of shipping technology enabling absolute zero greenhouse gas emissions emissions across all scopes. It shows that solutions are technically and commercially ready now to greatly reduce shipping emissions. The submission will be presented to the esteemed Inter Sessional Working Group on Greenhouse Gases 15 (ISWG-GHG 15), taking place from June 26th to 30th.

ZESTAs’ provision of information and reputable input in this international forum demonstrates the organisation’s commitment to shaping the maritime industry’s future. Through engaging in discussions around strategy and setting a level of ambition, ZESTAs aims to position itself as a key source of trusted information which can be relied upon in driving sustainable practices and technological advancements.

Following ISWG-GHG 15, ZESTAs will continue its active involvement in the Marine Environmental Protection Committee 80 (MEPC 80). From June 4th to July 4th, ZESTAs will showcase at the highest decision making level in shipping that zero emission shipping technology is not only viable but also market-ready. By highlighting successful case studies and emphasising the potential for technology proliferation, ZESTAs aims to inspire and encourage broader adoption of absolute zero emissions technology.

As ZESTAs continues to contribute its expertise and insights to the international maritime community, our positive reputation and advice is becoming more sought after by decision makers and other industry peak bodies, ZESTAs is committed to continuing our transformative discussions and collaborative efforts that will pave the way for a greener and more sustainable future.

The white paper, contributed to by our members and partners and prepared by ZESTAs’ team of experts, focuses on the advancements and capabilities of shipping technology enabling absolute zero greenhouse gas emissions emissions across all scopes. It shows that solutions are technically and commercially ready now to greatly reduce shipping emissions. It was submitted to IMO committee ISWG-GHG 15, which took place from June 26th to 30th.

“World governments can act decisively in an emergency and climate change has escalated to the level of crisis. Policy response must therefore be accelerated to crisis response level, bringing in emergency measures at regional levels, as was done for Covid-19.”

Madadh MacLaine, Secretary General, ZESTAs.

Download our ShipZERO 26 Policy Brief

EXISTING

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IMO ECA - Emission Control Areas

Part of MARPOL Annex VI, entered into force in 1997, revised in 2015.

Progressive reductions in NOx emissions from marine diesel engines installed on ships, with a “Tier II” emission limit for engines installed on a ship constructed on or after 1 January 2011; and a more stringent “Tier III” emission limit for engines installed on a ship constructed on or after 1 January 2016 operating in ECAs.

NOx and PM ECAs are the North Sea, the Baltic Sea, the coasts of the United States and the Atlantic and Pacific coasts of Canada.
SOx ECAs are the Baltic Sea, the North Sea and the coasts of the United States and the Atlantic and Pacific coasts of Canada.

In 2015, the limits for SOx and particulate matter (PM) were reduced to 0.1%.

 

– Source: International Maritime Organization –

IMO Global Sulphur Limit

Part of MARPOL Annex VI, entered into force 2020.

The global fuel oil sulphur limit was reduced from 3.5% to 0.5%.

 

– Source: International Maritime Organization –

IMO EEDI - Energy Efficiency Design Index

Part of MARPOL Annex VI, entered into force 2013.

The EEDI is a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry. As long as the required energy efficiency level is attained, ship designers and builders are free to use the most cost-efficient solutions for the ship to comply with the regulations.

EEDI is the IMO’s principle technical measure to reduce GHG emissions. EEDI applies to any ship of 400 gross tonnage and above that are engaged in international waters. Requires calculation of Attained EEDI (Regulation 20) and Required EEDI (Regulation 21).

The formula for Attained EEDI (the actual EEDI of a ship, CO2 emissions/transport work) incorporates all innovative technologies by including propulsion power from the main engine, auxiliary engine(s), energy efficient power generation and auxiliary propulsion (e.g. wind propulsion).

Reduction Factors are in place for reducing ship emissions depending on the implementation phase. Each phase sees reductions of 10% below the reference line.

 

– Source: International Maritime Organization –

IMO SEEMP - Ship Energy Efficiency Management Plan

Part of MARPOL Annex VI, entered into force 2013.

Requires all ships of 400 gt and above to carry a specific Ship Energy Efficiency Management Plan (SEEMP), the operational energy efficiency measure of the IMO.

 

– Source: International Maritime Organization –

IMO IEEC - International Energy Efficiency Certificate

Part of MARPOL Annex VI, entered into force 2013.

An International Energy Efficiency (IEE) Certificate for the ship shall be issued after a survey in accordance with the provisions of regulation 5.4 to any ship of 400 gross tonnage and above, before that ship may engage in voyages to ports or offshore terminals under the jurisdiction of other Parties.

IEE Certificate is valid throughout the lifetime of a ship unless there is a major conversion or change of flag or ship withdrawal from service.

Requires Port State Control (PSC) to conduct energy efficiency inspections. The IEE certificate is the starting point for any PSC inspection. Any port State inspection shall be limited to verifying, when appropriate, that there is a valid International Energy Efficiency Certificate on board.

 

– Source: International Maritime Organization –

IMO DCS - Fuel Oil Data Collection System

Part of MARPOL Annex VI, entered into force 2018.

Requires ships of 5,000 GT and above to collect consumption data for each type of fuel oil they use, as well as other, additional, specified data including proxies for transport work. The aggregated data is reported to the flag State after the end of each calendar year and the flag State issues a Statement of Compliance to the ship.

 

– Source: International Maritime Organization –

EU MRV - Monitoring, Reporting and Verification

Entered into force 2015.

Ships above 5,000 gross tonnage must monitor, report and verify CO2 emissions released during their voyages from their last port of call to a port of call under the jurisdiction of a Member State and from a port of call under the jurisdiction of a Member State to their next port of call, as well as within ports of call under the jurisdiction of a Member State. (Article 2)

Shipping companies must create a Monitoring Plan for each ship, based on templates produced by the Commission. Each ship must monitor a number of parameters during each voyage including fuel consumed and Emission Factors of each fuel type and CO2 emissions emitted as well as methodologies for calculating emissions.

Companies should monitor for each ship arriving in or departing from, and for each voyage to or from, a port under a Member State’s jurisdiction. Exemptions are if all of the ship’s voyages during the reporting period either start from or end at a port under the jurisdiction of a Member State; and the ship, according to its schedule, performs more than 300 voyages during the reporting period. (Article 9)

Companies should also monitor annually for each ship, including total aggregated CO2 emissions and aggregated CO2 for each voyage and average energy efficiency. (Article 10)

An annual verified Emissions Report, containing total CO2 emitted and other relevant information including the ship’s EEDI value, must be submitted to the Commission and to the authorities of the flag States concerned. (Articles 11 and 12) The annual Emissions Report will be made publically available. (Article 21).

 

– Source: European Commission –

IMO Target for GHG Reduction

Entered into force 2018.

Adopted at MEPC 72, as part of the Initial Strategy. Sets out the the levels of ambition to reduce GHG emissions.

The target is to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts towards phasing them out entirely.

 

 

– International Maritime Organization –

IMO EEXI - Energy Efficiency Existing Ship Index

Part of MARPOL Annex VI, entered into force in 2021.

Required to be calculated for every ship at its first survey following entry into force of the amendments. This indicates the energy efficiency of the ship compared to a baseline.

Ships with non-conventional propulsion (diesel electric, turbine or hybrid propulsion system) are exempt, except for cruise passenger ships and LNG carriers.

Ships are required to meet a specific required EEXI, based on a required reduction factor (expressed as a percentage relative to the EEDI baseline).

– Source: International Maritime Organization –

IMO CII - Carbon Intensity Indicator

Part of MARPOL Annex VI, entered into force in 2021.

Ships of 5,000 gross tonnage and above (approximately those who follow DCS requirements) must determine their required annual operational carbon intensity indicator (CII).

CII determines the annual reduction factor needed to ensure continuous improvement of the ship’s operational carbon intensity within a specific rating level.

The attained annual operational CII are required to be documented and verified against the required annual operational CII. This enables the operational carbon intensity rating to be determined.

The reduction rates are intended to achieve the levels of ambitions set out in the IMO’s Initial GHG Strategy, in particular, the 2030 level of ambition of reducing carbon intensity of international shipping by at least 40% by 2030, compared to 2008.

A CII rating is given on a scale – operational carbon intensity rating A, B, C, D or E. A ship rated D for three consecutive years, or E, must submit a corrective action plan, to show how the required index (C or above) would be achieved.

 

– Source: International Maritime Organization –

IMO EEDI Phase 3

Part of MARPOL Annex VI, to entered into force in 2022.

New design energy efficiency requirements for vessels built between 2021-2022 at least 30% below the EEDI reference line. It is applicable to containerships, general cargo ships, refrigerated cargo carriers, combination carriers, gas carriers, LNG carriers and cruise ships. In addition, efficiency requirements for containerships were raised to a 50% energy reduction rate.

– Source: International Maritime Organization –

UPCOMING

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EU ETD - Energy Taxation Directive (ETD) Revision

To enter into force in 2023.

Revision of Energy Taxation Directive to include marine fuel.

 

– Source: European Commission –

EU ETS - Emissions Trading Scheme

Shipping will be included in the EU Emissions Trading Scheme in 2023.

Upcoming amendment to Regulation 2015/757/EU.
All ships above 400 gross tonnage except ice brakers when sailing within the EU and 50% of voyages outside of the EU. GHG reduction target of 40% by 2030.

Includes an ‘Ocean Fund’ for the period from 2023 to 2030, to stimulate innovation in ships and ports.

 

– Source: European Commission –

IMO Arctic HFO ban

To be applied from 1 July 2024 onwards, except for category A and B ships constructed on or after 1 January 2017 with an aggregate oil fuel capacity of less than 600 m3.

Bans the use and carriage of HFO as fuel in Arctic waters. Exemptions and waivers mean that a complete ban would not enter into force until July 2029. Carriage of HFO as cargo is not banned.

 

– Source: International Maritime Organization –

IMO Mediterranean SOx ECA

To enter into force in 2025.

MARPOL Annex VI creates a SOx Emission Control Area in the Mediterranean Sea (Barcelona Convention signatories). This mandates fuels with maximum 0.1% sulphur content.

 

– International Maritime Organization –

Norway World Heritage Fjords zero emissions regulation
To enter into force in 2026.

Requires all cruise and passenger vessels entering UNESCO World Heritage fjords to be zero-emissions vessels.

 

– Source: UNESCO World Heritage Centre –

IMO Carbon Price

The IMO member states have agreed to put a price on carbon emissions.

Numerous proposals for a worldwide tax on CO2 emissions have been called for by IMO member states and shipping industry actors. While only member states can submit their proposals to the IMO, industry actor announcements may influence member state proposals.

Japan proposed a $56 per tonne CO2 price to come into effect from 2025 to 2030, and $135 per tonne from 2030.

Marshall Islands and Solomon Islands proposed a mandatory and universal $100/ton CO2 equivalent (CO2e) charge on shipping companies by 2025. The majority of funds would go towards climate vulnerable countries, such as SIDS, while another portion would go towards subsidising R&D and deployment of low-carbon technologies and fuels. Source: Informa UK Limited

Mærsk Mc-Kinney Møller called for a $150/ton CO2 tax on shipping fuel. They plan for tax to be implemented at about $50/ton in 2025, then increasing to at least $150/ton in later years. Money raised from the tax would be used to subsidize clean fuels, and, to support developing countries. – Source: Bloomberg –

Trafigura called for a $250 to $300/ton CO2 equivalent (CO2e) tax (or ‘partial feebate’) on shipping fuel that has a CO2e well-to-wake intensity above an agreed benchmark level. Concurrently, when a fuel is used that has a CO2e intensity below the benchmark, a subsidy is awarded. Revenue would be used mostly for subsidies, with further funds going to R&D for zero- and low-emission fuels and supporting climate change mitigation in Small Island Developing States (SIDS).

Nine global shipping associations including International Chamber of Shipping (ICS) and several IMO member states proposed 2$/t levy on fuel oil to set up $5bn fund to set up International Maritime Research Board (IMRB) to commission collaborative programmes for R&D of zero-carbon maritime technologies, including development of working ocean-going prototypes. It will also assist CO2 reduction projects in developing countries, including Pacific island nations.

 

– International Maritime Organization –

PROPOSED

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USA Ocean-Based Climate Solutions Act

Proposed by US Natural Resources House Committee Chair Raúl M. Grijalva in 2020.

Relevant aspects include:

– Establishes a pathway forward to protect 30 percent of US ocean by 2030.
– Promotes offshore wind energy and other marine energy research. Enhances the fuel efficiency of the fishing vessel fleet.
– Protects marine mammals through vessel speed programs Expands climate mitigation efforts in the Arctic.

 

– US Natural Resources House Committee –

US Clean Shipping Act of 2022

The bill directs the Environmental Protection Agency (EPA) to set carbon intensity standards for fuels used by ships of 20% LCA CO2-e from 2027, 40% from 2030, 80% from 2035 and 100% from 2040, relative to a 2024 baseline. These targets are in line with limiting warming to 1.5 degrees under the Paris Agreement.

It also sets requirements for zero GHG emissions and zero air pollutant emissions from ships at berth or at anchor in ports from 2030.

 

 

– United States Congress –

IMO Mediterranean NOx ECA

The Barcelona Convention signatories have agreed to discuss establishing a Nitrogen Oxide Emissions Control Area.

 

– International Maritime Organization –

EU FuelEU Maritime

Aims to increase the use of sustainable alternative fuels in European shipping and ports from 2025 by imposing strict limits on the fuel’s life-cycle carbon intensity in 5-year increments until 2050, when carbon intensity should be 75% compared to the 2020 base year. It covers all energy used on board when the ship is at an EU port and on voyages between EU ports, and 50% of the energy used on voyages departing from or arriving to an EU port.

Applies to all vessels above 5000 GT of any flag sailing in except fishing vessels.

From 2030, container ships and passenger ships at EU ports will also have to connect to onshore power supply (OPS) and use it for all energy needs while at berth, with some exceptions.

 

– Source: European Commission –

China ETS - Emissions Trading Scheme
The aim ultimately is to include any company that discharged over 26,000 tonnes of carbon dioxide (or its equivalent) in any year between 2013 and 2019. The 26,000 tonnes threshold will likely impact a swathe of shipbuilders as well as top shipping lines.

Follows a successful Shanghai ETS pilot program which covered emissions from shipping.

 

– Source: International Carbon Action Partnership (ICAP) –

USA NDC - Nationally Determined Contribution

The US is proposing the inclusion of shipping in the NDC, as defined in the Paris Agreement.

 

– International Coucil on Clean Transportation –

USA GHG Taxes

Taxes on greenhouse gas emissions in all sectors have been proposed by a number of US senators. They include:

    • MARKET CHOICE Act, 2019 (H.R.4520. Fitzpatrick): Transfers specified revenue from the tax to a Rebuilding Infrastructure and Solutions for the Environment Trust Fund (RISE Trust Fund) established by the bill, and other bodies.
    • Energy Innovation and Carbon Dividend Act, 2019 (H.R.763. Deutch): A fee equal to the GHG fuel content multiplied by a carbon fee rate beginning at $15 and increasing by $10 each year. It would be imposed on the producers or importers of fossil fuels, subject to adjustment depending on progress in meeting emission targets. Also imposes a specified fee on fluorinated GHGs, such as those emitted by gas tankers and refridgerated carriers (according to the EPA). The bill includes border adjustment provisions that require certain fees or refunds for carbon-intensive products that are exported or imported. Revenue would go to a Carbon Dividend Trust Fund.
    • Stemming Warming and Augmenting Pay (SWAP) Act, 2019 (H.R.4058. Rooney): Imposes a $30 per metric ton of CO2-e increasing by 5% plus inflation each year and increasing by $3 per ton every two years if the previous year’s emission goals are not met. The revenue is divided: 70% for the reduction of payroll taxes; 10% for additional payments to Social Security beneficiaries; and 20% to establish a carbon trust fund.

 

– Source: United States Congress –

China Coastal Low Carbon Fuel Regulations

The ICCT has called for mandatory energy efficiency standards and low-carbon fuel regulations for China’s domestic coastal shipping.

– ICCT –

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