PolicySHIPPING The global shipping industry is governed by the IMO’s regulations. In 2023, the IMO updated its GHG strategy to aim for net-zero emissions by or around 2050, as well as 2030 and 2040 mid-term targets and a goal for uptake of zero or near-zero emission fuels to be 5% (striving for 10%) by 2030.204 In addition to the IMO strategy, there are several key regional policies playing a critical role in supporting the decarbonization of the shipping industry. The EU’s Emissions Trading System for shipping, which sets limits on GHG emissions and requires shipping companies to purchase carbon credits for their emissions in voyages involving EU ports, has been extended in 2024 to cover all large ships (of 5,000 gross tonnage and above) entering EU ports.205 The FuelEU Maritime regulation, which will be effective in the EU from January 2025, has set a GHG emission-reduction target of 2% in 2025 (vs. 2020), increasing to 6% in 2030 to reach 80% in 2050.206 As part of the ongoing meetings and negotiations of the IMO’s Marine Environment Protection Committee (MEPC), several countries and organizations, including two prominent shipping trade associations, have submitted proposals. One of these is from the World Shipping Council, which represents members primarily in the container shipping segment. It has proposed a green balance mechanism to help close the gap between low- carbon fuels and fossil fuels. The mechanism would apply a fee to ships using fossil fuels and allocate credits to those using low-carbon fuels, ensuring that the average cost of fuel is equal.207 The next significant step on the policy lever will be the Spring MEPC83 meeting in the IMO. Shipping industry policy summary TABLE 7 Policy typePolicy instrumentsKey examples Impact Market-basedCarbon price –EU-ETS208 –US International Maritime Pollution Accountability Act: $150 per tonne of CO2 emissions proposed209 –IMO economic measure, 2023 strategy210Up to $10 billion a year of additional costs for the industry due to the need to acquire carbon credits once the EU-ETS is fully implemented in 2026.211 The proposed US carbon pricing is projected to bring in $250 billion in low-emission funding over the next 10 years.212 Carbon pricing under IMO is still under discussion and will not be in effect before 2027. Mandate-basedPerformance standards and certification –Energy Efficiency Design Index (EEXI)213 –Carbon Intensity Indicator (CII)214Ships must comply with these mandatory standards, which are intended to drive continuous technical and operational improvements. Direct regulation –EU Alternative Fuels Infrastructure Regulation These are mandates for major EU ports to provide shore-side electricity to vessels. They reduce emissions at ports by providing cleaner electricity as an alternative, with a specific timeline for ports to act upon (by 2030). Fuel standards –FuelEU Maritime regulation215 –US Clean Shipping Act216 –IMO technical measure, 2023 strategy217These are predictable pathways for low-emission fuels that encourage adoption and drive demand. Incentive-basedTaxes and subsidies –IRA clean power and green hydrogen production tax credits218These credits have encouraged a 50% reduction in green hydrogen production costs, which can boost scaling of green hydrogen capacity required for low-emission fuels.219 The feasibility of such subsidy- driven policies for developing economies is uncertain. Green corridors –Green corridor pledge at COP28 between the US and UK220This pledge reduces the risks of adopting low- emission fuels by deploying at a local scale and mobilizing demand. So far, 44 green corridor initiatives have been announced, involving over 171 stakeholders.221 Direct funding –Public funding for converting diesel plants to hydrogen and setting up charging stations in Croatia222This provides new funds for hydrogen projects, the retrofitting of diesel plants to hydrogen and the establishment of charging stations for maritime transport. Net-Zero Industry Tracker: 2024 Edition 61

Net Zero Industry Tracker 2024