Avoiding greenwashing and defining emission reductions: How a science-based framework could catalyse maritime’s Race to Zero

The maritime sector serves as a critical link in many global supply chains. More than 80% of global trade by volume is carried by sea, and this sector contributes to ~3% of global greenhouse gas emissions. It has a responsibility and an obligation to accelerate its climate action to tackle the climate crisis and enable the transformation to a net-zero economy. In this interview, UMAS Principal Consultant, Jean-Marc Bonello explains what impact a science-based framework will have on the sector's Race to Zero. By Charlotte Owen-Burge, Editorial Lead, Climate Champions | March 2, 2023

With respect to decarbonisation, what journey has the maritime sector been on in the past decade?

Going back to 2013, the industry was experiencing sustained high oil prices. Back then, there was some focus on efficiency for the sake of fuel savings, and decarbonisation was not in anyone’s vocabulary except in niche circles. The Paris Agreement in 2015 gave those niches the mandate to bring decarbonisation high up on the agenda at the IMO, which led to the hard-fought Initial Strategy being ratified in 2018 to reduce absolute emissions by at least 50% on 2008 levels.

Although this was not ambitious enough to match the urgency that the IPCC made clear was required, it provided a line in the sand which saw the concept of climate alignment through decarbonisation becoming more socialised.

Fast forward five years, and we’re at a point where industry is leading the charge for higher ambition in the sector’s decarbonisation, zero-emission fuels and technologies are growing at an unprecedented rate, and the IMO will be revising its Initial Strategy at MEPC 80 in mid-2023. This will be a key milestone for the sector as anything but a robust  1.5oC aligned target and interim milestones risks a significant departure from the urgency and scale of decarbonisation required to avoid climate catastrophe.

What have been the greatest challenges and most important signals of change?

The consensus is that slow regulatory development has been a big challenge, especially for the past five years. While technologies and zero-emission fuel solutions have been developed by industry, no clear direction has been provided by regulation, which makes any decision high risk and, therefore, difficult to finance. Partly due to the fragmentation and heterogeneity of the industry, there is disagreement on exactly which solution(s) will be best, which creates another challenge and ‘technology risk’ when picking a decarbonisation strategy. Taking a broader perspective, shipping cannot go through this process in isolation as it is part of a bigger global energy transition. Links with national and regional energy policy are still nascent, which is proving challenging when making a decision around fuels.

On the more positive side, it is now hard to keep up with the number of initiatives, pilot projects, green corridor announcements and corporate statements focused on decarbonisation. We are coming to a point where technology is not a barrier to decarbonisation and therefore the focus is shifting towards implementation rather than a proof-of-concept. Several stakeholders, including financiers, charterers, insurers and cargo owners, have started including climate alignment in their business decision-making and a push for high-ambition targets.

What is a science-based framework, and why is it important to the sector’s Race to Zero? 

Any effort towards decarbonisation needs to be rooted in scientific evidence to ensure it is saliant, legitimate and credible. From a commercial perspective, a science-based framework is the best way to mitigate the risk that, as regulations tighten on GHG emissions, a corporate strategy finds a company ‘behind the curve’ and is faced with technology obsolescence and asset stranding/devaluation. It is also the best way to win market share and access to low-cost capital as capital markets and customers move to manage their own climate risk. A science-based framework provides a set of steps that, if followed correctly, ensure that any action taken towards decarbonisation takes into consideration the latest scientific evidence at hand, is transparent and has been independently peer-reviewed. These steps usually involve measuring the impact of current activities, setting near-term action towards a long-term target and disclosing progress towards these targets. The hallmarks of a science-based target-setting framework that is aligned to the IPCC guidance are that it includes:

• All greenhouse gas emissions, not only CO2
• Captures lifecycle emissions from the start of energy production to the point of use
• Captures all scopes of emissions (Scope 1,2 and 3)

With these basic criteria at their foundation, science-based targets provide a robust method of defining emission reduction targets and mitigate against greenwashing. If such a framework is designed to be aligned with 1.5oC alignment as defined by the UNFCCC, it is a plumb fit for the Race to Zero meta-criteria and thus would provide an obvious starting point for any stakeholder that is setting off on their decarbonisation journey.

Using a well-designed and recognised science-based framework ensures no resource is wasted on solutions that are not in line with long-term decarbonisation and that every business decision is made with high ambition in mind. Moreover, as more companies engage in science-based target setting, this will become normal practice, and not having such an operating philosophy will become a barrier to operating in the sector. There is no time to waste on this cause; the longer we wait to act, the more expensive and disruptive the change to the industry will have to be.

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Why is near-term target-setting so important?

Across all sectors, we must achieve an approximate halving of GHG emissions by 2030 (on 2010 baseline). Therefore setting out to achieve zero emissions by 2050 is only the starting point of any serious endeavour to climate alignment. Short, or near-term targets, are essential to have as milestones on the journey towards the ultimate goal to ensure accountability but also provide tangible interim deadlines to work towards and spread the effort of transition over time. Setting up short-term targets allows for a much shorter review cycle to be implemented in order to assess the impact of decision-making towards a science-based target and take stock of whether those decisions are still valid or if changes are required. It is easy to set long-term targets, but achieving them through daily operation is challenging to measure and asses without interim targets.

Could you describe some of the tools the framework sets that help expedite this transition?

The industry has been lacking an independently developed, science-based trajectory which gives a clear definition of the rate of decarbonisation that matches the urgency required. The best example of a sector-specific science-based target-setting framework for the shipping industry is the maritime guidance launched by the Science Based Targets Initiative (SBTi) in 2022. This has been hailed as a world first in maritime climate alignment as it sets out a pathway to 1.5oC alignment as defined by the IPCC and accompanied by a well-established target-setting and disclosure framework under the existing SBTi methodology. It is also based on the idea of setting short-term targets towards a long-term goal which embeds accountability and provides momentum for decision-making sooner rather than later.

As this was developed specifically for the sector, it accounts for the nuances of the industry and integrates these in the development of the methodology through considerations around data gathering and carbon-intensity metrics used. The SBTi maritime guidance also provides a practical tool for any company with maritime transport activity within its operational boundary to set company-specific targets based on a base-year activity and projected growth in order to evaluate suitable climate-aligned targets.

Who are the maritime trailblazers? Do they have something in common which allows them to more rapidly progress?

It is difficult to single out specific trailblazers as there are so many parts of the industry that are moving rapidly towards decarbonisation. For any company that is moving fast on decarbonisation, their common features are:

• They have understood the inevitability of the transition and that it’s not a question of ‘if’ they will need to reach zero emissions, but ‘when’. Once this realisation has been made, then the natural next step is to turn a process that has to be taken (decarbonisation) into an opportunity e.g. to gain market share or enter new markets.
• They have found a way to look at the value of options, the value of understanding new technology and relationships, and/or the value that can be unlocked from a longer-term perspective
• They have understood the risks of their pre-existing fossil-centric assets (e.g. conventionally fuelled ships) and the need to mitigate the stranding risk in new investments. This often involves finding a way to justify a small premium in the capital cost of an asset, which in some circumstances can be done through lower-cost finance
• They have found ways to collaborate and share costs and risks across the value chain (or in the case of some large companies, across internal cost centres)
• They have understood and started to crystallise opportunities e.g. they have found ways to pass higher costs associated with alternatives to fossil fuel, onto customers

In some cases, they have spotted that there are government/other grants and funding opportunities or synergies that can be leveraged in order to enable early adoption, but this is not a pre-requisite.

I would be doing a disservice to the many Pacific island nations if I do not mention that they have been at the forefront of the fight for decarbonising shipping for the last decade even when it was not so high on the agenda.