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Shipping Expected to Do its Part to Reduce Emissions

Major changes are underway, as shipping needs to pick up the pace regarding its efforts to lower emissions from ships. In its latest weekly report, shipbroker Gibson said that “as dust settles on COP26, it is time to reflect on what has actually been achieved. A number of agreements were reached, although not all are related to shipping. Perhaps the most important outcome is the pledge signed by 100+ countries to cut methane emissions by 30% by 2030. Reducing methane emissions is arguably the fastest opportunity today to slow the rate of global warming. Will this potentially improve the environmental credentials of LNG?”

Source: Gibson Shipbrokers

According to Gibson, “for the tanker industry another important, but not legally binding, agreement was to accelerate the uptake of net zero emission vehicles and work towards all sales of new cars and vans being net zero emissions globally by 2040 and by no later than 2035 in leading markets. There are some heavy weight signatories to this pledge, but a significant number of large economies, such as the US, Germany, China, South Korea and Japan had not yet signed up. Without them onboard, the targets set will be even more challenging to achieve. Also, for the first time ever, fossil fuels were referenced in a COP document. Nearly 200 countries pledged to “phase-down” unabated coal and “phase-out” inefficient fuel subsidies. There is no timeline mentioned though, while every government will have their own view on what is considered efficient or non-efficient”.

“There were also some significant financial announcements. Although the $100 billion per year climate finance goal by 2020 for developing countries has not been reached, developed countries pledged to deliver through to 2025 and to agree a more ambitious post-2025 finance goal. Furthermore, the Glasgow Financial Alliance for Net-Zero, consisting of 450 organizations across 45 countries committed $130 trillion towards the net zero transition. Yet, several observers note that these agreements are largely voluntary, whilst the announced amount is the asset base of participating institutions and not the funds that will flow towards climate targets. Separately, more than 30 countries and financial institutions, including the UK, US, Canada and Germany committed to halting all new direct public financing for fossil fuel development abroad by end-2022”, Gibson said.

The shipbroker added that “some progress was made in terms of carbon itself, with an agreement reached to start setting up a global, UN-backed carbon credit that can be swapped and traded around the world. It is voluntary and far short of universal “carbon” tax, yet it is a step towards establishing a global system, eliminating double counting of carbon credits and establishing a strong accounting framework for voluntary carbon markets”.

“Also, a new transparency framework was established; where all countries will have to report on their emissions, progress on pledges and contributions to climate finance, at least every two years. It is hoped that greater accountability will facilitate the overall decarbonization efforts. In shipping, 22 governments declared to seek to set up at least 6 green shipping corridors by 2025. This means net zero emissions routes, involving employment of net zero emission technologies and alternative fuels. At this stage further details are vague; whilst it also appears that non zero emission voyages will not be excluded from operating in green shipping corridors”, Gibson noted.

The shipbroker concluded that “while progress clearly has been made, the COP26 summit also illustrated that the governments are finding it extremely challenging to plan a world beyond fossil fuels. Preparations for COP27 are already underway, while the “Glasgow Climate Pact” means that the countries are formally requested to increase their environmental ambition by the end of 2022. As always, there is plenty of uncertainly about the pledges made but undoubtedly decarbonisation efforts will only intensify going forward. COP26 may be over but the focus now shifts to MEPC77 and the IMO next steps”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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