Seventh Report - Net zero and UK shipping

We welcome the International Maritime Organization’s adoption in 2023 of a revised Greenhouse Gas Strategy and the clearer signals it provides to IMO States and the shipping industry on the pathway to achieving net zero ambitions from shipping by 2050.

The UK’s influence over and contribution to international shipping activity is considerable. We commend the UK Government on its contribution to date in securing a global strategy which is far more ambitious than that initially adopted by the IMO in 2018.

We nevertheless observe that the strategy adopted by the IMO does not currently align with a pathway consistent with the Paris Agreement target of limiting global warming to 1.5°C, and that its ambition is limited to achieving net zero emissions “by or around” 2050.

The period to 2028 and the expected adoption of a further GHG Strategy will be a crucial one for international shipping emissions, as agreement is reached on regulatory measures to implement the 2023 Strategy and as IMO States seek consensus on further decarbonisation plans. The outcome of discussions at the 81st meeting of the IMO Marine Environment Protection Committee in March 2024 appears to have been positive, but work is clearly required to consolidate and raise IMO ambitions on global emissions regulation. Continuity in the UK Government’s approach and the maintenance and strengthening of the coalition of ambition at the IMO is essential.

We recommend that the Government continue to work at the IMO for adoption of effective regulatory measures to implement the 2023 Strategy. In tandem with this, Ministers must press for a 2028 Greenhouse Gas Strategy which consolidates the ambition of the 2023 Strategy while striving for reductions in line with the UK Government’s stated goal of absolute zero emissions from international shipping by

Prompt and effective implementation of IMO conventions will be essential to the delivery of meaningful reductions in shipping emissions in line with Paris goals and national net zero pathways. We therefore urge the UK to work with those flag States with substantial shipping registries to ensure full and thorough implementation of IMO conventions on maritime GHG reductions, supporting capacity-building where necessary. (Paragraph 49) The UK Government’s approach to delivering net zero shipping

The current method for allocating international shipping emissions between states appears unsustainable as a basis for making UK policy on international shipping emissions and determining the maximum emissions permissible from the UK’s international shipping in the Sixth Carbon Budget. The International Maritime 58 Net zero and UK shipping Organization has already moved away from the bunker sales measure to a voyage- based measure. This appears to give a more accurate picture of the overall contribution of international shipping activity to GHG emissions worldwide.

We recommend that the Government urgently assess the merits of introducing a voyage- based measure of the UK’s contribution to international shipping emissions, so as to provide a sounder basis for developing policy on reducing that contribution. It is in the interests of the industry and policymakers alike that the matter is swiftly clarified, and that the legislation to include international aviation and shipping emissions in the Sixth Carbon Budget is brought before Parliament for approval without further delay.

We welcome the Government’s initiative to establish UK SHORE as a dedicated unit to promote research into green maritime technology and the reduction of emissions from UK shipping. We are nevertheless concerned to note that no specific objectives or targets have been set for the unit, and are alarmed to learn that the Department for Transport is unable to guarantee the unit’s funding beyond the end of the current Spending Review period in March 2025. It is worrying to note the slippage in policy on clean maritime clusters and zero-emission fuels and the provision of shore power in ports. At this stage of the Government’s strategy to achieve net zero from UK shipping, Ministers must ensure that the sector has certainty about policy direction.

Net zero offers the UK an unrivalled opportunity to secure benefits for the UK maritime sector and the UK’s research and manufacturing base. It is now high time for Ministers to advance to the next stage of policy development by setting stretching but achievable interim targets for UK domestic and international shipping emissions, consistent with carbon budget requirements and the overall 2050 net zero target. (Paragraph 95) Technical measures to decarbonise shipping: renewable marine fuels

The provision of up to £206 million of matching funding for research into low- and zero-emission shipping is to be applauded, and no doubt represents a step change in Government investment in the field. It is, however, dwarfed by the sums of public money committed to research and development into aviation technologies, including low-carbon aviation, since 2013.

The Government’s current refusal to guarantee funding for research and development into maritime decarbonisation beyond March 2025 is regrettable. We note that the Aviation Technology Institute has received a guarantee of funding to 2030, no doubt reflecting the importance to the economy, and to decarbonisation targets, of rapid progress in reducing emissions from domestic and international aviation. By failing to guarantee Government support for research and development into reducing domestic and international shipping emissions, Ministers risk stifling progress in this sector. Although decarbonisation of domestic and international shipping is less advanced than decarbonisation of aviation, it is just as challenging to undertake, and demands significant investment decisions from Government and industry in the short term if net zero goals are to be met. (Paragraph 134) Net zero and UK shipping 59

The Government must send clear and unambiguous signals to the UK maritime sector that it is committed to supporting its transition to net zero. We recommend that Ministers urgently review the funding perspectives for decarbonisation of UK shipping and, no later than the next fiscal event, provide a commitment to further matching funding for research and development to at least 2030.

As with low-carbon aviation fuel, the development of manufacturing capacity for zero-emission marine fuels is vital for the security of the UK’s maritime trade and for the establishment of green shipping corridors. It is disappointing that the Government says it is “not yet able to commit” to the establishment of manufacturing facilities in clean maritime clusters so as to deliver up to 2 TWh of zero-emission marine fuels annually by 2030. Accelerating support for these facilities would bring significant benefits from first mover advantage.

We note with interest the recent modelling undertaken by UMAS and Arup, examining how a domestic clean ammonia facility could significantly benefit the take up of zero-emission maritime fuels for ferries operating across the North Sea from Newcastle, the Tees Estuary and Immingham. This holistic assessment of the business case for new facilities demonstrates a refreshing approach to balancing the challenges and opportunities arising from maritime decarbonisation.

As part of the updated Clean Maritime Plan the Government must develop a strategy to support the development in UK maritime clusters of facilities for the manufacture of zero-emission marine fuels. This strategy must be supported by a delivery plan which sets clear production milestones.

We recommend that Ministers consult on the introduction of a revenue support mechanism to incentivise the commercial production of zero-emission marine fuels in the UK. (Paragraph 139) Technical measures to decarbonise shipping: efficiency improvements

The current Clean Maritime Plan sets no clear or measurable objectives for the UK’s contribution to operational efficiencies from domestic and international shipping.

The refreshed Clean Maritime Plan must set stretching interim targets for the emissions savings to be achieved from operational efficiencies in UK domestic shipping to 2050, together with a detailed plan for how these savings are to be achieved through measures such as route and speed optimisation.

The UK’s influence in international shipping is considerable and extends beyond its prominent position at the IMO. The basis of the majority of international shipping contracts is English law. The UK Hydrographic Office provides unrivalled resources to support vessels in optimising their voyages so as to maximise energy efficiency. This ‘soft power’ is an invaluable resource for the decarbonisation of global shipping. (Paragraph 166) 60 Net zero and UK shipping

We recommend that, as part of the refreshed Clean Maritime Plan, Ministers commission a workstream to examine how the efficiency of international shipping operations can be further optimised by the appropriate development of the expertise in the UK Hydrographic Office.

IMO standards for existing ship efficiency provide progressively more stringent measures to require the existing fleet to reduce its emissions. Current measures have been criticised for a lack of ambition. While the amendments to the MARPOL Convention currently being contemplated at the IMO may further ratchet up efficiency requirements, there are potential emissions benefits to be gained from a more stringent UK approach.

We recommend that Ministers consult on the emissions benefits to be achieved through regulating the maximum carbon intensity of vessels allowed to enter UK ports, with a view to permitting only those vessels rated ‘A’ to ‘C’ for carbon intensity under the current IMO Energy Efficiency Existing Ship index to enter.

It is regrettable that the Government has changed course on its policy on the provision of shore power to UK ports. In a period where grid connections are currently at a premium and demand for electricity supply is increasing, the delay in determining policy on how to provide power to the zero-emission ports of the future is unwelcome.

We recommend that Ministers launch their planned consultation on net zero ports without further delay, so as to gather signals from the ports industry and the wider maritime sector at the earliest opportunity as to what infrastructure is likely to be required to minimise the emissions from ships at berth in UK ports, to provide for bunkering and refuelling with low- or zero-emission fuels and to develop a suitable structure for funding infrastructure development. Ministers must send the clearest signals possible about the likely requirements for port electrification so as to enable early planning for potential grid connections.

The initial Clydebank Declaration, and the consolidation and development of initiatives for green shipping corridors since COP26, represent considerable progress in collaboration between governments, and between the Government and industry, in the practical measures required to make decarbonised shipping a reality. Ministers are to be commended for the initiative in pressing for the Declaration and for subsequent work to develop partnerships to establish these corridors.

The UK, as a leading proponent of this multilateral approach, is demonstrating how green corridors can be implemented on domestic, regional and intercontinental routes. We welcome the recent announcement of collaborations to establish green corridors between the UK, the Netherlands, Norway, Denmark, and Ireland, and we look forward to further positive developments.

In its response to this report we expect Ministers to set out the current state of each of the green corridor feasibility studies UK SHORE is engaged in, and the state of discussions with the USA, Canada, Singapore and other relevant Clydebank signatories on the requirements for implementing bilateral green corridors with each. (Paragraph 188) Net zero and UK shipping 61 Economic measures to decarbonise shipping

We welcome the inclusion of domestic shipping in the UK Emissions Trading Scheme from 2026. We also note the initial decision of the UK ETS Authority not to extend the UK ETS to cover international shipping. The Authority’s position is subject to further consultation.

The Government must press for a global market-based measure for international shipping to be adopted and implemented at IMO level by the end of the current GHG Strategy period in 2028. To avoid ‘double counting’, any IMO measure ought to be drafted so as not to impede the operation of any national or regional economic measures that are equivalent in both scope and ambition to its own global measure. (Paragraph 200) Relaunching the Clean Maritime Plan

The Clean Maritime Plan—the element of the Government’s Maritime 2050 strategy focused on decarbonising shipping—was issued in its initial form in 2019. At the time of publication, it was envisaged that the Plan would be reviewed in 2022. The revision was later deferred to 2023: even on that timetable it is now substantially delayed.

The revised Plan will represent a significant policy statement from Ministers in response to the IMO’s revised GHG strategy. It must be cast so as to outstrip the ambition of the IMO’s current strategy, while setting out stretching yet deliverable policy objectives and actions for the UK maritime sector. At a minimum we expect it to contain: • interim and overall targets for emissions from UK domestic and international shipping to 2050, together with a detailed plan to achieve the targets and details of the modelling and assumptions underpinning the targets; • a strategy to supply UK domestic and international shipping with zero-emission fuels derived from hydrogen, together with a strategy to develop facilities for the production, transmission and storage of such fuels, so as to outstrip IMO targets for the replacement of conventional fuels; • measures to leverage the UK’s expertise in shipping law and hydrography so as to support route optimisation measures in global shipping, and • measures to deliver decarbonised shore power to vessels berthed in UK ports, so as to reduce their emissions and improve port air quality.

The delay in publication of the revised Clean Maritime Plan is highly undesirable, particularly in the light of recent intensification of international dialogues on maritime decarbonisation. Stakeholders understandably demand policy certainty before making substantial investment decisions on decarbonisation strategies. Ministers must therefore update Parliament as soon as possible in the next session on their progress in finalising the review of the Clean Maritime Plan, and commit to a date, not later than three months from the date of State Opening, by which the revision of the Plan will be 62 Net zero and UK shipping issued. The update to Parliament must set out the issues which the revised Plan will address, including the Government responses to all outstanding consultations and calls for evidence relevant to maritime decarbonisation. (Paragraph 206) Net zero and UK shipping 63