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Airlines, shipowners’ new net-zero pledges leave questions on decarbonization roadmaps

08 October 2021 Max Tingyao Lin

Major trade bodies in the aviation and shipping sectors this week committed to achieving carbon neutrality by 2050, but environmentalists are questioning the roadmaps' credibility and plausibility.

The International Air Transport Association (IATA), the Air Transport Action Group (ATAG), and the International Chamber of Shipping (ICS) made the pledges after UN scientists in August declared a climate emergency—with global warming likely worse than previously thought.

In recent weeks, a growing number of companies have voluntarily established similar targets while governments—especially those in developed nations—are promising to tighten emission rules.

Airlines and shipping companies, which together account for 4-5% of the world's GHG emissions, have made little progress in decarbonizing their operations.

Batteries are unsuitable for long-haul flights and seaborne shipments, according to industry experts, while the technology and supply chain for low-carbon aviation and marine fuels has yet to be fully developed.

"All transport sectors are regarded as 'hard to decarbonize' because you need green energy in a portable form," said Martin Stopford, director at consultancy MarEcon.

"Ships are big structures, which makes it easier to support low-temperature fuels … and aircraft are limited to liquid green fuels at ambient temperatures. But all face the same problem of limited supply and higher cost," he added.

Enhanced ambitions

During their annual general meeting 4 October, IATA members approved a resolution to achieve net-zero CO2 emissions before the mid-century point despite opposition from Chinese airlines. China is aiming for carbon neutrality by 2060 as a nation.

IATA, which has 290 members that are responsible for 82% of global air traffic, had previously aimed to reduce net CO2 emissions by 50% from 2005 levels before 2050.

"IATA's revised target was necessary to show that the sector's climate response was keeping up with the increasing number of states that have adopted, or are in the process of adopting, net-zero goals by 2050 or sooner," Aviation Environment Federation (AEF) Director Tim Johnson said.

Johnson added that airlines should aim to cut all GHG emissions rather than just CO2. "Only one-third of aviation's contribution to warming comes from its CO2 emissions, with the remaining two-thirds attributed to the impacts such as aircraft NOx and contrail cirrus," the head of the nonprofit told Net-Zero Business Daily.

ATAG, whose members include IATA, airports, and aircraft manufacturers like Airbus and Boeing, adopted the same carbon neutrality target 5 October.

"Aviation has increased its ambition in line with the need for all sectors of the economy to pursue rigorous climate action. Despite having endured the greatest crisis in aviation history [in the form of the COVID-19 pandemic], this new agreement shows that our sector has placed climate action as one of its highest priorities," ATAG Acting Executive Director Haldane Dodd said in a statement.

The International Civil Aviation Organization (ICAO), the UN's specialized agency for air transportation, viewed the new pledge in a positive light.

"I'm sure that all ICAO Member States join me today in welcoming this latest and very ambitious net-zero 2050 target adopted by the air transport industry so that our global sector will continue to do its part," ICAO Council President Salvatore Sciacchitano commented.

ICAO members are due to discuss a long-term climate goal for international aviation next year, which could pave the way for tighter emission rules.

SAF cornerstone of ambitions

Both the IATA and ATAG released decarbonization roadmaps that adopt similar strategies: much greater usage of sustainable aviation fuel (SAF), development of new propulsion technologies related to hydrogen and electrification, and operational efficiency gains. The remaining emissions will be covered by carbon credits under ICAO's Carbon Offsetting and Reducing Scheme for International Aviation.

SAF refers to low-carbon fuels produced from resources including fats, oil seeds, corn, wastes, and residues. It can be blended with crude oil-based jet fuel under the current commercial and technological environments.

In the future, market participants are hoping to develop SAF in the form of synthetic hydrocarbon fuels produced using captured carbon and green hydrogen, also known as e-fuels.

ATAG estimates that SAF consumption will likely need to increase from 50,000 metric tons (mt) in 2020 to 330-445 million mt in 2050, accounting for 53-71% of the required CO2 reduction for the net-zero target. Building the SAF supply chain required to meet such demand would cost $1.08 trillion-$1.45 trillion, according to the roadmap. The supply chain envisioned would include up to 7,000 renewable fuel refineries, it added.

"National policy measures focused on innovation and energy transition are vital," said Dodd, suggesting that policymakers should provide financial incentives and establish a regulatory framework for the transition.

"Governments can play a key role in helping to sustain a green recovery for aviation from the COVID-19 crisis and a path towards net-zero emissions from air transport," he added.

The US plans to hike its annual SAF production from 4.5 million gallons in 2020 to 3 billion gallons by 2030 and 35 billion gallons by 2050, according to a White House statement 9 September. Initial support measures under discussion include a federal tax credit for producers of at least $1.50/gallon.

In the private sector, some energy majors like Shell and Chevron have said they will ramp up SAF output. This comes as an increasing number of airlines, including JetBlue and Delta, commit to long-term supply deals.

IATA Director General Willie Walsh welcomed Washington's recent announcement. "But we cannot tolerate announcements with no follow-up. To be meaningful, fuel suppliers must be accountable for delivering SAF at cost-competitive prices," he said.

According to the IATA's roadmap, SAF production will need to increase from 100 million liters in 2021 to 449 billion liters in 2050, accounting for 65% of the required emissions reduction. A further 19% will come from carbon offsetting and capture, 13% from new technologies, and 3% from operations and infrastructure improvements.

Looming questions

AEF's Johnson doubted whether the new green fuel market can really grow as much as the IATA hopes. "IATA's plans … go beyond previous industry forecasts of what is possible," he said, adding that "30% is a more realistic target."

Moreover, crop-based biofuels have been controversial in some countries as they could limit the land available for agriculture. A hike in SAF production could reignite the debate, according to Daniel Evans, global head of refining and marketing research at IHS Markit.

"In the near term, SAF will likely be biojet … Our view is that the availability of waste-based feedstock is finite and insufficient to meet demand," Evans said. "Therefore, it is likely that crop-based feedstock will be required. This implies the ongoing need to address indirect land-use issues and the food versus fuel debate."

With SAF being three to four times more expensive than conventional jet fuel at present, Evans said the airlines' initiative could led to higher airfares—at least initially.

"The biofuel production technology is mature, and so the potential for significant cost reduction is limited. Our view is that demand for feedstock will also maintain prices above historical averages," he said. "This implies an increase in airline operating costs, which they may want to pass through to consumers."

However, Evans suggested the emergence of e-fuels could eventually bring down SAF prices during the transition. "The technology is relatively immature, so there may be potential for cost reduction here. But the impact is not likely to be felt until well into the 2030s at the earliest," he said.

Brussels-based environmental group Transport & Environment (T&E) said it is skeptical of the IATA's pledge. IATA has opposed the EU's carbon market rules for airlines and jet fuel tax proposal aimed at promoting low-carbon fuel consumption, saying stronger measures must be taken.

"If the sector is serious about deploying sustainable fuels, then it should also support obligations to use these fuels, because this will send the right signals to the market to incentivize production," T&E Aviation Manager Jo Dardenne said.

"Why should governments and taxpayers pay for the deployment of these fuels if airlines are not even obliged to use them and if they continue flying around with tax-free polluting jet fuel?" she added.

Shipping's new target

The ICS, which represents 80% of the world's merchant fleet via national shipowners' associations, has stated the industry should expedite its decarbonization efforts with government support.

The announcement came after over 150 industry participants—including A.P. Moller-Maersk, BHP, and BP—jointly urged governments last month to support a net-zero transition for shipping by 2050.

The International Maritime Organization (IMO), the UN's shipping agency, currently aims to halve GHG emissions from cross-border shipping by 2050 relative to 2008 levels.

In a statement 5 October, the ICS said it now supports a target of net-zero CO2 emissions for shipping by 2050, but that such a goal is only achievable if governments take the necessary actions.

The London-based trade body has submitted proposals to the IMO calling for more research and development (R&D) efforts on low-emission shipping and carbon levies for emissions from maritime transportation.

"Talk is cheap, and action is difficult. So, our net-zero offering sets out the 'how' as well as the 'what' for decarbonizing shipping by 2050," ICS chairman Esben Poulsson said. "We're saying to governments that if they really want to reach net zero, they need to move from empty commitments to tangible action."

As an initial step to enhance R&D, the trade body has called on the IMO to approve the International Maritime Research Fund, which collects a carbon levy of $2 from vessel operators on every mt of marine fuel consumed.

The proposed fund will be supervised by the IMO and inject $5 billion into low-carbon research for 10 years from 2023. Backed by shipping groups including the ICS, and major maritime nations like Japan and Greece, the proposal is still under discussion by the IMO's Marine Environment Protection Committee, whose next meeting is scheduled for 22-26 November.

According to the ICS, the development of low-emissions shipping needs to be accelerated as time is running short for the industry. "Given the typical 25-year life of new oceangoing ships, if the industry is to meet an ambitious net-zero target, thousands of zero-emission ships will need to be in the water by 2030," it said.

Separately, the ICS called for a broader carbon levy applicable to global shipping. "This will help close the price gap between zero-carbon and conventional fuels and could be used to provide the billions of dollars needed to deploy essential new bunkering infrastructure required in ports worldwide," the trade body said.

The ICS did not detail the exact amount of this levy on bunker fuel in its proposal. However, the Solomon Islands and Marshall Islands, two countries highly exposed to climate change due to rising sea levels, proposed an initial levy of $100/mt to the IMO.

Widespread criticism

Environmentalists said the latest ICS initiatives were not strong enough to achieve the net-zero goal and that the plans should cover other types of GHGs.

"Having long-term aspirational goals is nice, but what really matters is the technology-driving and behavior-changing regulations. So far, unfortunately, ICS has not put its money where its mouth is," said Faïg Abbasov, shipping director at T&E. "Their proposals for R&D and a small levy won't cut it and are totally irrelevant for the climate ambition that everybody aspires to."

In the past, the ICS has come out against the proposed inclusion of shipping in the EU's Emissions Trading System (ETS), saying such rules would create an uneven playing field for shipowners.

"A clear demonstration of climate ambition from the ICS would be to support the EU ETS and $100/mt of CO2 carbon pricing proposal by the Solomon and Marshall islands," Abbasov said.

John Maggs, a senior policy advisor at Seas at Risk, questioned the ICS proposals' sincerity. "I think they are now on the back foot and doing everything they can to knobble ambition and prolong business as usual," he said.

"Their recent statement makes claims about their ambition, but then goes on to demand a whole load of things. [They are talking about] CO2 only, and net zero instead of absolute zero [that is, using carbon offsets]. That can only diminish the ambition of the IMO and the effectiveness of measures," said Maggs.

IMO member states are due to review the mid-century decarbonization target in 2023. Countries that vow to achieve net-zero GHG emissions have a strong chance of pushing for the same goal for international shipping then.

"The International Chamber of Shipping's latest comment paper is a step forward, but disingenuous and insufficient," Pacific Environment Climate Campaign Director Madeline Rose said. "It only supports a zero CO2 emissions target by 2050, whereas governments must ensure that all climate pollutants, notably methane and black carbon, are included in the target to put the industry on a future-proof path."

"Really, the IMO's revised mid-century target should be for zero climate and air pollutants to tackle shipping's dual clean energy transition and public health problem," she added.

Posted 08 October 2021 by Max Tingyao Lin, Principal Journalist, Climate & Sustainability, IHS Markit

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