In July 2023, the International Maritime Organization (IMO) adopted a revised strategy that calls for reducing greenhouse gas (GHG) emissions from ships to net-zero by or around 2050. While the revised strategy is not legally binding, the measures used to implement it can be, and in many ways it’s the stringency of these measures that will ultimately determine shipping’s contribution to future global warming.  

Earlier this week, our colleague highlighted the need for measures that limit emissions from ships measured on a life-cycle basis, the well-to-wake (WTW) emissions. With this blog post, we show how one proposed measure, the GHG Fuel Standard (GFS), can be used to reduce emissions in line with the IMO’s revised 2023 strategy or with a pathway consistent with limiting warming to 1.5°C. 

The GFS being designed now will require ships to use fuels that emit fewer WTW GHG emissions until there is a complete transition to all zero-emission fuels. This GFS is meant to encourage the adoption of new fuels including renewable e-fuels (hydrogen, ammonia, and methanol) and sustainable biofuels; by setting limits on the GHG emissions intensity of fuels, it will drive investments in production capacity and infrastructure for new fuels. One effective design of the GFS would identify the date by which the WTW GHG intensity of marine fuels is to reach zero and include interim GHG intensity targets (at regular intervals) to keep the sector on a steady course toward its final goal. Here we use ICCT’s new Polaris model to estimate the WTW GHG intensity reductions that would be needed to achieve net-zero by 2050 in a pathway consistent with the 2023 IMO GHG strategy. Polaris is a global maritime emissions projection model that reports tank-to-wake (TTW) and WTW emissions as carbon dioxide equivalents (CO₂e) based on the 100-year or 20-year global warming potentials of CO₂, methane, nitrous oxide, and black carbon (we exclude black carbon in this particular analysis because it’s not accounted for in the guidelines on life-cycle GHG intensity of marine fuels). 

Figure 1 shows the straight-line GFS trajectory that satisfies the emissions reduction targets in the 2023 IMO GHG strategy and an S-curve trajectory that would stay below the cumulative emissions limit for 1.5°C estimated here. The GFS trajectories were determined based on the business as usual (BAU) predicted energy use from the Polaris model and target emissions in the 2023 IMO strategy and 1.5°C aligned pathways (using 100-year global warming potentials, GWP100). For 2030, the 2023 IMO strategy set a goal of at least a 20% reduction in absolute GHG emissions compared to 2008 levels, and “striving for” a 30% reduction; for 2040, the GHG reduction goals are at least 70% and striving for 80% below 2008 levels. Predicted energy use from Polaris goes from 10.7 EJ in 2023 to 14.5 EJ in 2050, and we estimated the baseline GHG intensity of marine fuels at 92.5 gCO₂e/MJ from shipping’s fuel mix in 2019 using ICCT’s Systematic Assessment of Vessel Emissions (SAVE) model and excluding black carbon emissions. 

Figure 1. Well-to-wake GHG intensities of marine fuels required to align the IMO GHG Fuel Standard (GFS) with IMO’s 2023 GHG strategy and a 1.5 °C-compatible emissions trajectory.

As Figure 1 illustrates, to achieve the minimum IMO targets, the GHG intensity of marine fuels will have to reduce by 18% to 76 gCO₂e/MJ by 2030 and by 72% to 26 gCO₂e/MJ in 2040 compared to the 2019 baseline. For the “striving” scenario, reductions in 2030 and 2040 will have to be 28% to 67 gCO₂e and 81% to 17 gCO₂e/MJ, respectively. A 1.5°C-aligned pathway requires 32% reductions in WTW GHG intensity in 2030 to 63 gCO₂e/MJ and 99% in 2040 to nearly zero GHG emissions. All pathways require 100% reductions by 2050. Following the GHG intensities in Figure 1 would result in the absolute emissions reduction pathways presented in Figure 2.

Figure 2. Absolute well-to-wake GHG emissions trajectories under each scenario.

Table 1 specifies the GHG intensity limits needed to follow the absolute emissions reduction pathways in Figure 2. This table can be used by policymakers as they develop the GFS.

Table 1. Well-to-wake GHG intensities (gCO₂e/MJ) and reductions in well-to-wake GHG intensities of marine fuels from the 2019 fossil fuel baseline needed to align the GFS with different emissions trajectories.

The cumulative WTW CO₂e emissions compared to “well-below” 2°C (interpreted by us as keeping warming to not more than 1.7°C) and 1.5°C limits are presented in Figure 3. Achieving the minimum or striving IMO targets is consistent with limiting warming to well-below 2°C and the S-curve is consistent with 1.5°C.

Figure 3. Cumulative well-to-wake GHG emissions from 2020-2050 implied by each scenario.

The 2023 GHG strategy also includes a target for the uptake of zero or near-zero GHG emission fuels and/or energy sources that should represent at least 5% (striving for 10%) of the energy used by international shipping by 2030. Achieving even the minimum 5% energy target in 2030 would require 0.6 EJ of zero/near-zero fuels. To put this target into perspective, 0.6 EJ represents around 14% of global biofuel demand in 2022 (~4.3 EJ), whereas shipping (~11 EJ/year) represents about 2.5% of global energy demand (~442 EJ/year). When considered in the context of the limited availability of sustainable advanced biofuels for use in shipping, this underlines the importance of scaling up e-fuels to achieve IMO’s target. 

The stronger the GFS targets, the greater the demand for zero/near-zero GHG emission fuels, the fewer GHGs emitted by the sector, and the greater the likelihood that shipping aligns with both IMO’s GHG strategy and the Paris Agreement. The next opportunity for IMO delegates to contribute to the design of the GFS is at the meeting of the 16th Intersessional Working Group on GHG emissions from ships in March 2024. 

Last week brought long-awaited tax-credit guidance about sustainable aviation fuels (SAFs) from the U.S. Treasury Department. It found that, as configured, the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model does not “satisfy the requirements to calculate the emissions reduction percentage” to determine which fuels qualify for the lucrative credit for SAFs in the Inflation Reduction Act (IRA). In the brief guidance, Treasury also tasked multiple agencies with collaborating on an update of GREET that would fit the requirements. While this interagency working group might seem like a nod to the agricultural industry and corn ethanol producers who have been pushing for use of this model, there’s still little clarity about how life-cycle greenhouse gas (GHG) emissions will ultimately be calculated for different SAFs.

GREET can be a useful analytical tool for evaluating the life-cycle emissions of a variety of different fuels on a consistent basis, but it’s always dependent on the quality of the assumptions and inputs. In past work, the ICCT explained how using GREET can allow users to incorporate a variety of optimistic external assumptions and inputs that have not undergone regulatory scrutiny. The model has many possible configurations and data sources, and its impact on the SAF tax credit will heavily depend on the three key data inputs and assumptions discussed below. All of these will be determined by the interagency working group that will finalize the version of GREET used for the tax credit:

1. The indirect land-use change emission factor used for crop-derived biofuels. Demand for biofuels can lead to cropland expansion, but the magnitude of the expansion and the associated emissions remain the subject of vigorous academic debate. Depending on how GREET is configured, the estimated indirect land-use change (ILUC) emissions for SAF’s can range from one-quarter to one-third of the values assessed by the U.S. Environmental Protection Agency (EPA) for the Renewable Fuel Standard, by California for its Low-Carbon Fuel Standard, and by the International Civil Aviation Organization (ICAO) for its Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

To qualify as a SAF under the IRA, a fuel’s life-cycle emissions must be below approximately 45 grams CO2e per MJ of fuel. The difference between assuming an ILUC emission factor of ~7 gCO2e/MJ and ~30 gCO2e/MJ for a feedstock like soy can make a big difference in the total emissions, all without the producer having demonstrated any improvements in their fuel-conversion process. (To view a range of possible values, see Figure 2 here.) A key outcome of the interagency working group process will be the determination of which emission factor will be used for feedstocks like corn and soy. Will it be a low estimate selected from the literature, an estimate consistent with the other regulatory assessments, or something in between?

2. The guidance around soil carbon modeling and climate-smart agricultural practices. Though carbon offsets and offset programs have recently taken somewhat of a beating in the public imagination, they’ve nevertheless attracted substantial interest from the Biden Administration, which has described activities like planting cover crops and reduced tillage of crops that have been shown to improve soils as “climate-smart” practices. However, the exact change in soil carbon that results from such practices is uncertain and difficult to credit, and a recent article in Science highlighted warnings from soil carbon modelers about the uncertainties and research gaps in their current work.

This is important because one module in the GREET model allows biofuel producers to use modeled soil carbon change estimates to credit individual biofuel projects. The size of these credits can be substantial and can allow producers to claim large emissions reductions. Rather than a conventional supply chain LCA, this module looks into the future to determine shifts in soil carbon content based on an assumed 30 years of consistent practices. Crediting these reductions would thus necessitate a new dimension to Treasury’s guidance, as Treasury would have to verify the shifts in soil carbon, ensure their permanence, and develop a system for clawing back tax credits if producers fail to keep up the promised practices for the full 30 years. Given that many existing carbon-offset schemes have recently been criticized for the lack of rigor of their soil carbon offsets, Treasury may opt to steer clear.

3. The guidelines for book-and-claim accounting for natural gas and electricity. There’s been a lot of recent focus on the “three pillars” of demonstrating renewable electricity use as it pertains to producing green hydrogen for the IRA’s 45V tax credit. Such focus is also relevant for aviation. What constitutes a “renewable” electron? Under “book-and-claim” accounting, a fuel producer can purchase the rights to renewable energy somewhere else in the economy and attribute it to their specific process. The three pillars help to create guardrails to ensure that those renewable attributes are (1) truly additional to the status quo; (2) not being double counted; and (3) are closely correlated with the energy demand for the fuel pathway. If Treasury determines that hydrogen producers must demonstrate the three pillars for the renewable electricity used to generate hydrogen, will it hold renewable inputs to SAF production to the same standard?

Depending on how flexible the guidelines are for SAF’s, producers may opt to meet their GHG reduction threshold outside of their immediate supply chain by purchasing the rights to renewable electricity or natural gas generated somewhere else. It’s even conceivable that with a particularly loose interpretation of book-and-claim without additionality safeguards, a SAF producer could purchase the rights to highly GHG negative “moo hydrogen” made from dairy manure as an input to their SAF pathway. Even if the additionality of that moo hydrogen was dubious (say, for example, the dairy biogas facility long predates the IRA), the carbon offsets for the avoided methane could be used to adjust the carbon intensity of SAF pathways looking to cross the 50% GHG reduction threshold.

As the above helps to illustrate, suggesting that GREET is a kind of definitive “method” of conducting an LCA is not much different from suggesting that Microsoft Excel is the most accurate method for conducting an LCA or that Microsoft Word is the best tool for writing a screenplay. Treasury’s recent guidance provides no answers about how the United States will ultimately handle these thorny-but-important questions. Answering them is not just a matter of collecting data and updating GREET, but also establishing the government’s tolerance for risk in assessing what constitutes a GHG reduction and what behavior justifies a tax credit. Until those questions are answered in March, we’re left with the status quo.