5 big developments in shipping and aviation decarbonisation in 2023
2023 has been a huge year for decarbonisation policy. It’s easy to focus on the negatives, but there’s also lots to be celebrated. In this long-form read, we round up the most exciting policy changes that will impact decarbonising the shipping and aviation sectors – and throw in a few recommendations of our own too.
1. Shipping took decarbonisation (somewhat) seriously
In July, we had the International Maritime Organisation (IMO)’s Marine Environment Protection Committee (MEPC 80), where the IMO Strategy on Reduction of Greenhouse Gas (GHG) Emissions from Ships was adopted. The Strategy included enhanced targets to tackle harmful emissions as well as including:
An enhanced common ambition to reach net-zero GHG emissions from international shipping close to 2050.
A commitment to increase the uptake of alternative zero and near-zero GHG fuels by 2030, starting with a target of 5% – striving for 10% – of the energy used by international shipping by 2030.
Indicative check-points for 2030 and 2040 – explained by the graph below.
Source: UKP&I
Also in July, the European Parliament and Council adopted the FuelEU Maritime Regulation, to be entered into force from 01 January 2025. The main provisions can be found here, but the key one to note is:
“Measures to ensure that the greenhouse gas intensity of fuels used by the shipping sector will gradually decrease over time: 2% from 1 January 2025; 6% from 1 January 2030; 14.5% from 1 January 2035; 31% from 1 January 2040; 62% from 1 January 2045 and 80% from 1 January 2050.”
But what do these regulations and measures mean if you work for a shipping company?
There’s a growing need to show investors that you’re considering a 1.5 degree-aligned business model.
If you aren’t investing in low-carbon fuels, it’s time that you should.
All countries should be able to access the benefits of the transition, and should not lead to increasing inequities for climate vulnerable states and workforces. The Marshall Islands, the Solomon Islands, Tuvalu and Vanuatu submitted more information on this here. Your company should ensure seafarers’ protection policies and any business conducted with climate vulnerable states abides by these measures.
Source: UNCTAD
Shipping must do more. There are plenty of organisations that have committed to decarbonising the sector by 2050, taking the IMO Strategy one step further. Regulators must provide support to these ambitious first-movers, and ensure the clean energy is competitive and available. There’s hope that the UK’s Clean Maritime Plan – due to be updated imminently – will support this.
2. Aviation is also (somewhat) ambitious
Gone are the days where we say aviation cannot be decarbonised. The technologies are out there – their development just needs to be supported and incentivised. This year, support came in the form of the ReFuelEU Aviation Regulation and the International Civil Aviation Organisation (ICAO)’s goal of reducing CO2 emissions by 5% by 2030 (more on this below).
In October, the European Parliament and Council adopted the ReFuelEU Aviation Regulation, to be entered into force from 01 January 2024, with some articles entering into force a year later. The main measure is:
An obligation that all aviation fuel at EU airports contains a minimum share of SAF from 2025 – and from 2030, a minimum share of synthetic fuels – both shares increasing until 2050.
This means fuel suppliers will have to incorporate 2% SAF in 2025, 6% in 2030 and 70% in 2050. From 2030, 1.2% of fuels must also be synthetic fuels, rising to 35% in 2050.
In November, the International Civil Aviation Organisation (ICAO) held its third conference on Aviation and Alternative Fuels (CAAF/3). The two key outcomes were:
A goal to reduce international aviation’s CO2 emissions by 5% by 2030. This will be achieved using SAF and Lower Carbon Aviation Fuels (LCAF). Sadly, the damaging effects of non-CO2 emissions were not mentioned.
A Global Framework for Cleaner Energies to help States with the transition. The Framework includes capacity building programmes, knowledge and technology transfer, access to financing and guidance on how to enact policy which will help scale up SAF.
So what do these measures mean for your aviation company?
Invest in e-fuel SAFs. Around 40 countries have already implemented or are discussing a SAF mandate – including the UK.
Look beyond the status quo at alternative forms of propulsion, and consider the use of direct hydrogen.
Make use of funds. The EU and UK offer funding opportunities to ambitious companies who are dedicated to reducing aviation emissions. For example, our member ZeroAvia has just received £3 million.
3. Hydrogen is hot
Green hydrogen will be a crucial ingredient to shipping and aviation decarbonisation. Sadly, it’s expensive at the moment, and a lack of policy supporting its production leaves a Green Hydrogen Gap, as detailed in our report, slowing down demand and discouraging investment.
However, there have been some great developments.
1) In August 2023, the UK’s Hydrogen Strategy Update to the Market included:
The third round of the Clean Maritime Demonstration Competition (CMDC3), allocating over £60 million to 19 projects in clean maritime solutions, with six projects exploring the use of hydrogen and/or hydrogen-derived fuels.
The second SAF mandate consultation on 30 March 2023 including proposals for hydrogen’s use as a process input or as a feedstock.
By 2030, the UK aims to be a global leader on hydrogen, with 5GW of low carbon hydrogen production capacity driving decarbonisation across the economy – note how the phrase ‘low-carbon’ is used instead of ‘green’ or ‘renewable’.
While this is a start, the UK government must introduce policies that will help drive the production of green hydrogen specifically.
2) In September 2023, the EU’s Hydrogen Strategy and REPowerEU:
Committed to develop renewable hydrogen, with an aim to produce 10 million tonnes and import 10 million tonnes by 2030.
Created an Innovation Fund giving €3.6bn to low-carbon tech projects, more than half of which are dedicated to green hydrogen.
Defined renewable as: “hydrogen produced through the electrolysis of water powered by electricity from renewable sources or through the reforming of biogas or biochemical conversion of biomass”.
These are great incentives, but we need more to quickly develop the production of truly green hydrogen. Additional policies should:
Adopt ambitious mandates for the use of green hydrogen and green hydrogen-derived fuels to drive demand, and therefore supply.
Include strategies focussed on hydrogen demand must ensure it is used only in those sectors, like aviation and shipping, that don’t have alternative options for decarbonisation.
Adopt a cross-departmental approach to hydrogen policy, ensuring transport stakeholders are involved in decision-making on future uses of green hydrogen, and that hydrogen strategies recognise its importance in decarbonising the aviation and shipping sectors.
Ensure the green hydrogen economy is developed in accordance with principles of climate justice. With many of the countries slated as possible green hydrogen producers and exporters being in the Global South, commentators have noted the risk of economic relations entrenching dependency. They could even become exploitative if Global North actors wield market power to siphon off an outsized proportion of the gains of investment and trade agreements. Such agreements must ensure that Global South countries benefit justly from new economic relations, and maintain autonomy over green industrialisation.
5. Cash for DAC
Utilising DAC has greater emission reduction potential than other forms of carbon capture because you don’t need to create carbon to capture it – the carbon is extracted directly from the atmosphere which can then be permanently stored in deep geological formations or used for a variety of applications.
We know DAC is expensive. It’s actually the most expensive method of carbon capture. However, the International Energy Agency (IEA) explains notable progress is being made:
The United States announced important new funding in 2022 under the Inflation Reduction Act (IRA), increasing the 45Q tax credit to USD 180/t CO2 captured for storage via DAC, with a capture threshold of as little as 1 kt CO2/year.
The European Commission aims to store up to 50 Mt CO2 a year by 2030, including from DAC.
In the United Kingdom, the budget announced in March 2023 included funding of up to GBP 20 billion (around USD 25 billion) for carbon capture, utilisation and storage (CCUS) applications, including for DAC.
In Canada the 2022 federal budget proposed an investment tax credit for CCUS projects between 2022 and 2030, valued at around 60% for DAC projects.
In January 2023 Japan set a carbon capture roadmap with a target of capturing between 6 and 12 MtCO2 per year by 2030, including from DAC.
The above is predicted to contribute to a massive reduction in DAC costs, from USD 600-1000 per ton of CO2 today, to below USD 100/tCO2 by 2030. Companies like Carbon Engineering are going to drive this cost down too, so make sure you follow them.
6. Our amazing members
The final important moment of 2023 is that we’re so proud to be growing the SASHA Coalition membership. Our members are ambitious companies who believe we need more policy support to scale up green hydrogen to a competitive price. They are Cranfield Aerospace Solutions, ZeroAvia, Iðunn H2 and Zulu Associates.
Find out more about our members on the SASHA members page.
