Author: Anna Mantoyiannakou, Advisory Manager, RSM Cyprus
The shipping industry is considered “the lifeblood of the worldwide economy”, representing 90% of the global trade.
At the same time, shipping accounts for approximately 3% of global greenhouse gas emissions, moving in a direction that is inconsistent with the Paris Agreement’s main goal for neutrality in GHG emissions.
Notwithstanding, the characterisation that shipping would rank sixth in terms of emissions if it were a “country.”
Yet, the problem has been exacerbated by Yemen’s Houthi militia attacks and Russia’s sanctions, forcing ships to take longer routes and causing millions of tons of pollution.
The global shipping industry is at a stage of change, focusing on the challenges it faces regarding sustainability, the adoption of Environmental, Social, and Governance (ESG) criteria, decarbonisation, digitisation, and the safety of ships and crews.
But the biggest challenge is the transition to new fuels, the shipping industry’s green transition.
The industry has begun to embrace the challenge requiring regulators to assist in establishing the framework to expedite the green transformation. International organisations are working towards achieving the Paris Agreement target on climate change. The International Maritime Organisation (IMO) has tightened its targets to reach net-zero emissions by 2050.
With the conclusion of the 82nd session of the IMO’s Marine Environment Protection Committee, which took place from 30 September to 4 October 2024, Member States proposed “mid-term measures” for GHG reduction, including a goal-based marine fuel standard and a global maritime GHG emissions pricing mechanism, expected to be adopted in 2025.
Regulations, i.e. the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI, have already been established to address greenhouse gas (GHG) emissions from international shipping.
In the EU, the Fit for 55 legislative package limits CO2 emissions for vessels at EU ports. The EU emissions trading system (EU ETS) refers to maritime transport emissions with a 2-year phase-in period, establishing an annual absolute cap on emissions and emission allowances.
Subsequently, the use of alternative fuels, such as methanol, biomethane, hydrogen and ammonia, Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), and also hybrid powering options, i.e. wind-assisted propulsion (WAP) and batteries, becomes imperative.
However, the development of these fuels requires a comprehensive life cycle analysis and increased investment in R&D, new ship buildings, and port infrastructure. By 2030, numerous new vessels entering the market should be equipped to facilitate decarbonisation.
The FuelEU Maritime regulation, effective from January 2025, aims to boost the demand and consistent use of renewable and low-carbon fuels.
Cyprus, as a central shipping hub featured as the 3rd largest merchant fleet in Europe, the 11th largest fleet globally, and the largest third-party ship management centre in the EU, has a pivotal role to play.
The government supports decarbonisation through green tax incentives, encouraging owners of Cyprus and EU community-flagged ships to use alternative fuels like biofuels and hydrogen.
Since 2021, tonnage tax reductions have been up to 30%, and with the updated green incentives approved in February 2024, the shipowners are rewarded for using mechanisms to reduce their environmental footprint.
Notably, one of the most creative efforts towards decarbonisation – the Zero Emission Sea Transporter (ZEST) project – aims to introduce electric small vessels to transform coastal fleets. The primary result of ZEST, EVPLOIA APHRODITE, is a battery-powered vessel designed for decarbonisation. It will also serve as a research platform for smart ship design and sustainable shipping solutions.
To sum up, the shipping sector has a big challenge as it moves toward sustainability. To meet the challenge of the green transition, countries must enact laws and regulations and commit to cleaner technology and alternative fuels. Continued adaptation planning aligned with the Paris Agreement will bring a different focus to the unique circumstances of each country and support the climate-resilient development pathway and transition.
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