The global maritime sector underpins international trade, transporting over 80 percent of the world’s goods. Marine shipping is highly efficient, but the sector is still responsible for 3 percent of all global GHG emissions and ships burn approximately 300 million tons of fossil fuels every year. Although the energy intensity of shipping has fallen in the last two decades, the volume of shipping has increased by a greater amount, so energy use for shipping has increased by five percent since 2008. 

The most used fuels in maritime shipping today are marine gas oil and heavy fuel oil – a fuel that results in significant particulate matter and smog in port communities. LNG is a small but rapidly growing fuel for shipping; biofuels account for less than one percent of fuel used for shipping. 

Decarbonization of maritime vessels presents unique challenges. Vessels need access to fuels at ports, with resulting infrastructure requirements for the fuel supply, and fuels must have sufficient energy intensity to carry the vessels great distances. That energy intensity can also create safety challenges during storage. While vessels that are used in fixed trade patterns can be designed to use the fuels available at the specific ports at which they trade, chartered vessels must be able to refuel at any port.  

Marine engines are also typically designed for a specific fuel type. The vessel size and tonnage requirements affect the engine choices and power needs, which dictate the fuels and propulsion system options. These needs, and therefore fuel options, vary widely across vessel types, from containerships, to tankers, to dry bulk carriers, to passenger vessels, to tug/barge units.  

RFS for Ocean Going Vessels 

On Wednesday, the Senate Environment and Public Works (EPW) Committee explored this issue of maritime shipping during a legislative hearing in which the committee examined  S. 881, the Renewable Fuel for Ocean-Going Vessels Act, among other Clean Air Act legislation. S. 881 has been introduced by Senator Pete Ricketts, (R-NE) and Senator Amy Klobuchar (D-MN). The Committee called two witnesses to speak on this piece of legislation: 

• Kathy Metcalf, President Emeritus of the Chamber of Shipping of America 

• Nikita Pavlenko, Program Director, Fuels and Aviation, The International Council on Clean Transportation 

The Renewable Fuel Standards program currently excludes ocean-going vessels; this bill would allow renewable fuels used in ocean-going vessels to generate and retain renewable identification numbers (RINs).  RINs create revenues for vessel operators and help to narrow the price gap between renewable fuels and conventional fuels. In adding marine vessels to the RFS, which already covers land-based vehicles and aviation, the bill would seek to put marine fuel applications on an equal footing with other fuel uses.   

However, as Mr. Pavlenko pointed out in his testimony, as an opt-in provision that doesn’t fully reduce the price gap between biofuels and conventional fuels, it is unlikely that the bill would materially expand the use of biofuels in marine shipping. A similar provision in 2014 amended the RFS to include jet fuel but has not materially affected sustainable aviation fuel production; a decade later, SAF blending in the aviation sector remains below 1%.  

Moreover, the expansion of the RFS could have deleterious consequences if it resulted in the EPA proposed higher volume targets for the RFS, which could result in land use changes as a result of the increased demand for soybean and palm oil cropland. Particularly when land is being converted to biofuel production cropland is currently functioning as a major carbon sick, e.g. when rainforests and forest land are converted to cropland, this can result in significant net increases in carbon emissions despite the lower direct emissions profile of the biofuel. 

The maritime industry is actively engaged in efforts to develop alternatives to diesel fuel, with research and development ongoing for a variety of fuels including ammonia, hydrogen, methanol, LNG, LPG, biofuels, and battery-electric hybrid. Moreover, Ms. Metcalf testified on Wednesday, the industry is also actively supporting international regulations on maritime shipping. While the Chamber of Shipping of America testified support for Mr. Ricketts’ bill, they “support that bill as only one piece of an overall strategy to address decarbonization of marine transportation”. Much more important than any potential U.S. regulation is the international framework that has been set forth by the International Maritime Organization (IMO). 

IMO Standards  

The U.S. is one of 108 members in the IMO, and vessels engaged in international trade must comply with international requirements, regardless of whether the U.S. decides to adopt them. In April of this year, the IMO’s Marine Environment Protection Committee approved a Net Zero Framework that includes a new fuel standard for ships and a global pricing mechanism for greenhouse gas emissions. If approved by the full IMO, the standards will go into effect in 2027 and become mandatory for large ocean-going ships over 5,000 gross tonnage.  

The framework seeks to achieve net zero maritime GHG emissions by the year 2050 through prices on emissions above set tiers that become more stringent over time. While non-compliance with those tiers will result in penalties, shipowners will be able to purchase credits from over-complying vessels, creating a revenue stream to support low-emission vessels.  

Shippers are largely supportive of the proposal. For instance Maersk, which operates in almost 130 countries, has urged the IMO to adopt them, calling the proposals ambitious, proportional, and enforceable measures.  

On the other hand, the U.S. is actively opposing the adoption of the IMO standards. On August 12, Secretary of State Marco Rubio, Secretary of Commerce Howard Lutnick, Secretary of Energy Chris Wright, and Secretary of Transportation Sean Duffy jointly released a statement that described the IMO proposal as “Global Carbon Tax”. In the statement they threatened countries for supporting the regulations, saying “Our fellow IMO members should be on notice that we will look for their support against this action and not hesitate to retaliate or explore remedies for our citizens should this endeavor fail.” According to Reuters, the State Department is now actively approaching countries and threatening retaliation for support. For instance, the Netherlands was told it could face tariffs or other consequences if it supported the framework, according to a spokesperson for the Dutch Ministry of Infrastructure and Water Management.  

Adoption of the IMO Net Zero Framework will require approval by a two-thirds majority of parties at their next meeting in October. There is also a 16-month period after approval in which one-third or more of the parties to the MARPOL Convention, or parties representing not less than 50% of the gross tonnage of the world’s merchant fleet, can bring an objection. (Currently, the top five flag states are Liberia, Panama, Marshall Islands, Hong Kong, and Singapore – together they represent more than 50% of the world’s gross tonnage.) In April, 80% of voters approved the measure in the Subcommittee, with “no” votes primarily coming from oil-producing nations. It is unclear whether the pressure campaign from the U.S. will change the positions of the countries that previously supported and imperil adoption of the framework. 

Biofuels and Soybean Markets 

Unlike the Net Zero Framework from the IMO, Senator Ricketts’ RFS expansion bill is not primarily about addressing climate change. Underlying the pressure to expand the use of biofuels is the nation’s changed trading relationship with China under President Trump, and the implications that has for soybeans. By this point in last year’s soybean growing season, the U.S. had booked approximately 13 billion tons of soybean exports to China, whereas this year Chinese importers have yet to buy any soybean crops. China’s 23% retaliatory tariffs on U.S. exports have added approximately $2 per bushel to the cost of American soybeans, which has resulted in Brazilian soybeans being cheaper even during America’s peak growing season. 

Soybean growers hope to expand the market for soybeans by expanding their use in fuel, in order to make up for the reduction in demand for American soybeans from China. However expanding the global market for soybeans could have profoundly negative consequences for global GHG emissions. Currently, the global supply of soybeans is expanding most in locations at high risk for deforestation, including Brazil, which has expanded production of soybeans by 35 percent over the past five years.