20 January 2023

Shipping & the VCM: Charting a course for Paris

Louisa O'Connell

Head of Net Zero Research

Sofía Ordozgoiti

Research Associate

13 min

To align with the Paris Agreement goal, international shipping needs to reduce its GHG emissions by up to 1.1 GtCOe by 2050 (using IMO analysis). To achieve this, strong international and national level regulations and policies may be needed, together with investment in low-carbon technology. IMO projections for the shipping sector demonstrate a significant opportunity for the Voluntary Carbon Market: to finance projects that are currently unfeasible, to incentivise lower-carbon decision making or to compensate for emissions that cannot yet be abated. By 2050, the VCM could help the sector to remove the residual 0.4 MtCOe unabated emissions in the IMO target scenario. Carbon ratings are a key tool to help the shipping industry to navigate the VCM.

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Key Takeaways:

1. With shipping emissions projected to grow by up to 30% by 2050, incentives for Paris-aligned decarbonisation are needed at the global, national and corporate levels.

2. Shipping industry targets imply significant residual emissions by 2050 - implying a large source of demand for VCM removal credits in the longer term.

3. Carbon pricing could play an important role in decarbonising shipping (something the VCM can facilitate). Some estimates suggest a carbon tax of $150/tCO₂e may be needed.

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