ISWG-GHG 20-3-7: Re-establishment of the correspondence group on other social and economic sustainability aspects of marine fuels
ISWG-GHG 20-3-7: Further consideration of the development of the IMO life cycle GHG assessment (LCA) framework.
Re-establishment of the correspondence group on other social and economic sustainability aspects of marine fuels to safeguard net-zero goals.
Submitted by the Clean Shipping Coalition (CSC).
Executive Summary
This document encourages the re-establishment of the correspondence group looking at "other social and economic sustainability themes/aspects of marine fuels" for potential inclusion in the 2024 Guidelines on life cycle GHG intensity of marine fuels (2024 LCA Guidelines). By focusing on LNG, bio-LNG, and e-LNG as an example in this document, it is evident that without a comprehensive assessment of existing and emerging fuels, IMO's net-zero goals and the implementation of the IMO Net-Zero Framework could be under threat.
Background
Although this document focuses on information relevant to the re-establishment of the correspondence group examining "other social and economic sustainability themes/aspects of marine fuels", it is also designed to support CSC's broader objectives in respect to shipping's decarbonization and the implementation of the 2023 IMO Strategy on Reduction of GHG Emissions from Ships (2023 IMO GHG Strategy). It is essential that all three critical elements necessary for the successful implementation of the 2023 IMO GHG Strategy – the carbon intensity indicator (CII), the global fuel standard (GFS), and a GHG pricing mechanism – are underpinned by the comprehensive life cycle assessment (LCA) guidelines and aligned in a way that ensures an integrated set of policies that effectively drive the just and equitable energy transition committed to in the 2023 IMO GHG Strategy.
This requires a strong, enforceable energy efficiency measure to drive down fuel burn and costs, a GFS ideally aligned with a pathway that will give a good chance of keeping warming below 1.5∘C, LCA guidelines which reward truly zero-emission fuels, and a GHG pricing mechanism that bridges the price gap between fossil and ZNZs (zero and near-zero emission fuels), driving emission reductions and generating resources to incentivize the uptake of ZNZs and ensure a just and equitable transition (JET). Without such an integrated set of measures, achieving the 2023 IMO GHG Strategy's emission and JET goals while avoiding unintended negative impacts in respect of the decarbonization of the wider economy will be all but impossible.
In light of the developments at MEPC 83, particularly the approval of the IMO Net-Zero Framework, this document underscores the urgency of re-establishment of the Correspondence Group on the Further Development of the LCA Framework (MEPC 83/WP.6, paragraph 168.3). Given that such a framework may inadvertently favour methane-based fuels, there is a pressing need to ensure that the LCA framework adequately addresses a comprehensive life cycle perspective that includes their impacts on health, biodiversity, and pollution across the supply chain.
Introduction
In document MEPC 83/7/34, CSC, in its comments on the report of the Correspondence Group on the Further Development of the LCA Framework (MEPC 83/7/9), highlighted the significant potential for integrating social and economic sustainability considerations more comprehensively within the life cycle or land-to-sea assessment criteria. The document emphasized that methane-based fuels – such as LNG, e-methane, and bio-LNG – serve as pertinent case studies to illustrate the necessity of this approach. It further demonstrated how, when assessed through a robust and holistic LCA framework, the production and use of such fuels would likely be deemed incompatible with pathways towards zero-emission marine fuels. It is helpful to examine in this document how a more comprehensive assessment of methane-based fuels identifies the negative impacts of such fuels in terms of reaching IMO's GHG goals and in protecting public health and biodiversity, and highlights the essential need for such comprehensive LCA approaches.
Methane is a potent greenhouse gas and a short-lived climate pollutant that has significant direct impacts. Methane absorbs 82.5 times more energy than carbon dioxide on a 20-year timescale, and 29.8 times on a 100-year scale. In the atmosphere, methane reacts to create tropospheric ozone, carbon dioxide, and stratospheric water vapour, all of which are themselves GHG. Tropospheric ozone also poses a direct threat to human health, particularly for populations vulnerable to respiratory illness.
Methane-based fuels, such as LNG and its bio-based alternatives, are associated with significant levels of methane leakage. Methane leaks when on board ships, and recent measurements of methane slip from ships show that IMO's assumptions underestimate the on-board leakage of methane. 1 The supply chain of methane is also associated with leakage, occurring at every stage of extraction, processing, storage, transmission, maintenance, and distribution.
The combustion of methane-based fuels, even bio-LNG and e-LNG, inevitably produces carbon dioxide. Even if upstream emissions are low or potentially negative, the act of combustion converts methane into energy, water vapour, and carbon dioxide. While the resulting carbon intensity is lower than that of conventional oil-based fuels, these fuels can never be fully zero-emission at the point of use.
On a life cycle basis, the direct emissions and leakage impact of methane-based fuels are only one part of their footprint. These fuels are also associated with a wide range of environmental, health, and social impacts across their supply chains that are not adequately reflected in the current LCA framework. Failing to capture these dimensions risks presenting methane-based fuels as more sustainable than they are, obscuring their hidden costs and diverting attention from truly scalable zero-emission solutions.
The hidden costs of LNG
The unaccounted impacts of LNG begin at the wellhead, where natural gas extraction releases hazardous pollutants into the air and contaminates local water sources. Flaring, a routine practice at gas extraction sites, emits greenhouse gases alongside nitrogen oxides, sulphur dioxide, and black soot. Hydraulic fracturing, commonly known as fracking, requires the use of fluids which can contain carcinogens, reproductive and developmental toxicants, and endocrine disruptors. Fracking fluids can enter groundwater through well leaks or improperly handled wastewater, while surface waters are vulnerable to fracking fluid spills. Land disturbance from constructing well pads, pipelines, and access roads accelerates erosion, creating faster pathways for chemicals to leech into waterways.
Communities near LNG extraction sites are exposed to elevated levels of local pollutants in the air and in their water supplies, which are linked to respiratory diseases, cardiovascular issues, neurological damage, and increased cancer risks. 2 By undercounting these localized health impacts, IMO risks exacerbating public health crises, imposing irreversible social harm, and straining healthcare systems that are already under-resourced and ill-equipped to cope.
GHG leakage and local air pollution from LNG bunkering infrastructure disproportionately harm vulnerable communities, deepening patterns of environmental and social inequity. 3 Neighbourhoods near ports are already socio-economically disadvantaged and bear a cumulative burden from existing industrial activities, including elevated exposure to particulate matter, nitrogen oxides, and other harmful emissions from port operations. The expansion of LNG infrastructure, stimulated by policies that undercount life cycle emissions, will only intensify these burdens. Increased flaring, leakage, and emissions from LNG facilities compound health risks while perpetuating patterns of environmental injustice. By concentrating harms in already vulnerable populations, LNG expansion undermines equitable transition targets.
Why biofuels fail on a life cycle basis
Biofuel alternatives, including biomethane and its liquid form, bio-LNG, are associated with many risks that the LCA framework does not account for. While some biofuels may theoretically offer climate benefits, the most commonly deployed technologies all contribute to a range of environmental and social harms, including land degradation, water stress, and food insecurity. When their full life cycle impacts are accurately accounted for, these first-generation biofuels offer limited, if any, advantage over conventional fossil fuels.
Demand for agricultural land to produce biofuels can drive land use change, which can be associated with increased GHG emissions, environmental degradation, and other negative impacts. Direct Land Use Change (DLUC) occurs when non-agricultural land is cleared to grow biofuel feedstocks. Indirect Land Use Change (ILUC) happens when existing agricultural land is repurposed for biofuels, displacing food or feed production elsewhere. Both forms of land use change can lead to the destruction of carbon-rich ecosystems such as forests, wetlands, or grasslands, causing a net increase in emissions and loss of ecosystem services. Even biofuels derived from agricultural by-products can incentivize farm expansion-induced land use change, as they increase the profitability of the crop. Clearing land for agriculture may also infringe on land rights, including those of Indigenous and customary landholders. As set out in articles 11, 31, and 42 of The UN Declaration on the Rights of Indigenous Peoples (UNDRIP), summarized in document MEPC 81/7/12 (ICC), Indigenous Peoples have rights to protect and maintain their culture and knowledge, and UN bodies have the obligation to promote and respect the application of these rights.
As presented in document ISWG-GHG 18/2/21 (CSC), when accounting for ILUC emissions, crop-based biofuels provide little to no benefit over their fossil fuel counterparts. The most affordable biofuel feedstocks today are virgin high-yield crops, for which ILUC emissions can be up to half of total life cycle GHG emissions. In addition, the land area required to satisfy shipping's biofuel demand could go up to 35 million hectares by 2030, approximately the land area of Germany. By limiting land use considerations to a qualitative-only assessment, IMO risks overlooking the climate cost of crop-based biofuels. ILUC requires deeper technical treatment and consideration, as outlined in document ISWG-GHG 20/3/8 (CSC).
Biofuel feedstocks are generally water-intensive, and large-scale expansion of biofuel production can strain local water resources, exacerbating competition over water use and potentially infringing on water rights (ISWG-GHG 18/2/21). In regions already facing water scarcity, diverting water to biofuel crops may undermine access for local communities and ecosystems. Moreover, increasing demand for biofuel crops can threaten food security by competing with food production for land, water, and other agricultural inputs. Rising biofuel demand can drive up food prices and reduce availability, disproportionately affecting low-income populations.
Waste-based biofuels are an insufficient solution as they are highly limited in supply. Used cooking oil (UCO) or animal fats are waste-based feedstocks that convert a product to fuel without significant additional energy, and therefore can be sustainable on a life cycle basis. However, the shipping sector's demand alone would exceed globally available supply by 2035. 4 Shipping would need to secure preferential access to these resources, competing directly with other industries. Most notably, the aviation sector is rapidly increasing UCO use in SAFs (Sustainable Aviation Fuels), for which demand for a single major airline could exceed all of Europe's UCO collection potential by 2030. 5 Today, Europe consumes nearly eight times more UCO than it collects, relying heavily on imports from Asia. In UCO-exporting countries, however, irregularities between reported collection and export volumes, together with suspected mislabelling of virgin oils as waste, raise concerns regarding the credibility of declared waste-based biofuels.
Lastly, relying on biogas derived from manure management could come at the cost of increased pollution and dependence on unsustainable farming practices. Manure biogas is produced via anaerobic digestion, where manure stored in lagoons is capped to trap methane and convert it into biofuel. While these systems can reduce farm-level methane emissions, they are also associated with increases in pollutants such as ammonia, nitrous oxide, volatile organic compounds, and hydrogen sulphide. 7 Manure biogas systems are typically only financially viable at very large-scale confined animal feeding operations, which rely on high-emission liquid manure management. By financially rewarding emissions from these operations, biogas incentives disincentivize transitions to more sustainable manure handling and reinforce the most environmentally harmful farming models.
Incentivizing manure biogas also risks creating perverse incentives, driving unsustainable herd expansion, and further environmental harm. Evidence from the United States shows that farms installing dairy digesters are increasing cattle populations at rates far above national averages. 8,9 In states with significant cattle populations, emerging research argues that manure biogas production creates strong incentives for herd consolidation and expansion. Herd expansion, in turn, drives land use change through increased demand for grazing land and cropland for animal feed, while also intensifying competition for water resources. 10 Since digesters do not completely capture released gases, larger herds can ultimately increase local methane, carbon dioxide, and nitrous oxide emissions. 11 Expanding biomethane production to meet shipping demand would exacerbate these trends, driving further herd growth and amplifying environmental harm.
IMO rules drive dominance of LNG
By under-accounting for negative impacts beyond direct emissions, IMO risks undermining its ability to meet its decarbonization targets. The 2024 LCA Guidelines determine which fuels are eligible to generate compliance rewards under IMO's GHG regulations. However, by overlooking key negative impacts beyond direct emissions, the LCA framework artificially masks the real environmental impacts of fuels like LNG and bio-LNG. This distortion will accelerate their adoption beyond sustainable levels, locking the sector into unsustainable fuel pathways and delaying the transition to truly zero-emission alternatives.
The incomplete LCA framework has the potential to make LNG the most affordable choice for the next decade. By omitting upstream and localized impacts, LNG's reported emissions appear artificially low, falling below the GFI's direct compliance threshold in the first year and remaining below baseline levels thereafter. While its apparent climate performance is overstated, LNG also benefits from lower acquisition and infrastructure costs compared to most other alternative fuels. Analysis indicates that these factors have the potential to make LNG the fuel with the lowest total cost of operation (TCO), remaining more cost-competitive than any sustainable fuel until at least 2035. 12
This cost advantage, coupled with industry short-term cost optimization strategies, is expected to drive the dominance of LNG-fuelled ships. Stakeholder interviews highlight that uncertainty around zero- and near-zero (ZNZ) fuel rewards and long-term availability pushes shipowners to prioritize immediate TCO savings and defer long-term decarbonization decisions. 13 As a result, shipowners could favour LNG ships as the short-term lowest-cost option. This conclusion is even reinforced by IMO's own impact assessment, which projects that LNG will become the most widely adopted alternative fuel across the majority of policy scenarios. 14
By incentivizing LNG as the lowest-cost compliance option, IMO risks locking the shipping sector into a decade of fossil fuel dependence and delaying the transition to scalable e-fuels. Shipowners investing in LNG ships and bunkering infrastructure today will divert capital away from ZNZ fuels, postponing the research, development, and infrastructure buildout required to bring sustainable e-fuels to market at scale. 15 This lock-in effect not only delays the introduction of truly sustainable fuels but also risks widening the TCO gap between LNG and sustainable e-fuels, making future transitions even more challenging.
LNG-fuelled ships built this decade will outlast IMO's net-zero deadline, leaving the sector with costly and polluting legacy assets. LNG-fuelled ships built this decade will remain in service well beyond 2050, continuing to emit GHGs, methane, and local pollutants throughout their operational life. These ships risk becoming stranded assets, which are investments that lose all economic value well before the end of their expected service life. Emissions of the existing and ordered global fleet up to their scrapping age could nearly double the carbon budget compatible with a net-zero pathway, leaving US$411 billion of ships at risk of becoming stranded assets. 16 Shipowners will face retrofits or early recycling of LNG-powered ships, both of which impose additional financial and environmental costs. What may appear as a short-term compliance strategy could therefore entrench long-term emissions and leave the sector with a costly legacy of prematurely obsolete ships.
Continued reliance on LNG requires the construction of new LNG-transporting tankers, which risk becoming stranded assets. Over 40% of ships globally already transport fossil fuels, and the outlook for LNG carriers is particularly bleak. 17 Their specialized design, cryogenic storage systems, and associated infrastructure make conversion to other cargoes prohibitively expensive and technically challenging. In practice, these ships are locked into transporting LNG for the duration of their lifespans, with few realistic alternative uses. Aligning shipping activity with a 1.5∘C carbon budget would therefore render roughly a third of the current LNG fleet value obsolete by 2030, leaving the sector with another financially and environmentally costly stranded asset problem. 18
The same incomplete LCA framework that favours LNG today is also setting the stage for widespread adoption of unsustainable biofuels in the future. Analysis suggests that, over time, it could be more cost-effective to move to biofuels than switch to e-fuels. 19 An incomplete LCA will allow advanced biofuels to qualify as ZNZ fuels and generate rewards indefinitely. Considering that some biofuels are commercialized while e-fuels are still in development stages, biofuels are likely to be the first ZNZ fuels to be adopted. As LNG infrastructure and ship investments today can be readily transitioned to bio-LNG, the sector is incentivized to pursue the least-cost pathway, continuing LNG use in the near term and switching to bio-LNG in the long term.
Biofuels could make up around half of the global fuel mix in the late 2030s (ISWG-GHG 20/2/31). 20 Their low TCO and higher near-term availability compared to e-fuels could make biodiesel and biomethane the dominant compliance options in the medium and long term. Without strict limits on high-ILUC feedstocks, crop-based biofuels such as palm and soybean oil are projected to dominate, as they remain the cheapest compliance option. The resulting ILUC would drive deforestation and the loss of carbon-rich ecosystems, negating any climate benefit. Under this scenario, global shipping's well-to-wake GHG emissions could exceed those from continued fossil fuel use well into the 2030s. 21 Even if high-ILUC feedstocks are excluded, emissions in 2030 remain above the fossil-fuel baseline, underscoring the risk of relying on crop-based biofuels.
The incomplete LCA framework also risks skewing the surplus unit (SU) market, further slowing investment in e-fuels and undermining their viability. The IMO Net-Zero Framework includes economic incentives for the uptake of ZNZ fuels and energy, allowing low-emitting ships to generate SUs that can be banked or traded to generate revenues to offset increased costs. If an incomplete LCA framework allows biofuels to comply with the GFI trajectory and qualify as a ZNZ fuel, they could generate a significant volume of SU credits. This increase in supply will put downward pressure on SU prices, decreasing the cost to pollute and weakening the incentive for shipowners to pursue over-compliance through e-fuels. Since IMO incentives are expected to be critical to reducing the cost gap between e-fuels and cheaper compliance options, a sustained drop in SU prices would undermine the business case for e-fuels, delaying investment in the infrastructure and production capacity needed to bring them to scale.
The mass balance approach and its potential to jeopardize the IMO Net-Zero Framework
The potential acceptance of mass balance in the LCA framework represents a significant loophole that could undermine the IMO Net-Zero Framework. In a mass balance system, renewable and fossil fuels are mixed in the same supply chain, with the renewable share tracked on paper rather than kept physically separate. While administratively convenient, such an approach risks creating the perception of higher renewable fuel use than is actually delivered within shipping. The IMO Net-Zero Framework could allow a ship consuming 100% fossil fuel to generate SUs as long as a corresponding amount of biofuel is accounted for elsewhere upstream, with no requirement that the biofuel ever reach the ship. There is no guarantee that renewable fuel injected at another point in the supply chain will even be used by a ship – or in the shipping sector at all – effectively allowing the industry to claim reductions delivered in other sectors rather than driving shipping-specific emissions cuts. By permitting credits as a substitute for real-world emissions reductions, IMO risks increased local pollution and GHG burdens, eroding confidence in its decarbonization strategy and the credibility of its net-zero accounting. It is recognized that some certification frameworks under development may seek to set clearer boundaries on what is allowable; however, until such safeguards are integrated into the LCA guidelines, the risks outlined above remain material.
By disconnecting the location of emissions from the location of claimed reductions, IMO also risks creating inequities in the distribution of impacts. Pollution, methane leakage, and community burdens remain concentrated in port cities and along shipping routes, while the supposed environmental benefit occurs elsewhere upstream. This separation between where fuels are combusted and where credits are generated undermines principles of fairness and environmental justice.
This approach also further risks distorting the e-fuels market, impacting their adoption. By allowing fossil LNG-powered ships to appear compliant under the GFI trajectory, the mass balance system could effectively entrench LNG as the dominant option, reinforcing investment in infrastructure that prolongs dependence on methane-based fuels. At the same time, this would further inflate the supply of SUs, making compliance cheaper and reducing the incentive to develop and scale e-fuels. The result is a distorted SU market that delays the capital flows needed for the transition to scalable ZNZ fuels.
Book and claim could undermine the IMO Net-Zero Framework
Book-and-claim goes further by fundamentally undermining the ship's responsibility to change its actual physical fuel consumption, potentially allowing it to claim out-of-sector reductions instead. In such a system, renewable energy providers generate credits that they can trade separately from the underlying fuel. A ship powered by 100% fossil fuel could claim renewable use through the purchasing of credits, without any renewable fuel ever needing to touch the supply chain. This not only replicates all the shortcomings of mass balance but compounds them – it severs any geographical or temporal link between the location of emissions and the claimed reductions, leaving pollution concentrated in burdened communities as benefits are felt elsewhere. Credits are likely to be generated in other sectors and sold into shipping, allowing IMO targets to be met without any change in the marine fuel mix. Without airtight rules on traceability and double-counting, cross-border trading of certificates risks multiple actors claiming the same benefit.
Proposal for re-establishment of the correspondence group on other social and economic sustainability aspects of marine fuels
The CSC urgently proposes the re-establishment of the Correspondence Group on the Further Development of the LCA Framework to address impacts "beyond direct emissions or other sustainability criteria". IMO risks undermining sustainable fuel development and falling short of its decarbonization targets unless it fully considers climate, environmental, socio-economic, health, and pollution impacts.
Shipping is situated within the triple planetary crisis of climate change, biodiversity loss, and pollution, and a comprehensive, intersectional approach is needed to ensure the LCA framework supports a truly sustainable transition. The case studies above provide examples of negative impacts that remain unaccounted in the LCA framework, including on public health, environmental justice, land use and change, water use and quality, and food insecurity. By omitting these factors, IMO may be underestimating the hidden costs of LNG and biofuels when evaluated on a life-cycle basis. These gaps risk locking the sector into increased emissions and impacts, stalling the deployment of scalable e-fuels, and undermining the achievement of IMO's net-zero targets. Continued work is therefore needed to identify, define, and integrate these unaccounted impacts, making the re-establishment of the Correspondence Group an urgent priority.
Action requested of the Working Group
The Working Group is invited to consider the information contained in this document, in particular proposals in paragraphs 31 and 32, and take action as appropriate.
