Shipping and aviation are key contributors to the UK economy, with estimates being that, before the COVID-19 pandemic, they contributed over £40 billion and £20 billion, respectively each year. They are important sectors in achieving the UK’s net-zero ambition, but decarbonising these industries is a challenging exercise. Emissions from international aviation and shipping are not directly included in the Paris Agreement, with regulation left to individual countries, the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO).
The aviation industry is currently experiencing a time of extraordinary shock with impacts being felt on multiple fronts. Revenues have collapsed as a result of an estimated 97% reduction in passenger flights due to the COVID-19 pandemic. Aviation will also be subject to additional emissions costs in the fourth phase of the EU Emissions Trading System (ETS) coming into effect next year due to the annual linear reduction factor reducing the number of emissions certificates available in that phase.
The UK has been looking to decarbonise the maritime industry and introduced the Clean Maritime Plan in 2019 setting out ambitions and commitments to achieve zero emissions by 2050. Much like the aviation industry, the maritime industry has been significantly affected by the pandemic.
In its Ten Point Plan for a “Green Industrial Revolution” (the Ten Point Plan), the Government has committed to “position the UK at the forefront of aviation and maritime technology to push forward low carbon travel”. Taking action to achieve these aims could, according to the Ten Point Plan, deliver up to 5,200 jobs supported by a domestic sustainable aviation fuel (SAF) industry; “future proof” the aerospace industry and increase savings of up to 1MTCO2e1 by 2032 from clean maritime and 15MtCO2e by 2050 from SAF.
Jet Zero – Sustainable Aviation Fuels
The Government aims to place the UK at the forefront of change in the aviation industry. Under the Ten Point Plan, the UK will have the first SAF clearing house to certify new fuels in Europe. There will also be a consultation on a SAF mandate which will look into blending greener fuels into kerosene to create a market-led demand for alternative fuels. The mandate is expected to start in 2025.
The Ten Point Plan emphasises the need for further research and development (R&D) in this area, especially on new fuel, technology and infrastructure. The Jet Zero Council, a sector-wide partnership set up earlier this year, will work to develop new technologies feeding into the strategy for the net-zero ambition, with a consultation expected in 2021. Under the Ten Point Plan, £15 million will be invested in FlyZero, a 12-month study into “strategic, technical and commercial issues in designing and developing zero-emission aircraft that could enter service in 2030.” In an effort to boost R&D into SAFs, the Ten Point Plan introduces a £15 million competition for fuel plants, to “support the production of SAFs”. There will also be investment in R&D to upgrade UK airport infrastructure in a shift towards battery and hydrogen-fuelled aircraft.
Further information is required on the Government’s proposals for the aviation industry. It remains to be seen whether such proposals are consistent or more progressive than those set out in the ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation. Whilst it is commendable that the UK is committing to invest in SAF research, it is universally accepted that the amounts required to be invested to make SAF and battery / hydrogen-fuelled aircraft viable are far in excess of what has been committed.
The UK’s maritime industry is a key aspect of achieving the country’s climate change goals. The UK wants to decarbonise shipping as part of its aim to achieve zero emissions by 2050, a standard that is much higher than the IMO’s target of 50% reduction by 2050. However, shipping is an industry that is harder to decarbonise than others: assets are long-life and the industry heavily relies on energy with no alternative fuel yet appropriate for long-distance routes. Decarbonisation will require a large amount of investment.
The Ten Point Plan does not place much emphasis on the industry, other than to say that it has committed to a £20 million investment in the Clean Maritime Demonstration Programme, and that a hydrogen refuelling port will be launched in Teesside.2
The Clean Maritime Plan, launched last year, sets out the ambitions for the UK maritime industry for 2035 and 2050. These include: building a number of clean maritime clusters; the UK Ship Register being seen as a global leader in clean shipping and the UK being home to a world-leading zero-emissions maritime sector. The Government also made a number of commitments, including: a call for evidence on non-tax incentives; a consultation on how the Renewable Transport Fuel Obligation can be used in the maritime sector; a study to identify and support UK zero-emission shipping clusters; and support of clean maritime innovation through funding and competitions.
It is yet to be seen what impact the £20 million investment will have on the achievement of these aims, given the total value of the industry.
It is clear that further investment to develop new fuel, technologies and infrastructure is much needed in the aviation and maritime sectors if they are to be decarbonised. We look forward to seeing how the Government’s plans are adapted to revive these industries from the effects of the pandemic in a green and sustainable manner. While the details of their strategy will become clear over the next few years, the Government’s commitments in these sectors are a welcome step in tackling emissions from two industries that form an integral part of the UK economy.
1. MTCO2e – Metric tons of carbon dioxide equivalent
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© Herbert Smith Freehills 2021