In our highly globalized world, we have grown accustomed to receiving goods from the other side of the world in a matter of days without giving much thought to how they arrive on our doorstep. The shipping industry and its fleet of cargo ships is key to this global supply chain, with over a million vessels in circulation today. But this convenience comes at a cost: shipping is responsible for roughly 3% of the world’s greenhouse gas (GHG) emissions.
A meeting of an International Maritime Organization (IMO) committee in London last week could have turned the tide for the shipping industry. A deal was reached, but it failed to meet expectations from climate-vulnerable nations and environmental advocates. Crucially, what was poised to become the world’s first carbon levy on all industry emissions ultimately failed to materialize.
The Carbon Levy that Wasn’t
One of the most anticipated measures discussed in London was a requirement for merchant ships to pay a charge based on their greenhouse gas emissions. Climate vulnerable countries, including Pacific Island nations, lobbied for a $150 per tonne levy, which research suggested would help minimize the economic impact of decarbonizing the shipping industry.
Key fossil fuel nations including Saudi Arabia and Russia always opposed the proposal, while the US walked out of the talks entirely, threatening reciprocal measures should such a “blatantly unfair measure go forward.”
Governments set a lower emissions-intensity reduction target of 4% in 2028, which will rise to 30% in 2035. They also set a stricter target that will rise from 17% in 2028 to 43% in 2035.
Under the new scheme, starting from 2028, ships are required to reduce their emissions intensity by switching to cleaner fuels. Failure to meet the targets will result in a penalty.
Ship owners who miss the lower, easier-to-reach emissions target have the option to buy so-called “remedial units” for $380 per metric ton on every extra ton of carbon dioxide (CO2) equivalent they emit above a fixed emissions threshold.
Alternatively, ship owners can purchase “surplus” units from ships that have significantly reduced their emissions below the target levels, or can use their own surplus units from previous years where they overachieved in emission reductions.
Failure to meet the stricter emissions target will result in a lower fee of $100 a ton.
The money will be collected in a newly established Net-Zero Fund, which will support decarbonization efforts, helping workers through the transition and offsetting cost increases in developing economies.
Still, hopes that the IMO deal could generate billions of dollars to fund broader climate mitigation and adaptation measures were dashed. The fund is restricted to the shipping industry, leaving many frustrated not only with the substance of the deal but also with the negotiation process, which lacked meaningful inclusion.
In protest, Pacific Island nations abstained from the final vote. Explaining their position, Tuvalu’s transport minister Simon Kofe stated that the deal “won’t get us on a pathway to the 1.5°C temperature limit.”
“They asked us to settle for less, while we are the ones losing the most. We will not negotiate away our future,” Kofe said.
In its latest climate strategy, the shipping sector has committed to achieving net-zero GHG emissions by or around 2050.
Fueling the Future
IMO members last week also agreed on thresholds for what qualifies as “zero or near-zero” fuels. However, critics argue that the final deal fails to provide the policy clarity and financial incentives needed to drive investment in truly clean alternatives like green hydrogen and ammonia.
Instead, the deal risks promoting first-generation biofuels, which, while cheaper, have been widely criticized for their negative social and environmental impacts.
These fuels can result in higher GHG emissions than fossil fuels, largely due to the carbon released when forests are cleared for crop production. The expansion of biofuel crops has been linked to biodiversity loss, land conflicts, labor exploitation, and violations of indigenous rights in countries like Brazil, Indonesia and Tanzania.
If widely adopted, biofuel-powered ships could release an additional 270 million tonnes of GHG emissions by 2030, making it worse than business as usual.
While electrolyzed fuels from renewable sources, like e-hydrogen and e-ammonia, offer a more sustainable path, their commercial deployment has not reached the scale required for industry-wide adoption. Without strong financial backing and clear regulatory support, these cleaner options risk being sidelined in favor of cheaper, more polluting alternatives.
The current framework fails to deliver the revenue or ambition required to secure a just and equitable transition, leaving the shipping sector at risk of locking in high-emission fuels for another decade.
According to Faïg Abbasov, Shipping Programme Director at the European Federation for Transport and Environment, “[w]ithout better incentives for sustainable e-fuels from green hydrogen, it is impossible to decarbonize this heavy polluting industry. The ball is now in the court of individual countries to implement national policies to open a life-line to green e-fuels”.
Efficiency First: A Near-Term Opportunity
While scaling up clean fuels will take time, improving ship efficiency offers an immediate and cost-effective path to lower emissions. An effective option is slow steaming – reducing the speed of ships so they operate below full engine power and emit fewer GHGs. Estimates show that a 10% reduction in speed can lead to a 27% reduction in emissions.
Although slower speeds reduce overall shipping capacity and may require an increase in the number of ships in circulation, this also presents an opportunity to invest in new ships designed to run on cleaner fuels like e-hydrogen.
A Maersk cargo ship on a body of water.
A cargo ship owned by Danish shipping and logistics company Maersk. Photo: Galen Crout/Unsplash.
Slow steaming is already in use and has been adopted by major shipping companies like Maersk. The world’s largest shipping container company has been successfully slow steaming since 2007, decreasing engine loads by 35% without issue. The result: lower fuel consumption, reduced emissions, and cost savings on maintenance and operations.
The Bottom Line
The IMO’s deal marks a step toward decarbonizing international shipping – but it is not the historic leap many had hoped for. The sector is now set to have mandatory targets and financial penalties, albeit without the robust pricing signals, fuel definitions, and funding scale needed to catalyze a full-scale energy transition.
For some, the lack of ambition makes the deal more symbolic than impactful. “This week’s outcome misses even IMO’s baseline – leaving the 2030 decarbonization target dead in the water, with potential disastrous long-term impacts for people and the planet”, said Anaïs Rios, Shipping Policy Officer at Seas At Risk.
With emissions from shipping projected to rise to 10% by 2050 without further intervention, future negotiations will be critical to set the industry back on a pathway to net zero.a
Source: Earth.Org