Governments are expected to finalise talks on a global carbon price on international shipping, at a two-part summit of the UN’s International Maritime Organization (IMO) in London on 31 March – 1 April and 7-11 April.

Why this matters: There’s huge political momentum to get a carbon levy across the finishing line at the IMO, with over 60 countries from Europe, Africa, Asia, the Pacific and the Caribbean, as well as the industry, supporting this mechanism. They have indicated a price range of $18-150 for the future levy.

A persistent minority, including COP host Brazil, China, and South Africa, continue to favour a much weaker mechanism based on credit trading (the IMSF&F), which research finds is insufficient to meet the sector’s climate targets.

At the last round of negotiations in February (ISWG-GHG-18), the controversial Norwegian Chair of ISWG circulated the idea that Singapore’s J9 paper (a complex combination of carbon credit trading and two different bands of carbon intensity within a fuel standard) could be considered a “bridge” proposal between countries.

The Pacific and other climate-vulnerable nations rejected it on the grounds of failing to live up to the IMO’s commitments to a just and equitable transition (it would disproportionately raise revenues from developing countries’ older fleets, and send this money as subsidies to wealthy countries’ newer fleets, including fossil LNG ships).

The industry itself (the International Chamber of Shipping) has since put forward its own “bridging” proposal, which would incorporate the idea of a single flat fee for emissions (e.g. providing certainty and clarity about the revenues for a just and equitable transition) within the GFS architecture supported by China and Brazil, while exempting only vessels using Zero or Near-Zero fuels.

Ambassador Albon Ishoda, Marshall Islands Special Envoy for Maritime Decarbonization, said: “ISWG-GHG-19 is a test of IMO’s credibility. Without a universal GHG levy, IMO’s climate targets are meaningless. This is the fastest, most effective, and lowest-cost way to ensure a just and equitable transition, where no one is left behind. Delays cost lives. The time for action is now.”

Jamie Yates, Climate and Renewable Energy Analyst, Pacific Environment, said: “Pacific Environment remains steadfast in its call for a universal levy on shipping emissions paired with an ambitious carbon fuel standard… These measures are essential to accelerate the production of zero-emission fuels, support climate-vulnerable nations and break shipping’s dependence on fossil fuels… As the chief regulator of global shipping, the IMO must act now.”

Anaïs Rios, Shipping Policy Officer, Seas At Risk said: “Wind power must be central to the IMO discussions – It’s a proven, cost-effective technology that immediately cuts emissions, eases the energy transition, reduces reliance on alternative fuels and benefits the planet. Scaling up wind technology to the global fleet can bring the IMO closer to their GHG and energy targets and the best part? It’s ready to go now. Wind is the true hero in the push for clean, sustainable shipping.”

Bastien Bonnet-Cantalloube, Expert on Decarbonisation of Aviation and Shipping, Carbon Market Watch said: “The IMO is at a crossroads: next week and in early April, governments must come together and agree on measures that can help drive the transition to zero-emission fuels and technologies and reach the IMO GHG Strategy objectives. The policies agreed during the meeting cannot afford to be a drop in the ocean. Anything less than a high and effective levy will fail to deliver the incentives needed for shipping’s decarbonisation and a just, equitable transition. So far, so-called ‘bridging’ proposals on the table fall short and barely make a ripple—this is the moment to raise the bar.”

Emma Fenton, Senior Director, Climate Diplomacy, Opportunity Green says: “The future of clean shipping hangs in the balance. Whether or not the IMO guides this global industry to decarbonise fairly, fast, and far enough, depends on countries holding their nerve to support an ambitious outcome in the coming weeks. An ambitious, flat-rate levy on shipping’s greenhouse gas emissions is the only way to decarbonise the industry while leaving nobody behind. With increasing private sector support, delegates must now stand in solidarity with climate vulnerable countries and push for this ambition.”

The IMO is meeting on 31 March – 1 April for technical working group talks (ISWG-GHG-19) and on 7-11 April for the 83rd Marine Environment Protection Committee (MEPC 83), to finalise measures that will deliver its agreed upon emission cuts in an equitable way (the 2023 Revised Strategy): 30% by 2030, 80% by 2040, to reach zero by 2050.

These measures include an ‘economic’ policy based on a ‘GHG emission pricing mechanism’ and a ‘technical’ policy, a global fuel standard (GFS), which aims to drive up the use of zero-emission energy on ships to effectively fully power the sector by 2050.

Carbon pricing would help close the price gap between fossil fuels and renewable energy, and generate revenues for an equitable transition. A study by UNCTAD, commissioned by the IMO, found that a levy of $150-300/tonne of greenhouse gas, if designed correctly, is the best way to minimise the economic impacts of shipping decarbonisation on global GDP growth, and to promote global economic equality.

An analysis of the previous rounds of negotiations prepared by UCL is available here, and a rating of individual proposals by Carbon Market Watch here. A study by Opportunity Green here issued just this week has also found that global shipping is systematically undertaxed in the Global North, while record-breaking profits since the pandemic.

In parallel to the levy and the GFS, governments are also negotiating on the revision of the existing framework for energy efficiency of ships – Carbon Intensity Indicator (CII). Experts argue that delivering the IMO’s Revised Strategy will require all three components: an ambitious and equitable levy of at least $150/tonne GHG; a strong fuel standard, and an improved CII.
Source: Pacific Environment, Seas At Risk, Carbon Market Watch, Opportunity Green