Shipping 'misses boat' to decarbonisation

An agreement was reached at the International Maritime Organization (IMO) to set regulation to decarbonise the international shipping sector earlier this month. 

While it was an historic achievement, the final outcomes fall far short of driving emissions reductions quickly enough and do little to support the growing needs of the countries most vulnerable to climate change. 

The new rules could generate up to £10 billion in revenues each year, but where this will be directed remains to be seen. 

Propulsion

There’s a risk that the lion’s share could end up back in the pockets of the very shipping companies who have made record profits and paid unfathomably low taxes in the past five years – rather than supporting adaptation and resilience programmes in countries at the front line of climate change. 

Why focus on shipping emissions specifically? As an industry it accounts for three per cent of global annual greenhouse gas (GHG) emissions. To put that into context, if the shipping industry were a country it would have roughly the same emissions as Germany or South Korea. 

Not only is the maritime sector high-emitting and hard to decarbonise, but it is also responsible for transporting 80 per cent of goods around the world. 

As other sectors continue to decarbonise, shipping is projected to grow by an average of 2.4 per cent annually through 2029, which means that over time, shipping will account for more and more of the world’s annual emissions.

As a sector that is international in scope, global cooperation is essential to drive emissions reductions through incentivising the use of zero emissions fuels and clean technologies such as improvements in energy efficiency, wind-assisted propulsion, and electrification wherever possible. 

Negotiations

The latest negotiations represented the culmination of two years’ work. The aim? To set out plans that could deliver the objectives of the IMO’s 2023 GHG reduction strategy and achieve the ultimate goal of the IMO for international shipping to reach net zero by or around 2050.

In the IMO’s 2023 Strategy, member states agreed to adopt a ‘basket of mid-term measures’, which would include economic and technical aspects that would work together to drive the ambitious emissions reductions needed. 

Specifically:  

1. A goal-based marine fuel standard (GFS): Establishing targets for the emissions intensity of fuels used onboard a ship that would grow more stringent over time and ultimately requiring ships to switch to alternative, cleaner fuels and energy sources.
2. An economic element, on the basis of a GHG pricing mechanism: Placing a price on GHG emissions from international shipping that would increase the cost competitiveness of alternative fuels and energy sources and incentivise emissions reductions. This would also generate revenues that could be used to enable a just and equitable transition. 

To deliver a just and equitable transition to net zero for international shipping, hopes were especially high for the economic element – a clear statement of international solidarity in the face of the climate crisis. 

Emit

A coalition of countries, led by Pacific Island States, tabled a proposal that would have set a high priced, flat-rate levy on all of international shipping emissions. 

This would have created an incentive for emissions reductions and generated sufficient, predictable revenue that could be used to address the disproportionate impacts of climate change on Small Island Developing States (SIDS) and Least Developed Countries (LDCs).

At the end of two gruelling and occasionally contentious weeks, delegates at the IMO finally reached an historic agreement to set legally-binding measures to bring down emissions from international shipping. 

This signifies a new kind of multilateralism – where countries agree on binding, global measures to tackle an essential but high emitting sector – rather than acting purely on a domestic basis. However, for many, these meetings represented a potential turning point in global climate action and the final agreement did not live up to these hopes.

The core emissions reduction mechanism in the regulation is a two-tiered GFS mechanism. Ships who emit more than the least stringent limit will, in most cases, pay a penalty fee. 

Quantum

This means that there is a price on some GHG emissions. But not all. The regulation also includes a reward mechanism for ships using zero or near-zero GHG emission technologies, fuels and/or energy sources (ZNZs). 

Sadly, this agreement does not live up to the IMO’s 2023 strategy and – crucially – falls short of what could have been achieved in two key areas.

First, it does not meet emissions reductions targets. In its 2023 Strategy, the IMO set an emissions reduction target of 20 per cent by 2030, striving for 30 per cent. The new measures are at most projected to achieve 10 per cent reductions. 

Furthermore, the low price agreed in the measure means that some vessel operators may simply accept and absorb the cost into their operations. Essentially, they will ‘pay to pollute’ instead of being incentivised to make changes to reduce their emissions.

Second, it won’t contribute meaningfully to climate justice and an equitable transition. The low price and reduced scope of the measure mean that the quantum of revenue raised is dwarfed by the scale of the investment needed to decarbonise the international shipping sector. 

Harness

And, the focus on a ‘reward element’ risks simply paying those who have already invested in technologies rather than incentivising additional change. 

What’s more, the relatively low amount of revenue raised means that little will be done to contribute to the broader climate finance goals agreed at COP29 under the New Collective Quantified Goal to achieve $1.3tn annually by 2035.

It would be all too easy to lose hope for ambitious climate action in heavy polluting sectors like international shipping. But the IMO has set the floor for international shipping’s climate action, and now this platform must be used to raise the ceiling. 

The IMO doesn’t operate in a vacuum and more eyes than ever before have been watching the international shipping sector to see whether it will set the course for equitable climate action. 

Now we must harness this momentum and use it to action the calls from climate vulnerable countries that will allow us to deliver the scale and pace of change that the climate crisis demands.

This Author

Emma Fenton is the senior director of climate diplomacy at Opportunity Green, an NGO working to unlock the opportunities from tackling climate change using law, economics, and policy.