The ‘great’ compromise: IMO agrees to global carbon price for shipping

Too little, too late

But Ministers from Fiji, the Republic of the Marshall Islands, Seychelles, Solomon Islands, Tuvalu, the Republic of Vanuatu, and a representative of the Republic of Palau refused to support the deal, saying it was “too little, too late to cut shipping emissions” and protect their island nations.

Instead, Pacific Islanders along with the Seychelles, Caribbean, African and Central American states, and the UK had proposed a universal carbon levy on GHG emissions.

Not perfect

Shipowners, for the most part, welcomed the new measures. The International Chamber of Shipping (ICS) sees carbon pricing as critical to ensuring international shipping’s transition to net-zero GHG emissions by or about 2050.

“If formally adopted, shipping will be the first sector to have a globally agreed carbon price, something which ICS has been advocating for since COP 26 in 2021, when the industry agreed a net-zero 2050 target,” said ICS secretary general, Guy Platten.

But Mr Platten admitted the deal was “not perfect in every respect,” and was concerned that it “may not yet go far enough in providing the necessary certainty.” But he did thank member states and IMO for “achieving this agreement in challenging political circumstances.”

The most dramatic of those “circumstances” was created by the US, which stormed off, pulling out of the negotiations, while circulating a diplomatic message to the countries in attendance that it would not support any international environmental agreement that “unduly or unfairly burdens the US.”

“The deal is too little, too late to cut shipping emissions”

Politico reported that a letter sent by the US to many of the embassies in attendance threatened retaliatory measures against countries that imposed a carbon tax on US ships.

“Should such a blatantly unfair measure go forward, our government will consider reciprocal measures so as to offset any fees charged to US ships,” read the letter, according to Politico.

Signal on green fuels

The idea behind the carbon tax is the ‘polluters pay principal.’ Owners will be penalised for using fossil fuels, driving them towards lower carbon-intensive and alternative fuels, such as green versions of ammonia and methanol made with renewable energy.

Over the last few years, shipowners have invested billions of dollars in alternative fuel-capable newbuilds in preparation for the arrival of green fuels. But with the exception of LNG, progress has been slow on producing alternative fuels at scale and making them available at ports. LNG is available at more than 170 ports, with about 74 bunkering vessels in operation and another 30 under construction, according to DNV.

International shipping hopes its commitment to carbon pricing and fuels with lower carbon intensities sends a strong signal to energy producers to ramp up supplies of low- and zero-carbon fuel to the sector.

“Shipowners and energy producers need a workable, transparent, and simple-to-administer regulatory framework that will create the necessary incentives to accelerate the energy transition at the pace required,” said Mr Platten.

“We hope that this agreement will now provide the certainty which energy producers urgently need to de-risk their huge investment decisions,” he added.

Slammed by environmental groups

Environmental groups slammed the deal, saying it fell far short of the action that was needed to ensure international shipping meets its IMO GHG emissions reduction targets for 2023, 2040 and 2050.

Delaine McCullough, president of Clean Shipping Coalition, a group of NGOs that has observer status at IMO, said the IMO member states “squandered a golden opportunity” on maritime decarbonisation. “Instead of setting a strong energy efficiency regulation, combined with an ambitious fuel standard and sufficiently high price on all GHG emissions from ships, the IMO instead chose low ambition and business as usual,” she said.