Carbon Market Watch’s latest publication assesses and scores the various proposals to decarbonise the shipping sector, ahead of crucial International Maritime Organisation (IMO) discussions in London. Bastien Bonnet-Cantalloube gives his verdict.
The International Maritime Organisation (IMO), the UN body for shipping which is based in London, is hosting two key meetings in late September and early October to discuss the decarbonisation of the sector, among other topics.
For too long progress towards an international consensus on decarbonisation has been hard going for a sector which accounted for nearly 3% of global greenhouse gas (GHG) emissions in 2018, and whose carbon footprint could increase by half by 2050. It is high time that the maritime industry raised anchor to chart a new course that makes sure that climate action is not lost at sea.
So what’s on the table? Alongside addressing key problem areas, such as air, noise and plastics pollution, member states and organisations will consider various GHG emission reduction consultations.
Whereas talks were far from smooth sailing prior to the summer of 2023 when the IMO revised its GHG strategy, there is real hope for the industry to navigate towards lower emissions through plans to establish a decarbonisation pathway for 2050 with incremental targets. What is currently charted is nowhere near enough to be aligned with the urgent need to cap global heating to less than 1.5°C above pre-industrial levels as enshrined in the Paris Agreement, but is an improvement relative to previous perspectives.
A strong levy is key
Parties to the IMO have outlined their proposals for how targets can be reached, and will debate them during the meetings. Carbon Market Watch has analysed these plans, using our knowledge and expertise of carbon pricing to focus on the economic elements, also known as ‘market-based measures’ (MBM), as opposed to command-and-control (or ‘technical’) measures, like fuel standards.
CMW commissioned environmental consultancy ‘CE Delft’ to develop evaluation criteria to score the proposals. Analysed is the type of scheme, the amount of the levy, the scope of covered value chain and GHG type emissions, the implementation time-frame for each scheme, and the use of revenue, with a particular focus on its contribution to vulnerable countries, workers and R&D. Our new policy briefing ‘Shipping Forecasts’ shows how each proposal scores.
Pacific islands’ A+ plan
Our assessment shows that the scheme recommended by a group of Pacific islands and Caribbean states (Belize et al.) accumulates the highest score by a significant margin. The high levy at its core – $150 per tonne of greenhouse gas emissions in the form of carbon dioxide, methane and nitrogen dioxide – answers the requirement for a just and equitable transition by gathering substantial revenue to be redistributed to least developed countries (LDC) and small islands developing states (SIDS).
This tariff charged on ship fleets will also foster cuts in fuel consumption for improved energy efficiency and help to close the cost gap between usage of green and polluting fuels.
Alternative plans lack ambition
The plan of EU countries allied with Japan (Austria et al.) also suggests an ambitious levy. It is not set as high ($100 per tonne of GHG emissions) as Belize et al. and revenue spending is slightly less generous towards vulnerable countries. It is also a bit light in detailing the financing of research and development.
In our ranking, the proposal (Bahamas et al.) presented by a consortium of the Bahamas, Liberia and the International Chamber of Shipping (ICS) ranks third. It suggests a levy amount through a vague range (from $6.25 to $100 per tonne of GHG emissions) and an illustrative value of $18.75 per tonne of GHG, which is much too low to meet the ambitions of the IMO strategy.
While an attempt is made to cover the most pollutant GHGs based on a well-considered methodology, the scheme raises less revenue than alternative proposals.
Further shortcomings include a lack of detail over how funds accrued will benefit vulnerable countries, particularly in terms of research and development, while there is insufficient coverage of all life-cycle emissions from fuel use.
Finally, Canada proposed a high levy of $130 per tonne of GHG but its plan is underdeveloped. It neither suggests legal amendments nor provides details on revenue use, and the role of flag and port states needs to be clarified.
Most proposals would benefit from further elaboration of how the proceeds from the levy should be utilised. All should make clear that an IMO scheme does not replace existing or future national or regional climate measures, and it doesn’t prevent other governance levels introducing policies that enact higher climate ambition.
Spoilt recipe
Finally, a group of diverse and mostly large developing countries comprised of China, Brazil, Argentina but also Angola, Ecuador, Norway, South Africa, UAE, and Uruguay (Angola et al.) took an entirely different approach: a GHG fuel standard with a flexibility compliance mechanism (not too distant from what the EU and Japan also recommend in a separate proposal).
Yet, in opting to combine the technical and economic elements, it has spoiled the broth. Canny sailors and civil society won’t be fooled: when the cooking competition instructs preparation of both a main meal and a dessert, pouring a sweet honey sauce on the main meal is welcome but does not exempt you from baking the dessert.
The fuel standard proposal is not a bad idea, but it is not admissible as an economic measure. The chief cooks must return to the galley to redesign their recipe.
Onward to greener and fairer horizons
The idea of an ambitious fuel standard and levy is blowing in the wind.
Parties to the IMO meetings must anchor these principles in our regulatory landscape as a matter of urgency to reduce the sector’s emissions, otherwise the outlook for the climate is bleak as we sail towards the 2030 and 2050 horizon.
