The IMO (International Maritime Organization), which is the United Nations specialised agency for shipping, has announced a major step towards its goal of a net zero by 2050 with the announcement of the first-ever global fee on carbon emissions.
The organisation has approved a carbon intensity standard for fuel which is backed by a levy system. It will see shipping companies charged for greenhouse gas emissions (GHG) based on their carbon content. The carbon price forms part of a wider draft Net-Zero Framework which is expected to be formally agreed by the IMO in October this year.
The draft measures were agreed at the 83rd Session of the Marine Environment Protection Committee (MEPC 83) last week in London, where nations voted overwhelmingly in favour to approve the measures. Notably however, the US Government withdrew from negotiations on the basis that it would not support any agreement that unduly or unfairly burdens the US.
Under the new framework, ships with a volume exceeding 5,000 gross tonnes must progressively reduce their GHG emissions intensity (or emissions per unit of fuel). Initially this will be 30% by 2035, followed by 65% by 2040 (when compared with 2008 levels). The new system will also establish a carbon credit market, allowing more efficient vessels to sell credits to those with higher emissions.
In a press release the IMO explained that there will be two levels of compliance with GHG Fuel Intensity targets- a Base Target and a Direct Compliance Target at which ships would be eligible to earn “surplus units”. Those ships which emit above the set thresholds can balance their emissions deficit by:
· Transferring surplus units from other ships;
· Using surplus units they have already banked;
· Using remedial units acquired through contributions to the IMO Net-Zero Fund[i].
As noted above, the regulations will target large ocean-going vessels exceeding 5,000 gross tonnage (gt) - these vessels are responsible for roughly 85% of CO2 emissions from international shipping. The changes are set to be introduced from 2027. Companies that exceed the carbon limits set by the standard will have to pay either $100 or $380 per excess ton of emissions, depending on how much they exceed limits by.
According to AP, the IMO has claimed it will collect between $11-13 billion in annual revenue from the fees. This money will then be put into the organisation's net zero fund to invest in the fuels and technologies needed to transition to green shipping, as well as to reward low-emission ships, and to support developing countries so they aren’t left behind.
The Net-Zero framework announcement follows fears raised around the use of biofuels as an alternative to fossil fuels in shipping. Campaigners have warned that weak rules could encourage the use of biofuels made from palm and soybean oil, which are cheaper than cleaner alternatives but far more damaging. Earlier this year several major shipping companies & NGOs called on the IMO to exclude biofuels from its list of green alternatives.
In a joint statement released in February, leading shipping companies including Hapag-Lloyd AG, Hurtigruten, and Louis Dreyfus Armateurs, as well as T&E (European Federation for Transport and Environment) have called for the IMO to exclude crop-based biofuels from regulatory compliance. The signatories highlight that several countries including France, Norway and the Netherlands have already restricted or stopped using palm and soy biofuels domestically, while the EU itself has excluded the use of food crops from its flagship shipping fuels regulation. Yet, they note that at the global level no such restrictions are proposed.
They argue that unless legally binding safeguards are introduced, there is a risk that fossil fuels will be replaced with ‘unsustainable biofuels’, noting that in 2009 the EU’s push towards biofuels led to consumption of palm oil-based biofuels doubling between 2010 and 2020.
[i] IMO approves net-zero regulations for global shipping
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
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