Shipping’s global regulator aims to seal consensus this week on measures to cut carbon dioxide emissions this decade which would keep alive the possibility of a transformational international pollution tax on the industry.
Stakes are high for large shipping companies such as Maersk, CMA CGM and Cosco, and commodity traders such as Trafigura and Cargill that have strived to drive transport costs down, with decarbonisation estimated to cost trillions of dollars.
Delegates from 174 countries plus a host of industry observers at the meeting of the International Maritime Organization (IMO), the powerful UN body that regulates shipping, have been in week-long discussions over the measures to reduce the global fleet’s carbon intensity by 40 per cent by 2030 compared with 2008 levels.
Adoption of the plan would also mark the first concrete step to implement a strategy to cut global shipping’s emissions by at least 50 per cent by 2050.
Maritime transport, the lifeblood of global trade that pumps out about 2.4 per cent of annual CO2 emissions, is tricky to decarbonise because clean fuels such as green hydrogen, ammonia or methanol are not widely available and presently cost far more than fossil fuels.
The real importance of the meeting, in the view of many officials, hinges on whether the member states can emerge without divisions on climate change that would make an agreement on a carbon levy on international shipping an even more formidable challenge.
“Adoption of actual short-term measures this next week is another critical time,” said Kitack Lim, secretary-general of the IMO. “Without this one, we cannot develop our further ambition by 2023,”
The so-called short-term framework includes two parts: an energy efficiency index for existing ships, plus a requirement to improve carbon intensity of vessels between 2023 and 2030. The latter measure connects CO2 emissions to cargo volumes — which are likely to rise — rather than assessing absolute emissions.
Members agreed on Monday on a 2 per cent annual reduction in carbon intensity for ships between 2023 and 2026.
Environmental groups have denounced the measures as underwhelming and verging on inconsequential. One European delegation adviser said the carbon intensity requirement was a “paper tiger” with a lack of an enforcement mechanism.
The re-emergence of the US as a force in climate negotiations has bolstered the coalition of EU states and some Pacific Islands pushing for a greater ambition, but the approach also opens up the risk of a “failure to decide anything”, in the words of one European delegate.
Developing countries, particularly in Latin America, are deeply concerned about a hit to their trade-dependent growth and higher costs of basic goods caused by tighter environmental rules. China and Russia remain opponents of meaningful action, European delegates said.
“It’s the developed world telling the developing world to stay where they are. Growth of world trade is in developing countries,” said Edmund Hughes, a former senior IMO official for 10 years.
The question in the months and years ahead is whether the slow-moving, consensus-focused IMO can accelerate serious negotiations on putting a cost on shipping’s carbon emissions and whether companies’ lobbying matches their public messaging.
“Policymakers are sitting on the most significant historical mandate to decarbonise shipping,” said Rasmus Bach Nielsen, global head of fuel decarbonisation at commodity trader Trafigura, who believes the IMO needs to agree on a carbon levy by 2023 that begins two years later.
There are signs of sea change from within the industry itself. This month Maersk, the world’s largest container shipping group, suggested a $50 per CO2 tonne tax starting around 2027 that rises to more than $150.
The industry has also proposed a payment of $2 per fuel tonne, equivalent to $0.7 per CO2 tonne, to create a $5bn pool for research and development for clean fuels. But many delegates are concerned that this will be used as an excuse to delay the introduction of a substantial carbon tax.
An unlikely pair of candidates — the Marshall Islands and the Solomon Islands — have put forward the only proposal for a meaningful financial incentive to decarbonise shipping at $100 per CO2 tonne. The Marshall Islands is emblematic of the tensions. Its islands are mostly low-lying and at risk from global warming. At the same time, it has a large shipping registry and has typically aligned itself with the industry interests.
“If we look at IMO as a huge ship, then we have to start turning now from the iceberg ahead,” said Albon Ishoda, a delegate from the Marshall Islands. “If we’re allowed to have a transformational discussion, then that would drive progress on the ground.”
Lim of the IMO said that the key to avoiding a confrontation over a tax was in how the money raised would be used. “If everybody thinks we can benefit from market-based measures, if it’s by the developing side as well, then this will actually provide momentum.”
Shipping groups are likely to also stake their claim on the money. “If it goes into general government funds, then in the end those costs will be passed on,” said Rolf Habben Jansen, chief executive of Hapag-Lloyd.
Ultimately, the industry increasingly fears its influence over regulation could be slipping away and risks being branded a laggard on climate change. “The worst thing for the global shipping industry is to have a patchwork of regional schemes,” said Anne Steffensen, chief executive of Danish Shipping, a trade body.
The EU is expected to propose next month the widening of its emissions trading system to include maritime transport. If Brussels targets extraterritorial journeys, it will send shockwaves through the slow-moving world of shipping.
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