IMO breaks deadlock on carbon pricing for shipping

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Posted on May 27, 2022 8:35 PM by

Njiraini Muchira

The drive to decarbonize the commercial shipping industry has achieved a major breakthrough after countries reached consensus on carbon pricing of shipping emissions, a development that comes after more than 10 years of stalemate.

At a meeting of the Intersessional Working Group (ISWG) of the International Maritime Organization (IMO) last week, countries reached consensus on pricing greenhouse gas (GHG) emissions from shipping “as part of a basket of medium-term measures (MTM)”.

A summary of the meeting’s resolution by consultancy University Maritime Advisory Services (UMAS) shows that after more than a decade of resistance, countries have finally managed to reach consensus on emissions pricing, an evolution which would have a cost on carbon emissions as part of the concept of market-based measures.

The outcome of the meeting is a clear and positive step towards putting the maritime industry on a path to achieving the Paris Agreement goals of keeping global temperatures below 1.5 degrees Celsius and a equitable net zero transition.

“For many, particularly in industry, pricing GHG emissions has been the obvious next step for a while. This is not a new concept for IMO, but previous attempts to take it forward have failed. So it’s a huge step forward that there is now a consensus on this,” said UMAS Director Dr. Tristan Smith.

He added that although pricing needs to be complemented by a mandatory measure like a fuel standard, there is now much improved potential for a strong IMO incentive to decarbonise shipping.

The consensus on carbon pricing now paves the way for the next step, an agreement on the amount considering that various players in the shipping industry have offered different recommendations. The Getting to Zero Coalition, a group of leading maritime companies and environmental NGOs, has called for a carbon price of around $200 per tonne of CO2.

The world’s largest container shipping company, Maersk, has proposed a carbon tax on ship fuel of at least $450 per ton of fuel, which translates to about $150 per ton of CO2. The Marshall Islands and the Solomon Islands proposed a carbon price of $100 a tonne while the International Monetary Fund said the average global carbon price, currently at just $2 a tonne, must rise to $75 a tonne. 2030 to achieve the goals of the Paris Agreement.

While the issue of pricing shipping’s GHG emissions has remained contentious for more than a decade, consensus on medium-term measures means the IMO now has a framework through which to implement implementing policies to drive the transition and decarbonization of maritime transport.

The UMAS summary shows that during the ISWG meeting, countries expressed great urgency for the adoption of MTMs, with several countries expressing the need for adoption in 2023 and entry into force. by 2025. However, existing specifications for IMO timelines and processes suggest that entry into force could be 2026 at the earliest.

This is based on the fact that there is a range of policy mechanisms (technical measures such as mandates and economic/market-based measures) that need further discussion, refinement and prioritization.

The ISWG meeting marked the third substantive discussion on MTMs, with a focus on policies that could move the shipping industry away from fossil fuel use. A recurring concern raised by many Member States was whether the necessary low and zero carbon fuels will be available in sufficient time and quantity to enable compliance. The concern was particularly expressed by developing countries.

“A growing consensus has been reached around the need for a set of measures that would combine a technical element with an economic element,” noted UMAS Senior Consultant Dr Aly Shaw.

He added that there was also a lot of support for a wake-up-sink approach that cuts absolute emissions and puts shipping on a 1.5-aligned trajectory, with most countries also supporting the need for a transition. fair trade that leaves no one behind.

The commercial shipping industry is one of the biggest polluters, accounting for around 3% of global emissions, which translates to around one billion tonnes of CO2 emissions per year.

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