World’s cargo ships to pay more for dirty fuel under new rules » Yale Climate Connections

A landmark policy crafted in April by members of the U.N.’s International Maritime Organization, or IMO, will tax international shippers based on the carbon content of their fuels. The draft policy is due to be finalized in late 2025.

The agreement that emerged from the 83rd meeting of the IMO’s Marine Environment Protection Committee was undeniably a compromise – critiqued by activists and oil-rich nations alike. Yet it’s also undeniably historic. As the organization put it, “The IMO Net-zero Framework is the first in the world to combine mandatory emissions limits and [greenhouse gas] pricing across an entire industry sector.”

Key measures of the approved draft include:

• A fee of $100 per metric ton on emissions surpassing a threshold that will ratchet up each year for carbon intensity (based on greenhouse gas emissions per mile and per unit of cargo capacity), with the fee rising to $380 per metric ton beyond a higher threshold.

• A system that allows ships to “earn” carbon credits and trade them with other ships. Credits can be earned by using lower-emission fuel and/or contributing to a fund that will support low-carbon research, infrastructure, tech transfer, and capacity building, as well as help reduce harm to vulnerable states.

The IMO’s overall emission reduction strategy, launched in 2018 and updated in 2023, envisions reducing fuel intensity by 40% by 2030 and reaching net-zero emissions from international shipping by around 2050.

Wrangling a first-ever agreement amid stark differences

A total of 63 IMO members voted for the new carbon-levy agreement and 16 against, with 24 abstaining. Those opposed included the United States, Russia, Saudi Arabia, Qatar, Venezuela, the United Arab Emirates, and other major fossil-fuel producers, as reported by earth.org. Regardless of their votes, all 108 parties to a 1973 shipping pollution agreement known as MARPOL Annex VI – which together represent some 97% of the world’s merchant shipping fleet by tonnage – must adhere to any new agreements under it, including the carbon levy soon to be added.

The United States apparently pulled out of negotiations because of the “redistributional” aspects of the proposed IMO Net-Zero fund, according to the BBC. As reported by Reuters, a U.S. memo sent to ambassadors stated, “The U.S. rejects any and all efforts to impose economic measures against its ships based on [greenhouse gas] emissions or fuel choice.”

Although the United States had the second-largest amount of container port traffic of any nation on Earth in 2022 – almost twice as much as any other country after China – nearly all of the carbon levies under the new agreement would be assessed by other nations. That’s because only about 0.5% of the world’s cargo by tonnage is delivered by U.S.-flagged ships, meaning those registered in the United States.

In the lead-up to negotiations, a group of small island states and allies pushed hard for a flat tax of $150 per ton of carbon-dioxide-equivalent emissions. Leaders from those vulnerable nations decried the eventual compromise draft as insufficient to meet the moment. They included Hilton Kendall, minister of transportation, communication, and information technology for the Marshall Islands.

“We couldn’t take home the outcome that was given to us as a take-or-leave option – with rich countries asking us to pay for their technological transition while leaving us behind,” Kendall said in a joint statement from several island states. “We were fighting not only for our countries’ economic interests, but also for the safety of our people and our homes.”

Patching a hole left in the Paris Agreement

The voluntary nation-by-nation goals for emission reduction that are submitted every five years via the Paris Agreement don’t include international shipping or international aviation. Both sectors, given their complex boundary-crossing natures, were explicitly excluded from the 2015 agreement.

International shipping and aviation each make up about 3% of the world’s annual human-produced carbon dioxide emissions. Though seemingly modest, both those percentages are rising over time. And large-scale shipping and aviation, with their reliance on hulking modes of transport that journey far from power sources, are more challenging to decarbonize than, for example, homes or vehicles, where low or net-zero carbon technologies already exist.

In 2022, the Intergovernmental Panel on Climate Change’s Sixth Assessment Report said that some model scenarios show carbon dioxide emissions from transport, including road vehicles as well as trains, shipping, and aviation, could grow by anywhere from 16% to 50% by 2050. Already, shipping volumes have more than doubled since the 1970s.

“The urgency of implementing measures for reducing emissions is considered to be high, considering the lifetime of vessels is typically 20 years, if not more,” the report noted.

Peter Newman, a professor of sustainability at Australia’s Curtin University, was one of three coordinating lead authors for the transport chapter of the IPCC Working Group III report. In an email, Newman expressed concern about what the chapter referred to as “minimal commitment to new technologies” within the shipping and aviation sectors.

“Most of the people I respect in the international transport space say that the IMO and ICAO [International Civil Aviation Organization] are doing as little as possible and are trying to make it look like they are doing a lot,” Newman said. “They have not been funding the kind of R&D that was done on land transport. I think they are not doing nearly enough to help avert a major global climate crisis.”

More than 30 institutions that finance more than 80% of global shipping are signatories to the Poseidon Principles, which call for assessing and disclosing how closely the financial infrastructure of shipping is in line with adopted climate goals. “The setting of a global levy on international shipping’s emissions is a historic event,” said Poseidon Principles chair Michael Parker in a press statement. Acknowledging that the draft IMO agreement is “disappointing to many,” Parker added, “it will set in process a framework and methodology that can be built upon.”

“The shipping sector’s first binding emissions targets are laudable, but not enough to drive needed investments,” said the nonprofit Global Maritime Forum in a statement. “Uncertainties remain, as future revisions may be needed to ensure the zero-emission goals are met. National governments need to step up to bridge the cost difference between fossil and e-fuels, support the development of required infrastructure and fuel production, and ensure that more is done to promote the transition in the Global South.”

How can shipping get more climate-friendly?

Traditional bunker fuel, the type used for most long-haul cargo shipping, is a dense, high-carbon form of oil. Over the last few years, the IMO has been clamping down on aerosol pollution from such fuels. In fact, tightened restrictions on sun-blocking sulfate emissions that went into effect in 2020 may have given a slight nudge to dramatic ocean warming observed in the last several years, especially in the North Atlantic.

The IMO’s 2023 emission reduction strategy calls for “zero- or near-zero greenhouse-gas emission technology, fuels, and/or energy sources” to represent at least 5%, and ideally 10%, of the energy used by 2030 in international shipping.

Much research has gone into lower-carbon options for shipping fuel, including biofuel. But any large-scale ramp-up of biofuel could either put pressure on its existing users (such as motor vehicles that burn ethanol) or could trigger expansion of the vast monoculture farms that grow corn and other biofuel crops.

The other major research focus has been on ammonia, which can be produced from hydrogen and nitrogen and compressed into dense liquid form. Later this year, two parallel efforts in Denmark and Switzerland will launch and test the world’s first ammonia-powered oceangoing ships.

Since ammonia is a carbon-free substance that can be produced by renewable energy (making it “green ammonia”), ammonia-based shipping could be a close-to-net-zero process, apart from the relatively small amounts of pilot fuel required for ignition. However, liquefied ammonia is only about a third as dense as the marine gas now used for a small fraction of shipping, so storage and range would be a challenge – and complicated further by ammonia’s toxic and corrosive qualities. Catalytic converters would also be needed to capture the nitrogen oxides and nitrous oxides spewed out by ammonia-powered engines.

“There’s still a huge cost gap between the fossil fuels and the zero-emission fuels and we need to close this gap,” Refke Gunnewijk, who manages clean industry & transport at the Port of Rotterdam, told the BBC. “So you need carrots and sticks and in shipping the stick is not that big yet to use sustainable fuels.”

In the meantime, many ships are being retrofitted to use today’s fuels more efficiently. Tweaks such as optimizing ship contours and using onboard wind and solar power to boost propulsion could decrease emissions by as much as 40%, the IPCC reported. In fact, the average carbon intensity of cargo ships has already dropped by 30% to 40% over the past 15 years, according to the IMO. Still, that hasn’t been enough to outweigh the sheer increase in cargo volumes.

There’s also a major push to establish green shipping corridors, where the use of zero-emission ships could help generate attention and ambition. Along these lines, the Clydebank Declaration was launched at the 2021 U.N. climate summit in Glasgow, with Canada the most recent of the 27 signatories to date (including the United States). The declaration calls for six green shipping corridors to be established by 2025. One such proposed corridor would use green methanol fuel from renewable sources along a key route for shipping cars and trucks between South Korea and several European ports.

Jeff Masters contributed to this post.