Global Shipping Industry Faces Pressure to Address Greenhouse Gas Emissions

The International Maritime Organization (IMO) is currently under significant pressure to address the issue of greenhouse gas (GHG) emissions from the global shipping industry. With mounting concerns about climate change and environmental sustainability, various countries and organizations are advocating for stronger measures to mitigate the sector's impact on the planet. Among the proponents of these measures are the European Union (EU), Canada, Japan, and several climate-vulnerable Pacific Island states. These countries are pushing for the implementation of a charge on greenhouse gas emissions generated by international shipping. The proposed charge would involve imposing a fee on each metric ton (mt) of greenhouse gas produced by ships engaged in international trade.

Support for this policy has been gaining momentum, with the number of countries backing the initiative more than doubling from 20 in 2023 to 47 countries this year. Proponents argue that the charge could generate significant revenue, estimated at over USD 80 billion annually. This revenue could then be reinvested to develop low-carbon shipping fuels and support economies transitioning to more sustainable practices, particularly in developing and vulnerable regions.

However, there are dissenting voices, with countries like China and Brazil expressing reservations about the potential impact of such a charge on trade-dependent emerging economies. These nations are advocating for alternative approaches, such as a global fuel emissions intensity limit coupled with financial penalties for breaches. This approach would focus on regulating the efficiency of fuel use rather than imposing a blanket levy on all shipping emissions.

Despite these divergent viewpoints, IMO member nations are striving to agree on international policies to reduce greenhouse gas emissions from shipping. Establishing uniform laws across countries is crucial because fragmented markets with disparate local norms could present obstacles to trade. The management of the charge and the distribution of its proceeds is one major outstanding question. Industry insiders advise creating the policy to reduce emissions rather than increase money as a means of striking a middle ground. Such an approach would be consistent with initiatives to address climate change and move toward a more sustainable global economy.

A potential draft outline of an IMO net-zero framework was produced at the Maritime Environment Protection Committee meeting in London from March 18 to 22, 2024, which is a step toward the adoption of international laws for greenhouse gas reduction measures in the shipping sector. As stated in the IMO Strategy on the Reduction of GHG Emissions from Ships, which came into effect in 2023, these actions are necessary to meet the emissions reduction targets. The framework will be finalized at the upcoming conference in September after further discussion of these items. The result of these discussions will significantly impact how the maritime industry functions globally going forward and how it approaches the problems of environmental sustainability and climate change.

Figure 1: The Maritime Environment Protection Committee (MEPC 81) meeting in London from March 18 to 22, 2024.