Shipping’s Watchdog Makes a Plan  to Tackle CO2—Later

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Under pressure to decarbonize a global shipping industry that emits more CO2 each year than the U.K. and France combined, the world’s governments agreed a plan -- to make a plan.

The International Maritime Organization, the UN agency that regulates shipping, concluded six days of meetings on Thursday. Along with an official ‘work plan’ on how to come up with new decarbonization rules, regulations on cutting ships’ carbon intensity were adopted, as expected.

The big challenge facing the IMO -- which was never going to be fully solved this week -- is coming up with measures to wean ships off oil-based fuels. Alongside the work plan and carbon intensity rules, a proposal for a CO2 tax was considered, along with a $2-a-ton charge on marine fuel. Neither were approved, with discussions set to continue.

To outsiders, progress may seem painfully slow, but experienced observers of the IMO were upbeat on the agreed work plan. This is the process the IMO has used for progressing greenhouse gas reduction measures for about twenty years. Balancing the competing interests of so many countries also isn’t easy.

“There is a clear plan to identify new rules,” Edmund Hughes, who was previously responsible for GHG emissions at the IMO, said of the agreed work plan. The IMO suspended discussion on so-called market-based measures -- under which a CO2 tax would fall -- back in 2013, he said. Now, the IMO has essentially agreed to formally restart MBM talks.

Others were more critical, pointing out that there was already a clear plan for a stronger approach -- put forward by the Marshall Islands and Solomon Islands -- in the form of a C02 tax.

“Let’s go straight into substance. No need for time consuming work plans,” said Faig Abbasov, shipping program director at Transport & Environment, an NGO.

Such a tariff would help bridge the large price gap between oil-based fuels, and, green alternatives.

Part of the reason progress at the IMO is tough-going is a debate between developed and developing countries about who’s more morally obliged to take action. Covid has also decimated many economies, making them “even more sensitive to any cost being imposed” from outside, according to Hughes.

Still, if the IMO doesn’t find a way forward on emissions, it ultimately risks being sidelined. The European Union is planning to include pollution from shipping from at least intra-EU routes into its Emissions Trading System. Likewise, U.S. rhetoric has shifted under the Biden administration, placing a question mark about what steps it may end up taking should IMO progress be too slow.

There is also a “real danger” of a gap opening up between the kind of carbon cuts some shipping customers want and the cuts to pollution that the IMO delivers, according to Simon Bergulf, director of regulatory affairs at A.P. Moller-Maersk A/S, the world’s largest container line. Having the IMO “disconnected from the commercial reality” is a big risk, he said.

The carbon intensity rules adopted by the IMO don’t incentivize low- and zero-carbon fuels -- transitioning to which is desperately needed for the industry to decarbonize -- Maersk said. Nevertheless, Bergulf said he was 80% certain that the IMO’s work plan would lead to the organization adopting a global CO2 tax by 2025, something his company favors.

“When the IMO train leaves the station, it will arrive at the next,” said Lars Robert Pedersen, deputy secretary general of shipping industry group BIMCO.

©2021 Bloomberg L.P.

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