New analysis shows a shifting landscape with strong support for a carbon price to reduce GHG emissions from shipping
LONDON : Two new reports led by UCL Energy Institute Shipping and Oceans Research Group, show what’s at stake at the upcoming IMO meetings and in the crucial period in the run up to IMO MEPC 83 in April 2025. The IMO is expected to agree on policies, called mid-term measures, that will be key for achieving IMO’s Strategic objectives – including completing international shipping’s decarbonisation by around 2050, and contributing to a just and equitable transition for all states.
The eighteenth Intersessional Working Group on GHG (ISWG-GHG 18) is the penultimate negotiating session, before MEPC 83 – the meeting at which IMO has committed to agree in principle, a MARPOL amendment draft for a new “Chapter 5”, which will enshrine the legal definition of the new policy measures, comprising of a technical measure – a GHG fuel standard, which mandates reducing GHG intensity of shipping’s energy use over time and an economic measure – a price on GHG emissions, and specification of distribution of any revenues raised.
The first report by UCL, Frequently Asked Questions (FAQs) of the proposed policy measures being considered, shows how the landscape has shifted from the previous session just four months ago. From the analysis of the submissions, there are now two main camps, one that favours a Global Fuel Standard (GFS) in combination with a levy and another with only the GFS with a credit trading scheme but not including a universal price on carbon. The former now has strong support from countries, comprising of 70% of tonnage, a level of support which is important if a vote is called.
Dr Tristan Smith, Professor of Energy and Transport at the UCL Energy Institute said: “The FAQ reflects questions we have been asked by governments and wider sector stakeholders. The challenge in answering questions is that each component (the technical or economic measure specifications) has its own complexities, but its the interacting system of all these components that determine whether shipping will start its energy transition this decade or not, as well as critical questions relating to “who pays”, and “who benefits”
Dr Annika Frosch, Research Fellow at the UCL Energy Institute, said: “With 70% of tonnage now supporting a global fuel standard along with a carbon levy, it is crucial that the upcoming round of negotiations focuses on discussing the distribution of revenues, both within and outside the shipping sector.”
One area of ongoing debate at the IMO is on whether revenues generated should be used solely for “in-sector” (shipping-related) activities or be more broadly distributed to address food security and other potential negative impacts on states. The second report, by UCL in partnership with IDDRI, a France-based think tank which facilitates the transition towards sustainable development, and CIRAD also a France-based agricultural research and international cooperation organization, shows the mid-term measures will likely raise transport costs, disproportionately impacting Least Developed Countries (LDCs) and Small Island Developing States (SIDS). This increase in transport costs could affect food security of vulnerable countries in the short term, although the effects in the long term remain uncertain.
The analysis, which uses novel data and methods to understand food security implications, such as the vulnerability to food imports composite index, to assess each country’s vulnerability to food price increases, incorporating factors such as dependence on food imports, existing food insecurity and poverty levels, shows that countries such as Papua New Guinea, Haiti, Yemen, Solomon Islands, and Liberia face the greatest risks amongst other SIDS and LDCs. Many of these countries also have limited capacity to absorb in-sector revenue (e.g. investments in shipping infrastructure), suggesting that restricting carbon levy revenues to the shipping sector may not effectively address food security risks and therefore the IMO’s revenue distribution discussions should consider a broad range of options for distributing revenues to member states.
Marie Fricaudet, Research Fellow at IDDRI and PhD candidate at UCL, said: “For the second time this year, we have provided some evidence that restricting the use of revenue to shipping-related activities is unlikely to enable a shipping just and equitable transition, with many of the most vulnerable countries unlikely to significantly access and benefit from those “in-sector” investments.”
A third report, led by Dr Helvi Petrus of the Namibia University of Science & Technology and Martin Mwale of University of Malawi, provides a technical, evidence-based framing to help African states and similar economies understand the findings of the UNCTAD Comprehensive Impact Assessment. The analysis, part of the Leading Effective Afro-centric Participation (LEAP) project, shows that most policy scenarios resulted in GDP decreases relative to the business-as-usual (BAU) scenario. However, the scenario with a high levy and revenue distribution led to increase in GDP in certain countries, underscoring the potential of revenue distribution to mitigate adverse effects. The analysis shows that prices increased in almost all of the policy scenarios considered suggesting that mid-term measures might worsen inflation and should therefore in their design carefully consider revenue distribution options.
Dr Helvi Petrus, Senior Lecturer & Transport Economics Specialist, Namibia University of Science & Technology, said: “African States plays a crucial role in decision making and implementing the International Maritime Organisation (IMO)’s targets of attaining a net-zero greenhouses gas (GHG) emission by 2050. This report aimed at providing technical evidence-based framing to help African States and similar economies understand the findings of the UNCTAD Comprehensive Impact Assessment (CIA) toward supporting policy makers in interpreting engaging with and responding to policy proposal. Empowering African States is a step towards a brighter Maritime future”
Dr Dola Oluteye, Senior Research Fellow at the UCL Energy Institute said “Without fair revenue redistribution and supportive fiscal policies, GHG pricing could deepen Africa’s economic challenges. Africa must secure a just transition that protects growth, trade, and livelihoods by ensuring that the policy architecture choice guarantees a redistribution of funds to absorbing the impact of resulting transport cost rise from the decarbonisation targets set by the IMO for international shipping.”
Another study by UCL and UMAS, released last week, showed that a high GHG price in combination with targeted e-fuel subsidies are the key policy components that can close the competitiveness gap between scalable zero emission fuels (e.g. e-fuels such as green ammonia) and other early compliance options such as LNG, biofuels and CCS. The study finds that a fuel standard GFS in combination with a flexibility mechanism, even with a multiplier that ‘boosts’ the credit given to e-fuels, is unlikely to start an e-fuel transition before 2040.
Link to all three reports: FAQ on IMO’s Mid-term Measures, Food Security and Africa-centric review of UNCTAD CIA: https://www.shippingandoceans.com/post/new-analysis-shows-a-shifting-landscape-with-strong-support-for-a-carbon-price