The Story So Far
After years of discussion, the IMO (International Maritime Organization) faced the challenge of agreeing on an emissions levy for global shipping at its MEPC-83 session.
The goal was to adopt a Market-Based Measure (MBM) that balanced environmental goals with economic fairness.
What Were the Proposals?
International Chamber of Shipping: Fixed levy for each tonne of CO₂ emitted.
China: Market-driven approach with trading compliance units and investing in alternative fuels.
European Union: Fixed Greenhouse Gas (GHG) levy managed by an IMO-administered fund.
India: A ‘bridging mechanism’ targeting under-compliant ships, rewarding those using Zero or Near-Zero fuels.
Singapore: Enhanced version of India’s proposal, adding a GHG Fuel Standard and tiered system for emissions.
What Was Decided?
The MEPC-83 voted in favor of Singapore’s hybrid model, based on India’s proposal, adopting it as the IMO’s Net Zero Framework.
This made shipping the first global industry to adopt a mandatory emissions levy framework.
However, the decision needs to be finalized through a complicated process requiring votes from countries and possible objections.
What Other Interests Were at Play?
Oil-Exporting Countries: Opposed transition to green fuels, focusing on protecting fossil fuel markets.
Small Island Nations: Advocated for high carbon levies to fund green development.
China and Large Shipping Nations: Pushed for minimal levies to stay competitive while investing in cleaner fuels.
Norway and Scandinavian Countries: Pushed for rewards for early decarbonization efforts.
Brazil: Advocated for the rapid shift to methanol as a primary marine fuel.
Skepticism: Some traditional maritime powers, like Greece, questioned the necessity of a green levy.
Why Does Green Shipping Matter?
Shipping contributes 2.8% of global emissions, and international shipping would rank as the 6th largest emitter if it were a country.
Without action, emissions from shipping could increase by 50-250% by 2050.
The IMO has set ambitious targets to reduce carbon intensity and achieve net-zero emissions by 2050.
Is it an Equitable Distribution?
There are concerns that wealthier nations are shifting responsibility to developing economies, despite the principle of ‘common but differentiated responsibilities’
CBDR acknowledges the different capacities of countries to tackle climate change.
How Does India Benefit?
In the short-term, India’s maritime logistics costs will rise modestly due to the carbon levy, but the impact on trade volumes will be minimal.
India’s coastal fleet remains unaffected as the levy only applies to international shipping.
The MBM will increase India’s fuel costs for international voyages, but the rise is manageable.
India is investing in green hydrogen and could become a global hub for clean energy exports, aligning with the IMO’s fuel standards and gaining international incentives.
The Future of Global Shipping
Despite disagreements, the adoption of a MBM by the IMO marks a significant step towards decarbonization.
If successful, shipping could become the first global sector with binding climate goals, setting a powerful example for other industries.
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