‘Clarity’ and ‘ambition’: industry and Pacific States lay out their hopes for MEPC 83
Representatives from Small Island Developing States (SIDS) and the International Bunker Industry Association (IBIA) concur in calling for IMO Member States to agree a strong economic measure or greenhouse gas levy when they meet for MEPC 83 next week, highlighting the ‘vast’ needs to fund shipping’s energy transition whilst building climate resilience in developing countries.
The IMO’s Marine Environment Protection Committee (MEPC 83) is scheduled to approve so-called ‘mid-term’ measures to bring international shipping to net-zero ‘by or around’ 2050. This could include a global standard for the greenhouse gas (GHG) intensity of marine fuels, akin to FuelEU Maritime, as well as a universal GHG levy or other emissions pricing mechanism for international shipping.
The latter remains the main point of contention between IMO Member States. A levy proposal has gained momentum and is now backed by over 50 countries, including major shipping nations such as Greece, Japan, Korea and the UK, the world’s largest flag States, all EU members, Small Island Developing States (SIDS) and the International Chamber of Shipping (ICS). But the idea is opposed by others, including Brazil, China, Saudi Arabia and South Africa, who cite concerns about potential impacts of a levy on economies, shipping prices, and food security.
Finding a compromise between the two sides is at the core of discussions at an intersessional working group this week, with the aim of getting IMO Member States to agree on the measures by consensus a few days later at MEPC 83.
To levy or not to levy
A GHG levy – something that Pacific and Caribbean SIDS have been demanding for years – is one of the most important elements that Ambassador Albon Ishoda, Marshall Islands’ Special Envoy for Maritime Decarbonisation, wants to see in the final agreement. ‘We believe it is the simplest and most efficient way to address emissions from international shipping,’ he said in an interview with ship.energy.
Ishoda argued that a levy would act on several fronts, not only closing the price gap between renewable fuels and their fossil counterparts, but also raising revenues that can then be allocated to research and development into new technologies and supporting developing countries with the transition.
The IBIA representative to the IMO, Dr Edmund Hughes, also backs the proposal of a fund supported by a levy or another similar maritime GHG pricing mechanism. He believes this has the potential to be a game-changer, by providing the clear demand signals needed by the industry to invest in the production and bunkering of low- and zero-carbon fuels for shipping.
‘It is the economic element which is the key one, really, for many Member States at IMO, and many in the industry as well, because that’s seen as unlocking funds which potentially could be used for all sorts of reasons, including incentivising the uptake of new marine fuels and providing funds to developing countries,’ he told ship.energy.
‘Because that is one of the key elements missing, frankly, at the moment. We need to stimulate the demand for these fuels,’ Hughes added. ‘What is, for us, key is to remove the uncertainty that currently exists with the regulatory framework for enacting the IMO net-zero framework.’
Allocating funds
The proposal for a GHG levy, which was incorporated into the main negotiating text during a recent intersessional working group, also advocates for the creation of an IMO Fund to administer the revenues raised.
Where those revenues will be allocated as a priority, and the price at which a levy should be set, will be another critical question for delegates.
‘The point of this whole measure is to help international shipping reach net zero, and that should be the priority,’ Hughes emphasised. ‘And the way to do that is through incentivising the uptake of these fuels, so initially, sufficient funds need to be set aside to reward this uptake, to stimulate the demand.’
Ambassador Albon Ishoda insists that the price of a GHG levy must be ‘high enough’ so that in addition to incentivising new fuels and technologies, revenues can also be used to support developing countries with the transition.
‘I want to see a universal levy that is high enough in entry price to address the innovative change that is required, the equitable transition that is needed, and then the resilience for climate vulnerable countries that is also needed to survive,’ he summed up.
Countries like the Marshall Islands, as low-lying flat atolls, are experiencing first-hand the impacts of climate change through rising sea levels, increased extreme weather events, droughts and saltwater intrusions.
‘It’s not an economic issue for us, but it’s really a human issue. For the Pacific people, climate change is not an abstract. It’s a living reality,’ he insisted.
Revenues from a potential IMO Fund, he said, could help translate green technologies into smaller-scale projects to decarbonise the ports and ships serving communities living on remote islands, which rely heavily on shipping for imports of food and other necessities. Crucially, the revenues could also enable developing countries to climate-proof their infrastructure, he added.
Ishoda argues that the shipping sector, which contributes 3% of global greenhouse gas (GHG) emissions, now has an obligation to provide revenues to build resilience in countries impacted by the climate change resulting from those emissions.
‘I am not forgetting that shipping has a dirty past,’ he illustrated. ‘We don’t create the amount of emissions that a single shipping company does! But for us, we need to make sure that our infrastructures are built accordingly to withstand the continuing impacts from climate change.’
Is a consensus possible?
Ishoda is encouraged to see that developed countries are increasingly receptive to the concept of a ‘just and equitable’ transition.
Despite fundamental differences on the GHG levy proposal, he is hopeful that a compromise can be reached at MEPC 83. ‘It’s a conversation,’ he said. ‘I am a lot more confident than I was, say, this time last year. I believe in the power of human dialogues.’
‘We want to make sure that by the end of negotiations at MEPC 83, we are able to come out with a deal that will benefit everyone, not just a few,’ Ishoda emphasised.
IBIA’s Edmund Hughes, who was previously responsible for the preparation of the IMO’s Initial GHG Strategy as the organisation’s Head for Air Pollution and Energy Efficiency, also believes that it is possible to bridge the gap between the two sides.
‘What you’re trying to seek is this magic consensus whereby most governments might not get all they want – that’s where they start from – but if we’re going to see a consensus, then we have to see a degree of compromise from all parties,’ he explained.
The devil is in the implementation
Achieving a consensus will be critical, Hughes added, because although a majority of Member States could in theory force their way, countries left out of an agreement might not engage with the subsequent steps needed to implement and enforce the regulation, thereby undermining it, he explained.
Whilst an agreement would be a significant political success for the IMO, the moment of truth will come with its implementation, he underlined.
‘One thing is to get this over the line, and everyone can say we’ve succeeded in approving amendments to MARPOL Annex VI,’ Hughes pointed out. ‘But then after that initial euphoria, the difficulty is then when the businesspeople and the investors start looking at it and say, will this deliver the right signals in terms of demand for the industry. They will be the final arbiters of whether this is a success or not.’
If IMO Member States do reach an agreement next week, the Marshall Islands Ambassador Albon Ishoda believes this could send a powerful signal to other economic sectors that need to decarbonise.
‘If IMO is able to do this, then there is absolutely no excuse why other sectors cannot do an ambitious transition if we successfully do one,’ he said. ‘Those are my hopes. This is what can be achieved if we all come together as a global community.’
Listen to the full interviews with Ambassador Albon Ishoda and Dr Edmund Hughes on a special episode of the ship.energy podcast here.