The “Revised 2023 IMO Strategy” was adopted in the 80th session of the Marine Environment Protection Committee (MEPC 80) of the International Maritime Organization (IMO) in July 2023 and supersedes the “Initial IMO Strategy” that was adopted at MEPC 72 in April 2018. It has set, among other things, even more ambitious targets to reduce greenhouse gas (GHG) emissions from ships The main targets include reaching net-zero GHG emissions by or around 2050, and GHG emissions reductions of at least 20% (strive for 30%) by 2030, and 70% (strive for 80%) by 2040, all vs 2008 levels.
The “Initial IMO Strategy” that was adopted at MEPC 72 in April 2018 had as main targets to reduce GHG emissions by 2050 at least 50% vis-à-vis 2008 levels, and to reduce CO2 emissions per transport work (“carbon intensity”) by 2030 at least 40%, again vis-à-vis 2008 levels. The latter target is retained in the Revised Strategy, but the 50% GHG reduction target is now obsolete, being superseded by the net zero by or around 2050 target and the new 2030 and 2040 GHG reduction targets.
Still, and even though a slight decrease of carbon intensity has been observed in some shipping sectors, the absolute levels of CO2 (and therefore GHG) emissions exhibit a clear positive trend, with no sign of a peak, let alone a drastic reduction.
Critical in the ability of shipping to decarbonize are Market Based Measures (MBMs), also known as economic measures. These aim at applying the “polluter pays” principle and at internalizing the external costs of GHG emissions. MBMs would induce changes in ship owner behavior that would reduce GHG emissions. In the short run, they could induce slow steaming or other logistics-based measures that would lead to reduced GHG emissions. In the long run, they could incentivize the adoption of energy savings technologies or alternative, low or zero carbon fuels that are not economically viable so long as the price of fossil fuels remains low.
In 2010 the IMO evaluated as many as eleven separate MBMs, submitted by various member states and other organizations. However, the IMO suspended the MBM discussion in 2013, as a result of highly divergent views across IMO member states on the subject of GHG emissions.
In 2018, MBMs were included in the Initial IMO Strategy as a candidate mid-term measure, to be finalized and agreed to between 2023 and 2030. However, the real discussion on MBMs did not restart until 2022, mainly due to the prioritization of short-term measures, that were to be agreed to until 2023. Short-term measures include rules mostly relevant for the 2030 carbon intensity 40% reduction target.
In parallel, the inclusion of shipping into the EU Emissions Trading System (ETS) in the context of the European Green Deal was achieved by an EU Directive in 2023. A phased application is envisaged, starting in 2024 and with full application from 2026 on. Also from 2026 on, GHGs other than CO2 will count.
At this point in time the IMO is discussing a “basket” of mid-term measures. Whereas some (but not full) convergence has been observed on the technical element of the basket, which is essentially a Green Fuel Standard, little or no convergence exists on the economic element (or MBM). ETS has been ruled out as a possible global MBM, and the discussion focuses on a possible carbon levy.
Proponents of a carbon levy include Pacific island states (Marshall Islands, Solomon Islands, and others), the EU-27+the European Commission, Japan, Canada, and some shipping associations. However, there is no full alignment among all these proponents, and their views on the subject are fragmented.
Strongly against a levy are China, India, Saudi Arabia, South Africa, Brazil, Argentina, and other developing countries. Their view is that a carbon levy will ruin their economies. They went as far as strongly rejecting the economic part of the Comprehensive Impact Assessment (CIA) study commissioned by the IMO on the mid-term measures.
Russia, Norway, and the US complement these countries. Norway was for a global ETS but later joined China et al. in their proposal, which only includes a Green Fuel Standard. Even though the US under President Biden endorsed the Revised Strategy in 2023, the re-election of Donald Trump is a development that can not be ignored. Since the US, even under the Biden administration, did not endorse an economic measure, it is hard to see how it will do so under a second Trump administration. But of course this remains to be seen.
How (or if) this serious lack of convergence will be resolved is not clear. The IMO has to decide on a mid-term measure by 2025, and whatever measure is adopted will be implemented by 2027. Several IMO meetings are scheduled for 2025 on this subject, including an extraordinary MEPC session in addition to MEPC 83 (April 2025).
Harilaos N. Psaraftis
Professor Emeritus
Department of Technology, Management and Economics, Technical University of Denmark
Kgs Lynbgy, Denmark
hnpsar@dtu.dk
