29 February 2024 (Lloyd's List) - THE International Maritime Organization aims to adopt “practical and achievable” mid-term economic and technical measures, as work gets under way to prepare for their implementation, according to the UN body’s new secretary-general Arsenio Dominguez.
IMO member states will finalise proposals for a global fuel standard and a greenhouse gas pricing mechanism in 2024 during two Marine Environment Protection Committee sessions, for adoption in 2025 in line with the revised GHG strategy.
“We need something practical, something that can be implemented and is going to achieve the result,” Dominguez told Lloyd’s List.
The IMO chief believes the focus should be on the architecture and objective of the economic measure, rather than its labelling as a “tax or levy”.
“There are diverging views on these proposals. But the goal continues to be the same: adopting an economic measure, or a pricing mechanism,” Dominguez added.
The mid-term measures will enter into force in 2027, following adoption, according to the revised strategy.
It aims to cut emissions by 20% by 2030, 70% by 2040 and reach net zero by around 2050. The new targets also include “striving for” levels of ambition that aim for 30% by 2030 and 80% by 2040.
“We are in the process of the literature analysis, the impact on the fleet and the impact on states,” Dominguez said.
“We are going to see an interim report next month [in March] and the final report will be fully fleshed out for the main discussions starting in October. Everything is on track.”
The comprehensive impact assessment of mid-term measures will inform the decision of IMO member states on such mechanisms to be adopted.
The interim report of two separate assessments of the economic and technical measures’ impact on the global fleet and on member states will be published ahead of MEPC81, which will be held during the week starting March 18.
Some of the economic measure proposals require the creation of a fund that will channel monies to the countries most vulnerable to the impact of climate change. This follows an agreement on a fair and equitable transition that takes into consideration all member states.
However, there is uncertainty as to whether the IMO has the capability to oversee the fair distribution and allocation of these funds.
“There are experiences within the organisation of how these kinds of mechanisms can be put in place; the IOPC [International Oil Pollution Compensation] fund is an example of one of those.
“There could be oversight from the organisation and, depending on how much money we’re talking about, there are other institutions — including within the UN — that could assist.”
There are four main economic measure proposals on the table, including a fund and rebate mechanism tabled by the International Chamber of Shipping, and China’s proposal that aims to merge the fuel standard with the economic measure.
The small island developing states, led by the Marshall Islands, proposed a flat-rate levy starting at $150 per tonne of CO2 equivalent; while the World Shipping Council tabled a mechanism that aims to set the lowest possible fee on ships burning fossil fuels.
Recent submissions to the IMO point to a consensus of around 50 member states in support of a flat-rate levy.
Most EU countries — together with South Korea and a handful of developing nations, including Namibia and the Comoros — have co-sponsored a submission stating willingness to accept a global GHG pricing mechanism applying a cost to all GHG emissions.
This aligns with Canada and some small island developing states, such as the Marshall Islands. Japan has also made a similar proposal to set a fixed GHG price.
Meanwhile, there is public opposition to a levy from some countries, led by China and Brazil, having tabled an alternative mechanism merging a fuel standard with an emission trading system for vessels.
Dominguez is optimistic for an alignment of efforts between the IMO and the European Union on shipping’s climate regulations after the new secretary-general met with EU officials in February. This is despite a potential policy change following June’s EU elections.
“I continue to reiterate that, for me, a global industry requires global regulations. The EU has moved forward, and I invite them continuously to bring their experience and expertise on their implementation of the ETS to the organisation.”
This, he says, can then be utilised as the IMO looks to develop its own global measure.
The EU opted to implement its own economic measure for shipping through its Emissions Trading System from 2024.
Separately, the upcoming FuelEU Maritime regulation is seen as a similar measure to what EU countries proposed as the global fuel standard at the IMO.
FuelEU Maritime will come into force in 2025, aiming to reduce emission intensity of onboard energy use by ships with penalties and renewable fuel sub-targets.
The legislation leaves the door open for potential alignment on shipping climate policies in case the IMO adopts similar measures that EU member states find sufficiently ambitious.
Dominguez revealed he has been invited to attend the EU transport committee’s meeting in the autumn, having already established a firm relationship — one he stresses will be key in the crucial months ahead.
“As soon as the new European Commission and Members of European Parliament are in place, I will be there.”
He said for anything that needs to be explained further regarding the role of the IMO and how it is worked alongside the EU — and indeed other countries — in the past, he will be on hand to guide the EU committee.
Ensuring that the EU and the IMO are aligned on efforts is top of the agenda for Dominguez. “I will continue non-stop,” he said.
This article is part of Lloyd’s List special report on Decarbonisation, which will be published in full this week
