by Lloyd's List

27 September 2024 (Lloyd's List) - AFTER a week of intensive preparatory discussions, divisions remain inside the International Maritime Organization as member states prepare to discuss critical elements of its upcoming economic measure. 

Next week’s pivotal Marine Environment Protection Committee meeting will need to answer as yet unresolved questions over whether to adopt a flat rate levy or an alternative measure, as well as nailing down whether revenue distribution will be in or out of sector.

The type and price of the economic measure will be of critical importance for the shipping industry, as these will determine the level of the revenue to be created.

Economic measure proposals at the IMO’s table vary significantly in terms of the revenues they would create.

A $150-$300 per tonne of CO2 equivalent levy would create revenues up to $127bn per annum in 2027-2030; while a $30-$120 levy would create up to $32bn in the same period, according to DNV’s Comprehensive Impact Assessment report.

An integrated fuel standard and flexibility mechanism — a proposal backed by China and Brazil — would only create $0.5-$0.9bn per year in 2027-2030, according to DNV.

EU, Pacific and Caribbean states, along with industry groups, support levy proposals that could create higher revenue streams to both close the green premium and support an equitable transition, with money allocated to most climate vulnerable states.

China’s proposal also promises support for climate-vulnerable states, although the level of revenues to be created would be unlikely to provide any meaningful support to the small island developing states and least-developed countries.

The IMO would not succeed in achieving its 2023 GHG strategy’s goals without a levy and a rewarding system for overachieving vessels, according to a submission by the International Chamber of Shipping and top flag states the Bahamas and Liberia.

ICS, the Bahamas and Liberia tabled a proposal, arguing that a $18.75 per tonne levy would create $2.5bn per annum as a by-product to be allocated to support developing countries.

ISWG shows growing support for levy

The Intersessional GHG Working Group pointed to rising support for a levy inside the IMO, with new countries like Ghana and Malawi announcing support for a universal GHG contribution from all ships.

At least 50 countries — including the EU27, Japan and the Marshall Islands — had supported a levy ahead of the intersessional meeting, according to submissions to the IMO.

“Positively, the concept of a universal GHG contribution by ships per tonne of CO2 equivalent emitted remains firmly on the table, with strong support from a clear majority of IMO member states,” the ICS said in a press release.

Up to 20 countries are against a levy, with most of these arguing revenue distribution to focus on the shipping sector.

“Notwithstanding this strong support for a universal GHG contribution or something similar, ICS acknowledges the legitimate questions about this form of maritime GHG emissions pricing mechanism among some governments such as China and Brazil,” ICS said.