On Friday, many of the world’s largest shipping nations decided to impose a minimum fee of $100 for every ton of greenhouse gases emitted by ships above certain thresholds, marking what is effectively the first global tax on greenhouse gas emissions.
The International Maritime Organization (IMO) estimates that the new fees will generate between $11 billion and $13 billion annually.
This revenue will be allocated to the IMO’s net zero fund, which aims to invest in cleaner fuels and technologies needed to transition to sustainable shipping, reward low-emission ships, and support developing countries so they aren’t left behind with outdated and polluting vessels.
The thresholds established through the agreement will become stricter over time in an effort to achieve the IMO’s goal of net zero emissions across the industry by approximately 2050.
The agreement, which notably did not include the United States, is expected to be formally adopted at an October meeting, slated to take effect in 2027.
The IMO, which regulates international shipping, also implemented a marine fuel standard to phase in cleaner fuels in line with this initiative.
Shipping emissions have risen over the last decade to account for approximately 3% of the global total, largely due to increased vessel size and cargo capacity, which translates to greater fuel consumption.
IMO Secretary-General Arsenio Dominguez commented that the group managed to forge a meaningful consensus despite complex challenges posed by climate change and the need to modernize shipping practices.
He stated that the shipping industry is on track to meet the net zero goal.
However, some environmentalists at the meeting described the agreement as a “historic decision” that ultimately falls short.
Emma Fenton, senior director for climate diplomacy at the U.K.-based climate change nonprofit Opportunity Green, expressed concerns that the fee will not drive sufficient emission reductions and may not generate enough revenue to assist developing countries in transitioning toward greener shipping.
She cautioned that the measure could create a scenario where ships opt to pay the fee rather than make meaningful changes to reduce emissions, such as switching to cleaner fuels.
Fenton remarked, “The IMO has made a historic decision, yet ultimately one that fails climate-vulnerable countries and falls short of both the ambition the climate crisis demands and that member states committed to just two years ago.”
Conversely, other advocacy groups welcomed the agreement as a promising step forward.
Natacha Stamatiou of the Environmental Defense Fund stated, “By approving a global fuel standard and greenhouse gas pricing mechanism, the International Maritime Organization took a crucial step to reduce climate impacts from shipping.
Member states must now deliver on strengthening the fuel standard over time to more effectively incentivize the sector’s adoption of zero and near-zero fuels, and to ensure a just and equitable energy transition.”
Just a day prior to the agreement, delegates approved a proposal to designate an emissions control area in the North-East Atlantic Ocean.
Ships traveling through this area will be required to meet more stringent controls on fuels and engines to mitigate pollution, affecting vessels transiting in and out of North Atlantic ports such as the United Kingdom, Greenland, France, and the Faroe Islands.
This regulation will also oblige ships from North America, Asia, and numerous other destinations to reduce their emissions, according to Sian Prior, lead adviser to the Clean Arctic Alliance.
The Marine Environment Protection Committee, a body of the IMO, has been holding meetings throughout the week in London, and the decision was finalized on Friday.
A significant point of contention during the meetings was the method by which the fee would be implemented.
Over 60 countries entered negotiations advocating for a straightforward tax charged per metric ton of emissions, driven largely by Pacific island nations that face existential threats from climate change.
In contrast, countries boasting large maritime fleets, including China, Brazil, Saudi Arabia, and South Africa, pushed for a credit trading system instead of a fixed levy.
Ultimately, a compromise was achieved between the two approaches, although the measure’s ambition was diluted, as the fee is not a universal tax on all emissions.
The IMO generally aims for consensus in its decision-making process, but this time, a vote was necessary.
A total of 63 nations, including China, Brazil, South Africa, and various European states, supported the agreement, while 16 countries led by Saudi Arabia opposed it.
Additionally, 24 nations, including representatives from the Pacific Islands, abstained, citing concerns that the agreement was insufficient and might “do too little, too late” to address shipping emissions and safeguard their islands.
Simon Kofe, Tuvalu’s minister for transport, energy, communications, and innovation, stated, “We came as climate-vulnerable countries—with the greatest need and the clearest solution.
And what did we face? Weak alternatives from the world’s biggest economies.”
A negotiator from Brazil, whose name was not disclosed during the livestream of the closing, noted that the agreement wasn’t designed to be perfect, as each nation may have differing views on what that would entail.
Nonetheless, he acknowledged that nations listened to one another and developed a framework to combat climate change amid an extremely challenging geopolitical landscape.
The United States did not participate in the negotiations in London and urged other governments to oppose the proposed emissions measures.
The previous Trump administration had stated that it would reject any initiatives aimed at imposing economic measures on its ships based on emissions or fuel selection, arguing that such measures would burden the sector and contribute to inflation.
It even threatened potential reciprocal actions should any fees be introduced.
When asked about the United States’ position at a press conference, Secretary-General Dominguez remarked that large ships traversing international waters must adhere to the IMO’s regulations.
He encouraged nations with concerns to engage with the IMO to collaboratively progress moving forward.
Dominguez also acknowledged that there are worries about whether the targeted reductions in carbon intensity for fuels are stringent enough to decrease the reliance on liquefied natural gas as a marine fuel, which emits greenhouse gases upon combustion.
He described it as a “transition fuel,” considering it a bridge to cleaner energy sources, confirming that the IMO will continue to assess its environmental impacts in addressing its use.
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