IMO looks to transform its Revised GHG strategy into regulation

The IMO is taking steps to implement its Revised GHG Strategy: The IMO finalized some of its mid-term measures including adopting both a GHG Fuel Standard — a mandate on GHG intensity of fuel and energy — as well as a GHG pricing regulation, according to a press release by maritime shipping consultancy outfit UMAS. The measures were finalized at the IMO’s first working group meeting since the adoption of a Revised GHG Strategy in July 2023 and explicitly linking 2030 and 2040 GHG reduction standards with momentum also building on a universal GHG levy, the statement notes.

The IMO is determined to iron out a binding regulatory framework within a year, with a decision due by a future IMO’s upcoming MEPC 83 in Spring 2025, UMAS said. Despite broad agreement in the Revised GHG Strategy for a need for both a fuel standard and a carbon levy, the IMO’s secretariat and members have the “unenviable” task of converting these goals into regulation. One significant outcome from ISWG-GHG 16 working group meeting was an agreement to bind the GHG intensity limits of the GHG fuel standard, now dubbed goal-based marine fuel standard, to GHG reduction goals and ‘indicative checkpoints,’ a term which some members had previously considered too ambiguous. Differences remain however in terms of how a fuel standard and carbon levy can be combined, UMAS explained.

What options are on the table? 14 member states, primarily representing middle income economies, have voiced a preference for a flexible fuel standard, referred to as a credit trading mechanism or Emission Trading System (ETS), with no carbon levy, UMAS said. 18 countries, mostly representing small island developing states (SIDS) and least developed countries (LDCs) expressed a preference for a more rigid fuel standard in combination with a carbon levy. 16 countries, mostly representing developed economies, indicated a preference for a fuel standard with some flexibility (such as credit trading system or ETS), in unison with a universal carbon levy. All of the preferences discussed would generate revenues, but members also differ on how those proceeds should be disbursed, UMAS said.

What did opponents of a carbon levy say? Proposals for a carbon levy saw pushback from countries including China and Brazil, which maintain that such a move would place an unfair burden on emerging economies that are trade dependent, Reuters reported. Advocates for the policy, which include the EU, Canada, Japan, and climate-exposed SIDS, maintain that it could garner upwards of USD 80 bn a year, which can be redirected towards the development of low emissions shipping fuels and to fund the energy transition of poorer states, the newswire said.