UAE among GCC countries opposing new IMO levy: GCC states, including the UAE, unanimously voted against the UN’s International Maritime Organization’s (IMOs) new two-tier levy on additional shipping emissions, Mees reports. The countries also indicated that they are looking to torpedo the proposed plans ahead of a final vote in October.

Background: The IMO approved draft amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) that would force the global shipping industry — which is responsible for 3% of world’s GHG emissions — to reduce and pay for a portion of its emissions last week. The new rules — set to be formally adopted this October — will take effect by 2027 and apply to ships over 5k gross tonnes, covering 85% of international shipping’s emissions.

How it will work: The draft sets two escalating emissions targets, requiring gradual cuts to ships’ GHG fuel intensity. A stricter standard mandates a 17% cut by 2028 from 2008 levels, increasing to 21% by 2030 and 43% by 2035, the Financial Times reported on Friday. Ships that fail to meet this strict target would pay USD 100 per excess tonne of CO2 equivalent. The softer target would see cuts by 4% by 2028 and 8% by 2030, increasing to 30% by 2035, but failure to meet this level would result in steeper fees of up to USD 380 per excess tonne. The system also allows for credit trading, with compliant vessels able to sell credits to those that fall short.

GCC countries are not happy: A Saudi-led coalition of 15 member-states opposed the slightly higher original baseline and “[objected] to the selection of any price per unit of carbon” in a statement to the IMO cited by Mees. The statement indicated that a proposed tax would unproportionally “endanger exports from developing countries,” as it would lead to a hike in global prices for goods shipped by sea.

What they said: The statement proposes that the system of credits — as agreed upon in the draft — remains, rewarding those who exceed IMO targets with credits and penalizing those who do not with “gradual cost increases.”

The proposed tax is expected to hit GCC countries from two angles, undermining demand for marine fuels derived from oil and increasing the overall cost of shipping crude oil globally. As it stands, a standard 2 mn barrel of VLCC travelling from the Gulf to China could face charges of USD 1.6 mn in the first year of the tax’s implementation, according to MEES calculations based on Kpler data.

The GCC isn’t alone: Sixteen countries voted against the draft — nine of which were from our region, including Iran, Iraq, Jordan, Yemen, Oman, Bahrain, Saudi Arabia, Qatar, and the UAE. The draft was passed with support from 63 countries including China and Brazil — which were previously reported in February to formally oppose the levy.

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