In another example of global leadership on climate action, six Pacific Island members of the International Maritime Organization are urging the organisation to adopt a universal levy on greenhouse gas (GHG) emissions from the shipping sector.
They say this levy should be coupled with a Global Fuel Standard (GFS), which would penalise states that do not meet minimum standards.
A levy would require ship owners to pay for every tonne of greenhouse gases their vessels emit. As a result, commonly used oil-based bunker fuel would be more expensive, and the development and use of lower-emitting fuels such as ammonia, biofuels, methanol and hydrogen would be incentivised.
The ambitious proposal—which is being spearheaded by the so-called 6PAC+ group—sets an initial price on GHG of US$150/tonne CO2-equivalent. They say this could potentially generate an average of US$60 90 billion annually.
However, not all International Martime Organization (IMO) states support this proposal. Emissions credits or compliance/carbon trading options are also on the table.
The Pacific’s call comes in the leadup to a pivotal meeting next month of the IMO, which is the UN agency responsible for international shipping. The IMO says it wants to cut all shipping emissions by 2025, and has set intermediate goals for 2030 (20-30% reductions) and 2040 (70-80%) enroute to this target.
Now its members must agree on technical and economic elements in the basket of measures to reduce GHG emissions.
And they have a deadline of next April to reach agreement.
A recently published Micronesian Center for Sustainable Transport (MCST) working paper says next month’s meeting will deliver one of three outcomes: “a. a high price on emissions that can be used to drive industry mitigation and empower a truly equitable transition, b. a cheap and insufficient credit trading scheme or c. fail to agree and kick the can again. For the climate most vulnerable, only the first option is available to us.”
The 6PAC+ alliance says its argument has been strengthened by a recent UNCTAD study, which found that a simple Global Fuel Standard would be no more expensive than the other options on the table, and would be the only way of delivering the efficiencies and equity needed to transition away from GHG-emitting fuels.
UNCTAD estimates a US$150-300/ton price on shipping’s carbon would raise up to US$127 billion p.a. between 2027-2030.
Pacific diplomacy
International shipping accounts for 3% of global GHG, a figure that is anticipated to rise. If the industry was a country, it would be in the top ten of the world’s emitters.
Transitioning to non-GHG emitting technologies and fuels will be a trillion dollar plus investment, according to the World Bank, Global Maritime Forum and World Economic Forum.
The decision on shipping emissions pricing “was effectively kicked down the road for more than a decade,” say the writers of the MCST working paper.
But they also note that the negotiating landscape has changed dramatically in the intervening years, with the most climate vulnerable states driving much of that change, and becoming more vocal at the IMO and other negotiating tables.
“This change in representation dynamic has far reaching consequences, with a shift from what was essentially a developed/developing world bi-polar negotiating landscape – large western and Asian shipping and trading countries on one side and the large emerging economies from the BRICS and petro-states on the other. It is potentially strong enough to fully turn the dial at IMO and ensure option 1 [the universal levy and GFS] prevails.”
The MCST paper notes that this work is complementary to the efforts of Pacific Island students and their allies at the International Court of Justice, Pacific negotiators’ prominence at the United Nations General Assembly and global climate negotiations, and a recent International Treaty on the Law of the Sea (ITLOS) advisory opinion that GHGs are pollutants, and that the law of the sea requires specific legal obligations on States, with penalties if they do not comply.
Back at the IMO, Solomon Islands Permanent Secretary for Infrastructure, Allan Lillia, says the UNCTAD findings vindicate the Pacific Islands’ firmly held position.
“When we first called for a levy in 2020, everyone said it was too hard to do. When proposed an entry price of $100/ ton they said it was far too high. When they delayed and we revised the figures and raised the price to $150/ton last year they all raised their eyebrows. But, as it turns out, we are fully aligned with the science.”
Vanuatu’s Minister for Climate Change, Adaptation, Meteorology and Geo-hazards, Energy, Environment and Disaster Risk-Management, Ralph Regenvanu, says that the revenue raised through any levy must be fairly shared with the countries most vulnerable to climate change.
“The costs of climate change disproportionately burden the poorest and most vulnerable nations. Revenues from shipping GHG levies must be directed to support these countries in their maritime transition and broader climate response. This is not just about reducing emissions but ensuring that no country is left behind.”
The Pacific states have sought to strengthen their position by commissioning research by University College London and the Micronesian Center for Sustainable Transport to investigate how taking climate action would affect their countries’ imports/exports and the vessel fleets used to facilitate them. They say this is necessary because Pacific nations are underrepresented in trade and shipping data.
The research—which looked at the situation in Kiribati, Marshall Islands, Nauru, Solomon Islands, Tuvalu and Vanuatu—concluded that the projected increase in costs per 20-foot container would be between 0.1%-36.9%. Per tonne of bulk, the increase would be between 1.2%-6.8%.
The data indicated that the impact on lower valued commodities, including food and disaster-related goods, would be higher than the impact on higher value commodities.
And it found that the increased voyage distances in the Pacific, end-of-line effects, trade imbalances, small market size and the small number of shipping service providers meant “any increase in final price paid for maritime transport by consumers tends to exceed the basic marginal cost increase.”
The report also noted statements from shipping companies that these costs would be almost all passed on directly to customers.
These challenges are compounded by the current economic status of many Pacific nations.
Marshall Islands Special Envoy for Maritime Decarbonisation, Albon Ishoda, has been one the region’s most diligent and consistent government negotiator on climate change responses at the IMO and other fora. Supporting the 6PAC+ position, he says: “SIDS face higher levels of debt distress than other developing countries, with over 40% grappling with unsustainable debt levels. Between 2016 and 2020, SIDS paid 18 times more in debt service than they received in climate finance.”
Ishoda says he expects countries to coalesce around 6PAC+’s position following the UNCTAD report.
However, UNCTAD’s report has been challenged by other IMO members, including Brazil, which called the findings “nonsensical”.
At the IMO, the question of how much revenue would be generated by any emissions reduction measure, how it will be disbursed and who will manage the transactions are yet to be determined.
But the Pacific has laid down the challenge. In another working paper supporting 6PAC+’s position at the IMO, authors led by MCST’s Peter Nuttall write: “The IMO has one narrow window in which to achieve a global consensus on delivering the most ambitious and equitable transition pathway for any sector. Time is short and the jury is still out.”
