The International Maritime Organization (IMO) has imposed a new rule requiring shipping firms to pay for the carbon emissions their ships produce. This move aims to reduce pollution and promote low-carbon fuels. Shipping contributes significantly to global emissions, and this regulation targets cleaner practices. It is expected to raise around $10 billion annually, though environmental groups argue it falls short of the original goal.
While the rule encourages cleaner fuels like green ammonia, it may increase reliance on biofuels, which have their own environmental concerns. The IMO also plans stricter penalties for liquefied natural gas (LNG) use by the 2030s. Though a step forward, it remains unclear if the regulation will have the desired long-term impact on emissions reduction.
New carbon fee for shipping firms
Under this regulation, shipping ships will be taxed once they cross a certain level of emissions. The IMO wishes to make companies responsible for their environmental footprint and encourage them towards cleaner technology. The regulation is likely to raise about $10 billion every year. These funds will be invested in the shipping sector, funding green technologies.
However, this amount is much lower than the $60 billion per year a direct carbon levy could have raised. Unlike a levy, these funds won’t go to countries affected by extreme weather but will remain within the industry.
Limited impact on emissions
Even though the rule constitutes a historic move, green groups are slamming its narrow effect. The policy seeks to cut emissions by 8% by 2030, far less than the 20% reduction the IMO initially aimed for. Opportunity Green’s Emma Fenton called this choice lacking ambition to effectively deal with the climate crisis.
However, others view it as a move in the right direction for green fuel technology. Jonas Moberg of the Green Hydrogen Organisation is of the opinion that the regulation will spur investment in clean fuels such as green ammonia.
Increased interest in Biofuels and LNG
Shipping firms may opt for liquefied natural gas (LNG) as a cleaner option for fuel over conventional fuels. Yet, the tighter regulations of the 2030s will mean more stringent penalties for LNG.
Biofuels are likely to also make more appearances, but with environmental drawbacks. University College London’s Tristan Smith cautioned that biofuels would have a negative impact if they had side effects, so they are not as big of a solution as they appear to be.
Future of Shipping
This new regulation is one step in the direction of cleaner shipping, but not far enough. The $10 billion of money raised every year will not go far in making a big reduction in global emissions.
Shipping companies are increasingly under pressure to cut their environmental footprint and innovate more quickly to reach sustainability objectives. Though the IMO’s move is one signal that the shipping sector will have a central role to play in the green transition, more needs to be done.