Momentum Builds for IMO GHG Fuel Standard and Carbon Levy

The IMO's Marine Environment Protection Committee is set to discuss a variety of decarbonisation proposals at its meeting in London from March 15-22. Image Credit: Ship & Bunker

Momentum is building at the IMO behind the idea of imposing both a carbon intensity regulation and a GHG levy on bunker fuels.

The UN body's GHG working group met this week ahead of next week's meeting of the Marine Environment Protection Committee.

Consultancy University Maritime Advisory Services (UMAS) published a report on this week's developments on its website on Friday.

The idea of imposing both a global GHG fuel standard -- that sets progressively tougher carbon intensity requirements on marine sales over time -- and a GHG pricing mechanism is now backed by a majority of countries, the organisation said.

"The specifics of these policy measures will determine the 'shape' of international shipping, capital flows in the maritime value chains and have major implications for the economies of many countries and global trade," Tristan Smith, director of UMAS, said in the statement.

"Given this significance, ISWG-GHG 16 provides some important clues on where preferences are developing.

"However, this is still an early stage in the debate, with key evidence of the impacts and costs of different policy specifics expected this summer, and with so many interconnected moving parts, a 'scenario' view e.g. considering a range of scenarios of potential outcome is still needed."

The consultancy noted three different 'architectures' of how the regulations might develop and interconnect:

1. 14 countries, primarily but not limited to middle income economies, expressed a preference for a fuel standard which includes flexibility (referred to as credit trading mechanism or Emission Trading System ETS), and with no further GHG pricing mechanism e.g. levy
2. 18 countries, primarily but not limited to SIDS and LDCs, expressed a preference for a simplified fuel standard which excludes flexibility, working in combination with a universal GHG price e.g. a levy
3. 16 countries, primarily but not limited to developed economies, expressed a preference for a fuel standard which includes flexibility (credit trading mechanism or Emission Trading System ETS), and a universal GHG pricing mechanism e,g, a levy

"Overall the meeting therefore has continued to progress the finalisation phase, albeit without a decisive shift in the landscape of positions and preferences, whilst also retaining progress in line with agreeing specifics at MEPC 83 in June – a commitment reiterated by member states with a range of different preferences on specifics," UMAS said.