IMO Approves Historic Agreement on Carbon Prices
Posted on Apr 16, 2025 at 09:04 PM
The IMO member countries have decided to impose the first worldwide carbon fee for shipping after ten years of discussion. The carbon revenue system is the first of its kind to be administered by the UN.
Remarkably, the Marine Environment Protection Committee's 83rd meeting delegates concluded at the final day of talks on binding targets for shipping's greenhouse gas emissions, including a 20-30% reduction by 2030, a 70-80% reduction by 2040, and net-zero by or around 2050.
Penalty Framework for Over Emissions
Delegates passed technical and economic measures to incentivise compliance with emissions targets, introducing a tiered system of fees and compliance levels, with not all emissions being taxed.
The plan aims to impose a $380 penalty per tonne of CO₂ on ships exceeding the maximum emissions' intensity, which will increase every few years. Ships that meet this intensity standard will still be fined $100. Those who surpass the second “direct compliance” level will receive carbon credits, which can be
banked or sold to underperforming ships.
The fee structure penalises emissions above a certain limit, while emissions below are untaxed, and all ships under 5,000 GT, including coastal vessels and workboats, are exempt.
Besides, the framework allows operators to use alternative fuels, such as first-generation biofuels from food crops like palm and soybean oil, which are the cheapest “green” fuels but have a significant environmental cost due to large-scale production.
According to Faig Abbasov, shipping programme director for Transport & Environment, the IMO agreement promotes alternative marine fuels, but first-generation biofuels, which destroy forests, will receive the most attention over the next decade.
Maritime Training Courses provide a variety of options for individuals and organisations looking to help decarbonise the shipping sector by lowering GHG emissions from ships.
Transition Issues: Industry's Path to Net Zero by 2050
Climate advocates and industry groups agree that the fee structure is insufficient for transitioning to high-cost green methanol and ammonia. However, T&E analysis shows that the International Monetary Fund's schedule will reduce emissions significantly from 2030,
suggesting the industry will not reach net-zero until after 2050.
Dr. Marie Fricaudet, a senior research fellow at the UCL Energy Institute, stressed that although the implementation of a worldwide shipping emissions levy is a positive step, the current level of ambition is not enough to achieve the 1.5 °C trajectory, the International Maritime Organization's (IMO) emission reduction target.
Notably, the Trump administration's opposition to carbon fees
and Saudi Arabia's stance on climate action have led to a pushback against stricter emissions regimes. Critics argue that these countries have pushed down the global temperature rise to an untenable level, blocking progress. Industry groups have praised the MEPC outcome as a step in the right direction, though not a full resolution.
A Sustainable Shipping Future
The International Chamber of Shipping has expressed concerns that the proposed agreement may not be the preferred choice for all industry sections and may not provide sufficient certainty, but it is a framework that can be built upon.
Joe Kramek, WSC President & CEO, highlighted that a new global measure and record industry investment could potentially change the 'hard to abate' status of the shipping industry, marking a significant milestone in climate policy.
In Short, UCL warns that without a high-revenue IMO levy, national-level capital flows will determine who wins from shipping's green transition, similar to China's investments in solar panels, wind turbines, batteries, EVs, and shipbuilding. Nations with strong industrial policies may have a significant stake in the future of shipping.
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