Beyond the ‘Yes’
"Yes, there will be a pricing mechanism," IMO Secretary-General Arsenio Dominguez confirmed at COP29. But agreeing on a carbon pricing mechanism is only the beginning.
The IMO now faces the formidable task of navigating divisions among its 176 member states over how high a greenhouse gas (GHG) levy should be set and how the revenue will be used.
Some of the world’s largest shipping registries, each with contrasting priorities and significant influence within the IMO, have proposed drastically different pricing structures.
Liberia, the world’s largest registry, along with the Bahamas and the International Chamber of Shipping, has recommended the lowest fee – just $18.75/mt of CO2-equivalent (mtCO2e). The fee will be based on a lower emissions value from either tank-to-wake (TtW) or well-to-wake (WtW) emissions, but cannot be less than zero, according to the proposal.
On the other end of the spectrum is the 6PAC+ alliance of Pacific and Caribbean island nations calling for steep penalties. This group, which includes the Marshall Islands, has called for a $150/mtCO2e levy on a WtW basis.
The EU and Japan advocate a universal levy of $100/mtCO2e, based on WtW emissions. Canada suggests a gradual increase starting at $90/mtCO2e from 2027, and reaching $130/mtCO2e by 2030.
Other IMO member states like China, Argentina, Brazil, Norway, South Africa, the UAE and Uruguay have not proposed any pricing mechanisms.
Setting the pricing level is just one hurdle. It is also crucial to reach an agreement on how to allocate the revenue, whether to include incentives like feebates for emissions reductions and the fate of a potential flexibility mechanism proposed by some member states.
The IMO aims to finalise the emission pricing mechanism by October 2025 and implement it by 2027. With the clock ticking toward this working goal, it faces an intense period of negotiation to forge a unified pricing mechanism that is aligned with its decarbonisation ambitions.
In other news this week
Johannes Schürmann of FincoEnergies told ENGINE that when it comes to biofuels, a lack of knowledge and visibility on biofuel prices can make shipping companies hesitant to close term contracts today. “The main reason is they have no clue [about] the pricing indexes in biofuel,” Schürmann said.
A new consortium is working to establish standardised safety procedures for ammonia and to develop international standards for ship-to-ship (STS) bunkering. The group includes the Korean Registry, Liberian Registry, HD Korea Shipbuilding & Offshore Engineering, HD Hyundai Heavy Industries and KSS Line.
Canada allocated CAD 25.2 million ($18 million) for four projects in Ontario. The funding will help build and upgrade shore power infrastructure and alternative fuel bunkering facilities, and it will finance a feasibility study for a new public port.
Tanker owner Hercules Tanker Management (HTM) (HTM) ordered six newbuild IMO type 2 chemical bunker tankers from Jiangmen Hangtong Shipyard in China. These 7,700-dwt capacity vessels will be capable of carrying and supplying B100 biofuel (100% biofuel) as well as methanol.
By Konica Bhatt
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