Chapter 1: What is at stake at the IMO

Thinking of shipping conjures up images of tales, stretching across vast and endless oceans so it is easy to forget that the maritime industry contributes to 3% of global greenhouse gas emissions. But that is all about to change.  

The United Nations International Maritime Organization (IMO) is currently in London to negotiate key measures to reach their 2024 decarbonisation strategy targets. The goal? To reduce emissions 30% by 2030, 80% by 2040 and reach full decarbonisation by 2050. To get there, the strategy plans will require the uptake of zero or near-zero greenhouse gas (GHG) emission technologies, fuels and/or energy sources such as wind propulsion technologies and e-fuels to represent at least 5% – and ideally 10% – of energy used by international shipping by 2030.  

Three measures are on deck, and need to be adopted this year if the strategy is to go to plan: 

  • An ambitious and equitable levy. Think of it as a toll on pollution. By placing a high price on pollution, a shipping levy could place a powerful financial incentive to reduce carbon output. The revenue gathered could strengthen a just transition for vulnerable countries and support climate action.  
  • A Global Fuel Standard (GFS), transitioning away from fossil fuels to carbon neutrality: As well as setting stricter limits on polluting emissions, wind power needs to be on the table as a true, zero emission fuel.  
  • A strengthened Carbon Intensity Indicator (CII), maximising ship efficiency to minimise fuel consumption. It acts like a report card, grading ships on how efficiently they run. A stronger CII means tighter standards and clearer incentives for cleaner options.  

Only by combining these three tools can we ensure that the transition to a decarbonised shipping sector is equitable, effective and timely. Let’s look at this in more detail: 

The Case for an Ambitious and Equitable Levy

Imposing a levy would mean that ships would pay a fee based on how much carbon dioxide they emit, which would in turn, create a revenue to fund the green transition. The levy is not just about cutting emissions but also making sure that the transition is fair, especially for countries that heavily rely on maritime trade: 

The money raised could go towards: 

  • Wind-assisted propulsion (WASP) technologies, helping ships to reduce the amount of fuel needed on a voyage and boosting their overall efficiency 
  • The development and scaling up of e-fuels, clean alternatives to traditional fossil fuels 
  • Upgrading ports to allow for new infrastructure needed for the transition to e-fuels 
  • Mitigating increasing freight cost, particularly for food-importing nations. 

Unlike carbon credit trading mechanisms that can lead to unpredictable price swings, a levy provides stability. The revenue from the levy allows shipowners, operators and energy producers to invest in green technologies with confidence. One example of this would be to retrofit an existing vessel with wind assist propulsion (WASP) technology

The most ambitious proposal calls for a levy of at least 150$ US per tonne of co2 emitted, potentially raising up to $60 billion annually for climate action, and is backed by Caribbean and Pacific Island States, as well as major flag states. Without such a mechanism in place, low-income countries, a lot of which have great renewable energy production potential, risk falling behind, missing the economic opportunities of the energy transition. It is also important to redistribute the revenues gained in an equitable manner.   

Ensuring Wind Propulsion is Supported in the Global Fuel Standard (GFS)

When we think of wind propulsion, we immediately imagine historical ships with huge sails. But guess what? Wind propulsion is back and it’s a great ally in the push for clean shipping.  

While the IMO has set a goal for at least 5% energy used by shipping to come from zero or near-zero energy sources by 2030, the reality is that e-fuels will not be widely available by then. Wind propulsion can bridge this gap by: 

  • Delivering immediate reductions in fossil fuel use and emissions 
  • Lowering the demand for alternative fuels, making the energy transition more manageable 
  • Offering flexibility to ship operators as they navigate the shift to clean fuel energy. 

To support this, the GFS must offer a reward factor for wind-assisted propulsion (WASP). By applying a multiplier of 2, the energy saved through WASP technologies could count twice in compliance calculations – a strong incentive for shipowners to invest in wind power. 

Additionally, ensuring a well-to-wake (WtW) methodology ensures all fuels are evaluated fairly, considering emissions from production use. 

But what is a well-to-wake? It’s a comprehensive way to measure the total emissions of a fuel – not just when it’s burnt in a ship but also from its production, transportation and storage. It’s like tracking the carbon footprint of a product from the moment it’s created to the moment it’s used. By applying this method, the GFS can ensure alternative fuels are genuinely sustainable and not merely shifting emissions to another part of the chain.  

Incorporating a sustainability criterion will also ensure that land rights, food security and human health are not affected by fuel choices, creating unnecessary socio-economic harm.  

  1. Strengthening the Carbon Intensity Indicator (CII) to Drive Real Emission Reductions

As mentioned earlier, the CII is a bit like a report card, grading ship owners on how well they use fuel and energy. Just like a lenient grading system doesn’t push students to excellence, the CII is lacking enough drive to push the industry towards ambitious emission cuts.  

A more ambitious CII would: 

  • Require ships to improve their energy efficiency up to 38% by 2030, compared to 2018 levels 
  • Encourage practical measures like hull cleaning, speed reduction and optimised routing 
  • Serve as a steppingstone on the path to decarbonisation by complementing the levy and the GFS.  

To ensure its effectiveness, the CII must: 

  • Increase the post-2026 Reduction Factors, aligning CII reduction targets with the IMO’s overall decarbonization goals. 
  • Enhance data transparency and integrity by integrating CII with the IMO Data Collection System (DCS) and increasing transparency, third-party verification, and public accessibility of emissions data which will improve accountability and effectiveness. 
  • Extend the measure beyond its premature phaseout in 2030.   Conclusion: A Historic Opportunity for Leadership 

The IMO is at a crossroads. The decisions made today will determine whether the shipping industry transitions to a clean future equitably or remains locked in outdated, high-emission practices. Countries must stand firm in negotiations to: 

  • Adopt a strong, equitable levy that drives investment in clean shipping, ensures fair revenue redistribution, and supports wind propulsion technology. 
  • Integrate wind propulsion in the GFS by applying a reward factor and maintaining a well-to-wake methodology to ensure truly sustainable fuel choices. 
  • Strengthen the CII to align with decarbonisation goals, enhance transparency, and drive real emissions reductions. 

With these measures in place, the global community can achieve a just and sustainable transition to zero-emission shipping, benefiting the environment, the global economy and the people. Cleaner seas and a healthier planet are within reach.  

 

Read Chapter 2: Two IMO Pricing Mechanisms – Levy and Credit Trading 

Posted on: 2 April 2025