Countries agree on UN pact requiring ships to cut emissions or pay a fee

NEW YORK - Amid the turmoil over global trade, countries around the world reached a remarkable, though modest, agreement on April 11 to reduce the climate pollution that comes from shipping those goods worldwide – with what is essentially a tax, no less.

An accord reached in London under the auspices of the International Maritime Organisation, a United Nations agency, would require every ship that ferries goods across the oceans to lower its greenhouse gas emissions or pay a fee.

The targets fall short of what many had hoped. Still, it is the first time a global industry would face a price on its climate pollution no matter where in the world it operates. The proceeds would be used mainly to help the industry move to cleaner fuels. Some of the money could also go to developing countries most vulnerable to climate hazards.

The accord would come into effect in 2028, pending approval by country representatives at the agency’s next meeting in October.

Given the widespread support for the terms of the April 11 agreement, the head of the organisation expressed hope it would be adopted in October with few or no changes.

The agreement marks a rare bit of international cooperation that is all the more remarkable because it was reached even after the US pulled out of the talks earlier in the week. No other countries followed suit.

“The US is just one country, and that one country cannot derail this entire process,” said Mr Faig Abbasov, shipping director for Transport and Environment, a European advocacy group that has pushed to clean up the maritime industry. The agreement is the “first binding decision that will force shipping companies to decarbonise and switch to alternative fuels”.

The agreement applies to all ships, no matter whose flag they fly, including ships registered in the US, although the vast majority of ships are flagged in other countries. It remained unclear whether or how Washington might respond to the fee agreement.

A State Department official said only that the US did not participate in the negotiations.

Ships mostly run on heavy fuel oil, sometimes called bunker fuel, and more than 80 per cent of global goods move by ships. The industry accounts for around 3 per cent of global greenhouse emissions, comparable with the emissions from aviation.

The agreement is far less ambitious than one initially proposed by a group of island nations that had suggested a universal assessment on emissions.

After two years of negotiations, the proposal sets out a complicated two-tiered system of fees. It sets carbon intensity targets, which are like clean fuel standards for cars and trucks.

Ships using conventional shipping oil would have to pay a higher fee – US$380 (S$500) per metric tonne of carbon dioxide-equivalent produced – while ships that use a less carbon-intensive fuel mix would have to pay a lower fee – US$100 for every metric tonne that exceeds the fuel standard threshold.

It is expected to raise US$11 billion to US$13 billion a year, according to the organisation’s estimates.

“It is a positive outcome,” said Mr Arsenio Dominguez, the IMO’s secretary-general. “This is a long journey. This is not going to happen overnight. There are many concerns, particularly from developing countries.”

The threshold would get stricter over time. It could allow the industry to switch to biofuels to meet the standards. That is a contentious approach, since biofuels are made from crops, and growing more crops to make fuel could contribute to deforestation.

The new shipping fuel standards are meant to spur the development of alternative fuels, including hydrogen.

There were objections from many quarters. Developing countries with maritime fleets said they would be unfairly punished because they have older fleets. Countries such as Saudi Arabia, which ships huge quantities of oil, and China, which exports everything from plastic toys to electric cars worldwide, baulked at proposals to set a higher price, according to people familiar with the negotiations.

“They turned away a proposal for a reliable source of revenue for those of us in dire need of finance to help with climate impacts,” Mr Ralph Regenvanu, the climate minister for Vanuatu, said in a statement after the vote.

In the end, China and the European Union were among those that voted in favour of the compromise agreement. Saudi Arabia and Russia voted against it.

The US pulled out of the talks entirely.

The global shipping industry agreed in 2023 to eliminate greenhouse gas emissions by around 2050. In 2024, it followed up on that commitment with a more concrete plan, taking the first steps towards establishing an industrywide carbon price.

Projections by the International Chamber of Shipping, an industry body, found that it would have a negligible effect on prices. “We recognise that this may not be the agreement which all sections of the industry would have preferred, and we are concerned that this may not yet go far enough in providing the necessary certainty,” said Mr Guy Platten, the chamber’s secretary-general. “But it is a framework which we can build upon.” NYTIMES