UN shipping agreement a victory for multilateralism but a failure for the climate

Negotiators at the UN’s shipping body (IMO) managed to clinch a deal that might save multilateralism for another day, but will likely lead to the destruction of rainforests by promoting first-generation biofuels, says T&E. The measure also falls short of delivering IMO’s own decarbonisation targets set only two years ago, T&E’s analysis shows.

In 2023, the IMO committed to reaching net-zero greenhouse gas emissions from international shipping by 2050 and deliver up to 30% and 80% emissions reduction by 2030 and 2040 respectively. This week’s meeting was expected to set clear and binding regulations to support member states in achieving those milestones. In the end, the measure would at best deliver 10% emissions reduction by 2030, 60% by 2040 and fail to reach net-zero by 2050.

For the first time there will be an IMO framework that will generate limited revenues for decarbonisation, though T&E’s snap analysis shows that this falls short by a large margin of what is needed to incentivise clean fuels and contribute to a just and equitable transition. The rules also set targets of emission reductions. Ships that are not meeting targets would face financial penalties through the purchase of Remedial Units (RUs). On the other hand, ships that go beyond the most stringent targets could potentially generate and sell Surplus Units (SUs) that could be banked for future use or transferred to other ships. There are also financial rewards for zero and near-zero emission fuels.

But there are problems with the design of the pricing system. The current package will exempt nearly 90% of excess shipping emissions from carbon penalties via RUs. According to analysis from T&E, this will generate around $10 billion per year until 2035 in revenues, although how and when it will be distributed is heavily dependent on the creation of an IMO Net-Zero Fund. This is likely to take time.

With a lack of stringent sustainability rules damaging biofuels like palm and soybean oil are likely to become the go-to option, as they will be the cheapest fuels that comply with the IMO rules. The uptake of these fuels could actually result in a disastrous increase of emissions if no precautions are considered as soon as possible. Previous T&E analysis showed an IMO agreement without sufficient safeguards against high ILUC biofuels[1] could result in an additional 270 Mt CO₂e in 2030. This risks undermining the decarbonisation effort, especially in the absence of long-term certainty to incentivise investment in green fuels.

Faig Abbasov, shipping director at T&E, said: "Multilateralism isn't dead. Despite a tumultuous geopolitical environment, the IMO deal creates a momentum for alternative marine fuels. But unfortunately it is the forest-destroying first generation biofuels that will get the biggest push for the next decade. Without better incentives for sustainable e-fuels from green hydrogen, it is impossible to decarbonise this heavy polluting industry. The ball is now in the court of individual countries to implement national policies to open a life-line to green e-fuels".

Note to editors

[1] When biofuels are produced on existing agricultural land, the demand for food and feed crops remains, which leads to someone producing more food and feed somewhere else. This leads to land use change (by changing e.g. forest into agricultural land), which leads to a substantial amount of CO₂ emissions being released into the atmosphere.