Carbon Brief’s Josh Gabbatiss has a good explainer on the emission intensity standards and carbon pricing mechanism negotiated by IMO member states last week:
The final IMO net-zero framework sets a lower emissions-intensity reduction target of 4% in 2028, which will rise to 30% in 2035. It also includes an upper target that will increase from 17% in 2028 to 43% in 2035.
These targets represent a clear compromise, falling roughly in the middle of the ranges proposed by different countries.
Any ships that cannot reduce their emissions intensity in line with these goals by switching to cleaner fuels will need to pay out.
Ship owners who fail to meet the easier, lower target can purchase “remedial units” for $380 a unit, which would feed into the new “net-zero fund”.
Alternatively, they can buy “surplus” units from ships that have reduced their emissions intensity to well below the target levels, or use their own surplus units from “over-complying” in previous years.
Those who meet the lower target but fall short of the more difficult upper target must pay into the net-zero fund, but at the lower rate of $100 a unit.
The base price of $100 per tonne of CO2eq is meaningful, and much better than the wimpy CORSIA:
International aviation has an offsetting scheme called Corsia, but this is frequently criticised as ineffective and reliant on cheap offsets.
As a comparison, the price of $380 per tonne of emissions for shipping fuel in the new deal is roughly one hundred times more than the average price paid for credits in the Corsia system in 2022 and 20 times more than current prices.
Some climate people are (justifiably) disappointed that instead of a carbon tax that covers all shipping emissions, IMO chose a trading scheme the only prices emissions that exceed limits. But this still looks like a clear win to me. A universal levy approach may have broad support, but some of the supporters are asking for lowball prices like those in CORSIA.
This compromise combination of reduction targets, timelines, and price levels may not be enough for shipping to achieve net zero by 2050, but it rules out the future of LNG and fossil fuels in shipping. It’s the first real global carbon pricing scheme that doesn’t involve bullshit offsets.
An Inconvenient Thought 