Since the Industrial Revolution in the 1800s, humans have relied on burning fossil fuels to generate energy for their various activities. As a result, growing volumes of greenhouse gases (GHGs) were released into the atmosphere, trapping heat, and changing our climate. Shipping was no exception to this process: as early as the 1870s, many vessels converted from coal to fuel oil to generate power for their propulsion systems. Nearly 150 years later, shipping is responsible for 2.89% of global GHG emissions. Nevertheless, while considerable efforts are being made to decarbonise key emitting sectors like housing, aviation, and road transport in line with Paris Agreement pledges, the shipping industry still lags behind.
Given the industry’s global nature, decision-making around the adoption of decarbonisation measures and concerns about its potential impacts is not exclusive to any state or group of states. These matters are deliberated during scheduled sessions of the International Maritime Organisation (IMO)’s Marine Environment Protection Committee (MEPC). In 2018, the MPEC developed its initial Greenhouse Gas (GHG) Reduction Strategy which set below-par targets to reduce total annual emissions by 50% by 2050 compared to 2008, and laid out a non-exhaustive list of short, mid, and long-term measures for decarbonisation.
Are market-based measures fair?
Market-based measures (MBMs), or rules and legal frameworks encouraging desired behaviours through financial incentives, are a crucial part of the GHG Reduction Strategy. They are widely seen as the most effective means to make alternative clean fuels for shipping competitive with fossil fuels, and thus incentivise a shift away from the latter. However, there is much less consensus around how MBMs should be designed and implemented, considering the vastly different circumstances of countries around the world. While MBMs may be perceived by developed countries as a component of the ‘race’ to achieving net-zero, developing countries are much more concerned about potential impacts on their socio-economic development.
There are serious trust issues between developed and developing countries around the unequal impacts of new measures. The GHG Reduction Strategy recognises the diplomatic challenges related to climate change mitigation measures, adding that ‘particular attention should be paid to the needs of developing countries, especially Small Island Developing States (SIDS) and least developed countries (LDCs)’.
Notably, a concrete proposal was put forward by the Governments of the Marshall Islands and the Solomon Islands to establish a universal and mandatory GHG levy for international shipping. The proposal attempted to attribute special consideration to the circumstances of LDCs, SIDS, and other developing countries by suggesting the inclusion of a ‘feebate’ mechanism which would direct part of the revenues generated by the levy to support financing climate change mitigation measures therein.
Nevertheless, this proposal received strong opposition from developing countries on the basis that it disregards the principle of common but differentiated responsibility, and respective capabilities. Broadly speaking, the latter principle distinguishes efforts from different countries to solve global environmental problems, suggesting that efforts should be made based on two criteria: responsibility (for causing the environmental problem – both historical and present) and capability (to tackle the problem – both financial and technical).
The challenge at hand stems from the fact that, on one hand, the MEPC recognises developing countries already face high shipping and trade costs and depend almost exclusively on maritime transport to access regional and global markets. On the other hand, a GHG levy for international shipping will likely increase transport costs and import prices for SIDS and LDCs compared to the rest of the world. Given that the proposed ‘feebate’ system merely aims to raise the capability of vulnerable countries to address the consequences of climate change rather than the direct impacts of the adoption of the MBM in question (namely, offsetting the increase of import prices and transport costs relative to the rest of the world), the greater risk MBMs would incur for developing countries would not be adequately offset – meaning a consensus on the topic remains unlikely.
In search of solutions: a climate justice perspective on the shipping industry
The lingering political deadlock of the MEPC is inextricably tied to the concept of climate justice, which recognises that the impacts of climate change will not be felt equally or fairly between populations in different countries – and therefore calls for the world’s most vulnerable communities to be placed at the heart of climate policies. It demonstrates that both the impacts of climate change and those of mitigation policies must be considered in tandem.
Ultimately, the efficiency of MBMs rests upon the market availability and competitiveness of zero-emission technologies and alternative green fuels, which they incentivise the shipping industry to employ. Evidently, research and development (R&D) have a pivotal role to play in filling knowledge gaps around green fuels and technologies to boost their commercial viability, improve safety, and reduce production and handling costs among other things. However, despite calls for the IMO to establish a R&D decarbonisation fund supporting research projects to achieve the aforementioned objectives, an industry-backed proposal to finance it via a levy received strong opposition from the governments of developing countries, most notably China, India, and Brazil, arguing that developed countries must ‘take the lead’ in R&D efforts in accordance with ‘broader climate change policy obligations.’
As the divide between the Global North and the Global South continues to grow, and markets and economies reshuffle to adjust to changing global circumstances, concepts of fairness and justice are becoming increasingly crucial for the success of diplomatic efforts to combat climate change globally – while simultaneously ensuring that no one is left behind as we achieve sustainable development.