The story so far: After a decade of deliberations towards decarbonising the maritime industry, at its 83rd session, the Marine Environment Protection Committee (MEPC-83) of the International Maritime Organization (IMO) was faced with the challenge of coming to a consensus on a proposed emissions levy on global shipping. The session’s objective was to adopt a Market-Based Measure (MBM) that balanced environmental effectiveness with economic fairness.
What were the proposals?
Five distinct proposals were tabled in the meeting. The first was by the International Chamber of Shipping which advocated for a fixed levy per every tonne of CO₂ emitted. Secondly, China proposed a market-driven approach where ships could trade compliance units and invest in alternative fuels. The European Union suggested a fixed Greenhouse Gas (GHG) levy, managed by an IMO-administered fund while India propositioned a ‘bridging mechanism’, which would target only under-compliant ships to bear the financial burden, while rewarding those using Zero or Near-Zero (ZNZ) fuels. Finally, Singapore also joined the fray by proposing an enhanced version of India’s model, involving a GHG Fuel Standard (GFS) and a tiered system rewarding surplus emission units and requiring the purchase of remedial units for underperformance.
Even before the debate on MBMs could fully unfold in the IMO, geopolitical tensions took centre-stage. The U.S. Trump administration, which had already withdrawn from the Paris Agreement and stripped the agency that responds to disasters from their climate work related responsibilities, did not participate in the IMO deliberations. It warned of “reciprocal measures” if the EU-backed uniform carbon levy were passed.
What was decided?
The MPEC-83 of IMO voted 63 to 16 in favour of accepting Singapore’s hybrid model based on India’s proposal as the IMO’s Net Zero Framework, making international shipping the first global industry to adopt a mandatory emissions levy framework. Having piloted a compromise formula amidst extremely divergent views, both India and Singapore have claimed credit for the successful outcome.
However, the decision of the MEPC-83 is not final yet. Despite the vote, the path to implementation is far from straightforward. The MEPC-83’s decision, having approved the Net Zero Framework, now needs to amend Annex VI of the MARPOL convention, which governs air pollution from ships. The amendment will undergo a six-month circulation period among all contracting parties to MARPOL. For final adoption, it requires a two-thirds majority of votes from members present and voting; this means that if all 101 parties participate, at least 67 must support the measure. Even if adopted, the amendment could still be blocked, should one-third of the parties — provided they account for at least 50% of global shipping tonnage — formally object in writing.
Currently, with 63 votes in favour, 16 against, and 22 abstentions, the outcome remains uncertain. The process ahead is critical and could reshape the dynamics of global shipping regulation for decades to come.
What other interests were at play?
The wide range of positions expressed during the MEPC-83 underscores the enduring dominance of national interests in global climate diplomacy. Oil-exporting countries, led by Saudi Arabia, opposed any significant transition to green fuels, prioritising the protection of their fossil fuel markets. In contrast, small island nations and least developed countries advocated for steep carbon levies, seeking to redirect revenues into broader green development initiatives.
Moreover, China, along with other large shipping nations, pushed for minimal levies to preserve competitiveness while focusing on investments in cleaner fuels. Norway and other Scandinavian countries have been seeking recognition for their early and costly efforts in decarbonising shipping, proposing that these efforts be rewarded through surplus credit systems. Brazil has been advocating for a rapid shift to methanol as a primary marine fuel, while several nations, citing a lack of viable green technologies, hoped for delayed implementation.
Even after voting, scepticism has lingered among shipowners in traditional maritime powerhouses like Greece, who question the necessity and feasibility of a green levy altogether. The range of these responses illustrates the immense challenge the IMO faces in crafting a universally acceptable emissions framework.
Why does green shipping matter?
Shipping may seem invisible to most consumers, but it plays an outsized role in global emissions. The sector emits approximately one billion metric tonnes of GHG each year, representing about 2.8% of total global emissions. If ranked as a country, international shipping would be the sixth-largest emitter in the world, between Germany and Japan. Projections indicate that, without corrective action, emissions from shipping could rise by as much as 50 to 250% by 2050. Even though the sector contributes less than road transport emissions, they face heavier regulatory pressure because of their international nature.
Therefore, to align with the 13th UN Sustainable Development Goal as well as the Paris Agreement, the IMO began implementing emissions-reduction measures in 2011, followed by the Initial GHG Strategy in 2018 and the updated IMO GHG Strategy in 2023. It has also included a technical measure such as the Energy Efficiency Design Index in Annex VI of the MARPOL convention; an operational measure, the Ship Energy Efficiency Management Plan, for reduction of GHG emissions from ships; and introduced mandatory recording and reporting of fuel oil consumption.
Consistent with the ‘Paris agreement temperature goals’ it has also adopted ‘levels of ambition’ and ‘guiding principles’. Between 2018 and 2023, it has agreed to fix a target for reducing carbon intensity (CO2 emissions per transport work) by at least 40% by 2030 compared to 2008 levels, and by 70% by 2040, ultimately achieving net-zero by 2050. This is notably more concrete than the International Civil Aviation Organization, which has only pledged a “long-term aspirational goal” of net-zero emissions by 2050 without setting interim targets.
Is it an equitable distribution?
There has been a gradual erosion of the guiding principle of ‘common but differentiated responsibilities and respective capabilities’ (CBDR-RC) incorporated in the 2018 initial GHG strategy. The CBDR-RC is a core principle enshrined in climate agreements like UNFCCC, Kyoto Protocol and the Paris Agreement. It acknowledges that all nations must address climate change but recognise historical responsibility and unequal capacities. Developed nations, with their longer industrial histories, are expected to bear greater burdens. However, recent IMO proceedings reflect an effort by wealthier nations to shift responsibility onto developing economies, despite stark differences in income and consumption.
How does India benefit?
While the carbon levy and GHG targets set by the IMO may pose short-term challenges for certain sectors of the Indian economy, India is likely to emerge as a long-term beneficiary of the new MBM framework. According to the United Nations Conference on Trade and Development, the impact of the MBM on India’s maritime logistics costs will be modest in the near term — ranging from 4.98 to 7.29% on imports and 5.92 to 8.09% on exports by 2030. By 2050, these figures are projected to rise to about 33 to 35%. However, the actual impact on trade volumes is expected to be minimal.
India currently operates nearly 236 ships over 5,000 gross tonnage, with only 135 involved in international voyages. Since MBMs apply only to international shipping, India’s coastal fleet remains unaffected. At present, India spends roughly $400 million per year on fuel for its international fleet. The MBM is projected to increase this by approximately $108 million by 2030 — a manageable rise given the scale of India’s maritime economy.
Perhaps the most exciting implication of the MBM framework is the potential for India to become a global hub for clean energy exports. As the world’s third-largest importer of fossil fuels, India is now investing heavily in green hydrogen through its National Hydrogen Mission. Industrial giants such as Reliance, Adani, and JSW are planning to scale up production, while three Indian ports are preparing to offer green hydrogen bunkering services.
Under the mission’s guidelines, Indian green hydrogen must meet a well-to-wake greenhouse gas fuel intensity of no more than 2 kg CO₂e per kilogram of hydrogen, translating to about 16.7 grams of CO₂ equivalent per megajoule. This standard positions Indian hydrogen well within the IMO’s reward thresholds, which are capped at 19.0 g CO₂e/MJ until 2034 and 14.0 g CO₂e/MJ thereafter. This alignment creates a significant opportunity for India to export green fuels globally and capitalise on international incentives.
Global shipping now stands at a transformative moment. Despite persistent disagreements and uncertain implementation pathways, the adoption of a MBM by the IMO represents a milestone in the journey toward decarbonisation. If successful, this framework could make shipping the first truly global sector to operate under binding climate goals, setting a powerful precedent for others to follow.
Amitabh Kumar, a retired IRS officer, is former Director General of Shipping, Government of India. Views expressed are personal.
Published – May 13, 2025 08:30 am IST