COP27, Decarbonisation, International Maritime Organization, MEPC

Can MEPC79 fulfil the promise of COP27?

Pledges made at the recent climate talks in Egypt show the political and corporate will to decarbonise. Now regulators need to show the way.

If progress was slight at the latest UN Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP), held in Sharm El-Sheikh last month, it was in stark contrast to the volume of commitments made by companies and countries at the vast fair that surrounds the core negotiations. While parties to the convention failed to agree to phase out fossil fuels, a huge outpouring of new initiatives showed the public and corporate will to reach keep Paris Agreement climate goals alive. As Fathom reported, shipping was no exception.

The widening gulf between vastly ambitious corporate pledges and sluggish progress in intergovernmental talks is a concern. Those good intentions will founder without strong regulation to drive investment. As maritime focus shifts to the next round of IMO Marine Environment Protection Committee talks, starting on 12 December – and the Intersessional Working Group on GHG that precedes it next week – can shipping succeed where the UNFCCC did not?

For Michael Wiseman, Head of International Maritime Emissions Policy at the UK’s Department for Transport, COP27 was notable for placing responsibility for shipping’s decarbonisation firmly on its own shoulders.

“We’re not going to be able to take it for granted that the UNFCCC and the landside sectors are going to do the hard work for us when it comes to mitigation,” he told delegates to a webinar organized by Lloyd’s Register. “That means us member states at the IMO, are really going to have to pull our weight, particularly coming into next July and MEPC80, when our initial strategy on GHG reduction will be revised.”

An earlier transition

The UK is among several developed economies and climate-vulnerable countries that are calling for shipping’s ambition to be increased to net-zero by 2050. It has submitted two papers exploring the feasibility of this target, along with more ambitious intermediate targets, to MEPC79.

“A couple of the figures that came out of that that research are startling, to the order of US$100 billion per year in extra costs,” Wiseman said. “For each year that we procrastinate, we’re looking at a more disruptive and turbulent transition. So we need that investment made in in regulatory policy in order to in order to make this transition easier.”

One of the bright spots of COP27 was the last-minute agreement to a ‘loss and damage’ fund under which developed economies will commit to compensate poorer countries for climate impacts. Though details including the scale of support have yet to be finalized, the move highlights the importance of equity in advancing the energy transition. Countries that have suffered the most from climate change yet produced minimal emissions compared to the developed world need to be compensated for damage done and incentivised for diverting fossil-based growth plans onto a more renewable trajectory.

Those equity elements are at the core of IMO discussions as well as the UNFCCC. Without them, there will be no consensus on targets or measures. Climate change is an existential threat to low-lying island states, including the Marshall Islands. Setting out the urgent actions needed, Albon Ishoda, the country’s ambassador to the Republic of Korea and part of the IMO delegation, described the Paris Agreement as “the reddest of red lines” for these vulnerable states.

Equity first

The Marshall Islands, along with the Solomon Islands, Vanuatu and New Zealand, have sponsored a resolution at MEPC79 committing to 80% emissions reduction by 2040 and complete reduction by 2050, on a well-to-wake basis. Ishoda described these targets as the “absolute minimum scientific requirement” for keeping to Paris Agreement goals. Another joint submission with the Solomon Islands proposes a greenhouse gas emissions levy of US$100 a tonne, with at least 51% of any revenue from the levee to go to the most climate-vulnerable countries.

“Shipping’s unpaid externalities can no longer be ignored,” Ishoda said. “The polluter pays principle must be applied. That was mentioned across the debates at COP27. It means a significant price on shipping emissions. It means clear commitment to aggressive 2040 and 2050 goals. And it means ensuring the transition is affordable and leaves none behind.”

Command-and-control mechanisms such as carbon pricing will be essential to shipping’s decarbonisation, reducing the relative cost of lower-emission fuels and technologies will providing revenue for mitigation and research. But it must be placed in the correct context to have the intended impact, said Tristan Smith, Associate Professor in Energy and Transport, University College of London. As an author of the IMO’s Greenhouse Gas Study and many others, including the UK feasibility study of more ambitious targets, he is well placed to explore the dynamic between ambition, strategy and measures.

“The biggest request I hear is that we need the IMO to adopt carbon pricing and then we’ll be able to have a business case for investment. But unless you have a set of numbers in the strategy, particularly the level of ambition, then the IMO may well adopt carbon pricing, but it will be adopted without the stringency you need. It was the incredibly weak 2030 carbon intensity target that gave us the weak outcome on CII and EEXI, which is frustrating many people because it doesn’t create the business case for the steps they want to take.”

Fork in the road

As the IMO enters its next phase of climate action discussions, it faces multiple calls for a raised level of ambition by 2050 as well as stricter intermediate targets. This decision, which will need to be finalized at MEPC80 in July 2023, will inform the necessary level of any mid- to long-term measures. The measures to be developed also need to be decided by MEPC80. They will not be agreed without a focus on how developing economies and climate vulnerable states are supported through the transition.

In that context, the coming three weeks are unlikely to see breakthrough announcements on either strategy or measures, but will lay the groundwork for progress next year. If they do not, the effect could be damaging for IMO’s role as sovereign regulator of the global maritime industry. Smith noted that the ambition of companies and countries at COP27 highlighted a “fork in the road” moment for maritime’s responsibility for its own climate agenda.

“We can either go forward with very unambiguously IMO-led ambition and policy, or this is a transition that will increasingly be led by individual countries and individual companies taking action, because they have no other choice but to do so. That will be the fallback if we don’t get a strong enough outcome.”