With little fanfare, the first-ever global carbon tax was due to be formally adopted as an international agreement this year.
The International Maritime Organization, or IMO, the UN agency that oversees global shipping, has created a zero-emissions program to transition the sector to cleaner fuels. This is an important step in the energy transition, as the industry that accounts for about 90 percent of global trade also accounts for 3 percent of global emissions.
Under this system, shippers would pay a fee per ton of greenhouse gas emissions if their emissions exceed a certain threshold. Then the fees will be merged into a fund and is distributed to support the development and deployment of alternative fuels and decarbonization in developing countries. The shipping industry, which has been committed to creating a consistent regulatory environment and a level playing field, has largely supported the plan. The same thing happened to the vast majority of UN member countries.
Then, in April, the Trump administration abruptly pulled out of negotiations with the IMO. As a vote on the agreement approached this month, the administration began pressuring other countries to abandon the agreement. Administration also published a statementwarning that the US is considering imposing additional tariffs, visa restrictions, additional port fees and sanctions on officials from countries that vote in favor of the framework. President Trump himself addressed Truth Social, calling the proposal a “new global green tax scam on shipping.”
The campaign was a success. Last week, at the end of negotiations, Saudi Arabia suddenly called for a vote to postpone the IMO meeting for one year without a decision on a zero-emissions system. Since IMO rules dictate that the call for an adjournment precedes all other considerations, the proposed adjournment was voted on immediately and accepted by 57 countries in favor and 49 against. (Twenty-one countries abstained from voting.) That means it will be at least another year before the framework is officially signed.
Close observers of the IMO's decarbonization efforts told Grist that U.S. obstruction was a critical factor in preventing adoption of the framework.
“It’s fair to say that the retaliatory measures and punitive threats that the US administration shared ahead of the meetings played a role,” said Em Fenton, senior director at Opportunity Green, a UK climate group that is closely following the IMO talks. “Last week’s outcome was a devastating blow to climate multilateralism.”
The IMO has been moving towards setting emissions rules for several years, but efforts intensified in 2023 when the agency's 176 member countries agreed to a greenhouse gas strategy that would commit them to achieving net zero emissions by around 2050. To achieve this goal, countries began negotiating legally binding measures that included a standard limiting the carbon intensity of fuel used by shipping companies, as well as economic measures to enforce this standard, which could take the form of a levy. or a carbon trading mechanism.
Economically, the countries were divided. An ambitious coalition of more than 64 countries, including the European Union, Britain, the Pacific, Caribbean and Africa, has proposed a relatively high flat tax on all marine emissions. Under their proposal, each ton of greenhouse gas emissions would be assessed at the same level across the board. However, another group of countries, led by China, have advocated for a carbon trading mechanism that would allow countries to offset their emissions through carbon credits. (China and other emerging economies are large exporters, and they believe a flat fee would hurt businesses and reduce their competitiveness.)
Countries eventually came to a compromise with a two-tier system: countries with high emissions at the top tier could participate in some carbon trading. Those in the lower tier will pay a fee based on a levy per tonne of emissions. And those who meet zero- or near-zero-emission fuel requirements will receive financial rewards. This approach became the basis of the net-zero plan that was to be voted on this year.
The shipping industry has generally welcomed the structure. First, the industry has achieved record profits in recent years. A Opportunity Green report found that the world's 139 largest shipping companies, accounting for more than 90 percent of the global fleet, earned $340 billion in profits between 2019 and 2023. In fact, the 10 largest companies were taxed at an average rate of less than 10 percent, much lower than the global average corporate tax rate of 21.5 percent.
Industry also sought regulatory certainty. Ahead of last week's meeting, a group of trade bodies representing the shipping industry issued a statement calling for the framework to be adopted. “Only global rules will allow decarbonization of the global industry,” they noted. “Without this framework, shipping risks facing a growing number of unilateral regulations that will increase costs without effectively promoting decarbonization.”
With this structure now under threat, the path forward is unclear. While supply talks won't resume until next year, Fenton said countries should seek further technical clarity. during other interim meetings to reach consensus and ensure the adoption of this framework next year.
Meanwhile, cities and ports around the world are taking steps to green their infrastructure. Alice Cranes, director of the ports and shipping program at C40, a global network of mayors taking action on climate change, pointed to the various initiatives already underway to reduce the shipping industry's carbon emissions. Cities have built green shipping corridors, which are trade routes where ports and other partners work together to transition to zero- or near-zero-emission fuels. Ports have also begun setting stricter emissions standards for trucks and have supported the development of offshore wind power.
“Our response is that cities continue to pursue a just maritime transition despite what happened at the IMO last week,” Cranes said. “Cities will continue to advance equitable decarbonization of ports and shipping.”
But these measures will not have a significant impact on the industry's main source of emissions, which are the huge, fuel-hungry boats that criss-cross the globe delivering goods. And the failure of the negotiations IMO sounds like a warning about the fragility of international cooperation. This dynamic could continue at COP30, the international climate conference in Belem, Brazil, next month.
“Something of a compendium of delays and obfuscation is more likely to be on the table and visible at COP30 than it would be if it weren't prevalent here at IMO,” Fenton said. “And it's very disappointing.”
