Global shipping to pay for pollution as IMO approves carbon pricing

A section of containers at the Port of Mombasa. March 3,2025 [Omondi Onyango,Standard] The global shipping industry is about to undergo its most dramatic transformation in decades. In a landmark decision that will reshape maritime trade, the International Maritime Organization (IMO) has approved a sweeping carbon pricing system that will penalize ships for greenhouse gas emissions starting in 2028. This means that a landmark agreement on carbon pricing for ships is now on track for global adoption. The new rules, finalized this week during tense negotiations at the IMO's 83rd session of the Marine Environment Protection Committee (MEPC) in London, introduce a two-tiered penalty system. Tier 1, will charge USD100 per tonne of CO2 equivalent for emissions between a ship's direct compliance target and base target. Tier 2, for emissions exceeding the base target, will attract a steeper price of USD 380 per tonne. This unprecedented move comes as part of the IMO's Net-Zero Framework under MARPOL Annex VI, marking the first time the shipping sector - responsible for nearly 3 percent of global emissions - will face mandatory financial consequences for its climate pollution. "Ships will now be held financially accountable for their environmental impact," said Emma Fenton senior director, climate diplomacy. "This change everything." The complex new system establishes annual greenhouse gas fuel intensity (GFI) targets for all large commercial vessels over 5,000 gross tonnage. Ships exceeding these limits will be required to purchase "remedial units" - effectively paying a carbon tax - through a newly created IMO Net-Zero Fund. The penalties escalate sharply depending on how far a vessel misses its targets, with the higher USD 380/tonne rate applying to the worst polluters. At the centre of the controversy lies the ambitious timeline. By 2030, ships must achieve a 21 percent reduction in emissions intensity compared to 2008 levels to avoid the steepest penalties - a target that several major shipping nations immediately denounced as unrealistic. The Saudi Arabian delegation, speaking for a bloc of 15 nations including Russia, Iran and several African states, warned the measures would "disproportionately burden developing economies" and could disrupt global trade flows. "These rules were designed by wealthy nations without proper consideration for their impact on food security and energy supplies," argued the Saudi representative during negotiations. The group went so far as to demand a formal vote on the measures - a rare challenge to the IMO's usual consensus-based process. Meanwhile, small island nations facing existential threats from rising sea levels expressed frustration that the deal didn't go far enough. "We're being asked to accept half-measures while our homes disappear," countered Vanuatu's Climate Minister Ralph Regenvanu,. The economic implications are particularly acute for trade-dependent developing nations like Kenya, where the Port of Mombasa serves as a critical gateway for East African commerce. Kenyan officials voiced concerns that the new carbon costs could ripple through supply chains, potentially increasing prices for everything from imported wheat to exported tea. "Unless there's substantial support for developing countries to transition, these measures risk becoming another burden for African economies," John Omingo. That fund, expected to generate USD40-60 billion annually by 2030, represents both the promise and the pitfalls of the new regime. While it will finance cleaner shipping technologies and port infrastructure upgrades, questions remain about how quickly these solutions can be deployed - and who will benefit first. As the shipping industry digests the new reality, analysts predict a scramble to adopt alternative fuels like green ammonia and hydrogen, along with renewed interest in wind-assisted propulsion systems. Major carriers like Maersk and MSC now face tough calculations about whether to invest billions in new vessel technologies or pay escalating carbon penalties. The coming years will see intense technical negotiations to finalize implementation details, with the first major review of the system scheduled for 2032. What's certain is that the era of unfettered fossil fuel use in global shipping is coming to an end - but whether this transition happens fairly or chaotically remains to be seen. For consumers worldwide, the changes may eventually appear in the form of slightly higher prices for imported goods. For the climate, they represent a long-overdue step toward taming one of the world's most polluting industries. And for the thousands of delegates who spent years hammering out this compromise, the work is just beginning. Omingo observed: "We've agreed on the destination. Now we have to build the road to get there." Despite the finalization of the text, the outcome was not unanimously welcomed. A bloc of countries, including Saudi Arabia, Iran, Iraq, Malaysia, Thailand, and the United Arab Emirates, formally reserved their positions. They argued that the final text may impose unfair economic burdens. On the opposite side, Pacific Island nations such as the Marshall Islands, Tuvalu, and Vanuatu voiced disappointment, stating that the new measures still fall short of what is needed to meet the urgency of the climate crisis. Ministers from Fiji, the Marshall Islands, Seychelles, Solomon Islands, Tuvalu, and Vanuatu refused to endorse what they termed as a weakened emissions pricing deal abstaining in protest of what they called a failure to align shipping with the 1.5C climate target. The Pacific nations, alongside allies from the Caribbean, Africa, and Central America, had pushed for a universal levy on shipping emissions to fund climate resilience and ensure deep cuts in pollution. Instead, they faced what Solomon Islands' Minister of Infrastructure Development, Hon. Manasseh Maelanga, described as a deal that "will cause greater instability" and allow shipping to "continue polluting." The rejected proposal would have imposed a strict carbon levy to accelerate the industry's transition while directing funds to vulnerable nations. Instead, the adopted measures backed by major economies fall short of the ambition needed, according to Pacific leaders. "We came as climate-vulnerable countries with the clearest solution," said Tuvalu's Minister Simon Kofe. "They asked us to settle for less while we are the ones losing the most." Regenvanu, singled out Saudi Arabia, the U.S., and fossil fuel-aligned states for blocking stronger measures, accusing them of "abandoning 1.5C." The Pacific's abstention marked a rare fracture in IMO negotiations, where consensus typically prevails. Seychelles' Minister Antony Derjacques questioned how major economies could justify a weak deal to their own citizens, let alone to island nations facing existential threats. Marshall Islands' Transport Minister Hon. Kendall said, "We couldn't take home an outcome that leaves us paying for rich countries' transition while they leave us behind." Despite the setback, Pacific ministers vowed to continue the fight. "We will be back," declared Ambassador Ishoda, signaling plans to rally allies ahead of the next IMO meeting in October.

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