The world's largest maritime nations gathered at the International Maritime Organization (IMO) headquarters in London yesterday for a four-day meeting to vote on the adoption of a so-called Net-Zero Framework (NZF) aimed at reducing global carbon dioxide gas emissions from the shipping sector. This will be the first time that a UN organisation levies a global carbon tax on the world.
IMO member nations agreed on the contents of the regulatory framework in April this year. The aim is to adopt it at this meeting.
Most ships run on heavy fuel oil that releases carbon dioxide and other pollutants.
“The Administration unequivocally rejects this proposal before the IMO and will not tolerate any action that increases costs for our citizens, energy providers, shipping companies and their customers or tourists,” a joint statement issued by US Secretary of State Marco Rubio, Secretary of Energy Chris Wright and Secretary of Transportation Sean Duffy said.
“The economic impacts from this measure could be disastrous, with some estimates forecasting global shipping costs increasing as much as 10 per cent or more. We ask you to join us in rejecting adoption of the NZF at the October meeting and to work together on our collective economic and energy security,” they noted.
The NZF sets a marine fuel standard that decreases, over time, the amount of greenhouse gas emissions allowed from using shipping fuels. The regulations also establish a pricing system that would impose fees for every ton of greenhouse gases emitted by ships above allowable limits.
There's a base level of compliance for the allowable greenhouse gas intensity of fuels. There's a more stringent direct compliance target that requires further reduction in the greenhouse gas intensity.
Ships with the highest emissions would have to buy those credits from other ships under the pricing system, or from the IMO at $380 per tonne of carbon dioxide equivalent, to reach the base level of compliance. In addition, there's a penalty of $100 per tonne of carbon dioxide equivalent to reach direct compliance.
Ships that meet the base target but not the direct compliance must pay the $100 per ton penalty as well. Ships whose greenhouse gas intensity is below a certain threshold will receive rewards for their performance.
The fees could generate $11 billion to $13 billion in revenue annually. That would go into an IMO fund to invest in fuels and technologies needed to transition to green shipping, reward low-emission ships and support developing countries so they aren't left behind with dirty fuels and old ships.
The United States is considering the actions against nations that support this global carbon tax on American consumers. It plans to pursue investigations and consider potential regulations to combat anti-competitive practices from certain flagged countries and potential blocking vessels registered in those countries from US ports.
It may impose visa restrictions, including an increase in fees and processing, mandatory re-interview requirements and revisions of quotas for C-1/D maritime crew member visas.
The US government may impose commercial penalties stemming from US government contracts on ships flagged under nations in favour of the NZF. It may impose additional port fees on ships owned, operated or flagged by countries supporting the framework.
The United States is evaluating sanctions on officials sponsoring activist-driven climate policies that would burden American consumers, the joint statement added.
ALCHEMPro News Desk (DS)
Receive daily prices and market insights straight to your inbox. Subscribe to AlchemPro Weekly!
marketing@alchempro.com
