Pricing Mechanism for the Shipping Industry

At the 83rd Marine Environment Protect Committee (MEPC) meeting, the International Maritime Organization (IMO) decided to approve a two-tier global greenhouse gas (GHG) pricing mechanism for the shipping industry, becoming the first of its kind in any transport sector. The proposal passed by a majority vote, with 63 nations in favour with only 16 opposing, with one more vote in October, requiring a two-thirds majority to pass.

The initial framework will introduce mandatory emissions targets starting in 2028, requiring ships to gradually cut fuel intensity by at least 30% by 2035. The framework will also impose a levy for excessive emissions at $380 per tonne of CO2 equivalent for non-compliant vessels (Tier 2) and $100 per tonne of CO2 equivalent for those partially meeting the required targets (Tier 1). Ships that exceed these compliance standards may earn tradeable “surplus units” as emission credits.

By the time it enters into force in 2027, the levy is projected to generate up to $13 billion annually, with a formal review of the mechanism occurring at least every five years to ensure it remains effective in driving decarbonization.