In a landmark decision poised to reshape the maritime industry, member countries of the UN’s International Maritime Organization (IMO) have agreed to implement the world’s first global carbon pricing mechanism for shipping. The move, widely seen as a pivotal step toward decarbonizing a sector responsible for nearly 3% of global emissions, marks a significant shift in international climate governance—especially given that shipping emissions are not currently covered under the Paris Agreement.
A New Era in Maritime Emissions Control
The agreement, reached during the closing plenary on Friday, received strong support from 63 countries, including major economies such as India, Brazil, China, the EU, Japan, South Africa, and Singapore. India’s Shipping Ministry represented the country in the negotiations. The proposal outlines a global carbon tax on shipping emissions, with formal adoption expected by October 2025. While technical specifics are still under discussion, the policy is set to begin enforcement in 2028.
By then, ships will either need to shift to cleaner, low-carbon fuel alternatives or face financial penalties. Specifically, vessels that continue using conventional fossil fuels will incur a fee of $380 per tonne for the most carbon-intensive emissions and $100 per tonne for remaining emissions that exceed a yet-to-be-defined threshold.
$30–40 Billion in Revenues by 2030
The tax is projected to raise an estimated $10 billion annually, totaling up to $40 billion by the end of the decade. These revenues are expected to be reinvested into clean shipping technologies, infrastructure upgrades, and potentially into supporting developing nations in adapting to greener maritime trade.
However, the emissions cut expected from this policy remains modest. According to current assessments, the mechanism could bring about a 10% reduction in absolute emissions from shipping by 2030. This falls short of the IMO’s own revised targets announced in 2023, which call for a minimum 20% reduction—and ideally up to 30%—by the same year.
Divided Opinions: A Compromise in Motion
Despite the agreement’s historic nature, it wasn’t without contention. Key petro-states like Saudi Arabia, the UAE, Russia, and Venezuela strongly opposed the tax. Meanwhile, the United States, though not entirely against the principle, withheld support for several core components of the plan. One of the key compromises was basing the levy on emissions above a set decarbonization target rather than charging per tonne of total emissions. This adjustment was aimed at winning broader consensus but has also led to concerns about the policy’s effectiveness in driving rapid change.
“This agreement is a compromise,” said Suranjali Tandon, Assistant Professor at the National Institute of Public Finance and Policy. “Although it introduces incentives for shifting to alternative fuels, the transition is expected to be gradual. The real test will be how countries like the US respond—particularly if there are trade-based retaliatory measures—and how the substantial revenues are redistributed.”
Why This Matters
The global shipping industry is often viewed as a difficult sector to decarbonize due to its international nature, fragmented regulation, and dependence on heavy fuel oil. Introducing a global carbon tax not only brings accountability but also paves the way for innovation in clean marine technologies.
Moreover, the levy adds a new dimension to climate policy. Since shipping emissions were excluded from the Paris Agreement, this initiative fills a significant regulatory gap, signaling that no sector can remain untouched in the broader push toward net-zero emissions.
Challenges Ahead
Though the policy framework is a crucial milestone, much remains uncertain. Countries must now work through complex negotiations to finalize technical details—including defining emissions baselines, establishing enforcement mechanisms, and agreeing on how to allocate and utilize generated revenues.
Additionally, shipping companies face the daunting task of adapting fleets, retrofitting vessels, and sourcing new fuels—all within a tight timeline. Analysts warn that without complementary measures, such as investments in green ports and global supply chain upgrades, the full benefits of the levy may take years to materialize.
The IMO’s decision represents a bold yet cautious first step in making the global shipping industry more climate-responsible. As nations gear up to finalize the agreement and put it into action, the world will be watching closely. This policy could set a precedent for other hard-to-abate sectors and, perhaps more importantly, test global resolve in uniting for the climate beyond traditional frameworks.
