The shipping industry has been facing an acute crisis. For the first time in modern history, both of the Middle East’s critical waterways — the Strait of Hormuz and the Red Sea — were effectively closed for the past several weeks. Since early March, as Iran and Houthi rebels threatened ships attempting to cross these waterways and blocked the movement of oil in response to U.S.-Israel bombing, crude oil prices have soared. Maritime fuel costs in turn rose so sharply that some biofuels are now cheaper. And more than 150 ships were marooned, unable to safely pass through the strait, which carries 20% of the world’s oil supply. Others have been making long detours around the southern tip of Africa, adding to the mounting cost of shipping and weeks of travel time. After briefly reopening the strait, Iran seized the waterway once again over the weekend, restricting ships from passing.
It’s under these conditions that the International Maritime Organization, the United Nations agency overseeing global shipping, is meeting this week to discuss reducing the climate change impact of the shipping industry, which is responsible for 3% of the world’s greenhouse gas emissions. For the last three years, the 176 countries that are members of the IMO have been working toward adopting the so-called net-zero framework, an international policy requiring shippers to pay a fee for every ton of greenhouse gas emissions above a certain threshold. These proceeds would then be used to drive the development of alternative, cleaner fuels and to support lower-income countries.
But last summer, just as nations were nearing a vote to formally adopt the framework, the Trump administration threw a wrench in those plans. Secretary of State Marco Rubio, along with the heads of other agencies, released a statement warning countries that voting for the framework would result in a number of punitive actions by the United States, including visa restrictions, additional tariffs, and port fees. Seemingly overnight, countries that were previously in favor of the net-zero goal seemed to lose their nerve. And at an October meeting where the framework was expected to be adopted, countries voted instead to delay the decision by at least a year.
In the months since, technical work has continued, but the political backing required to adopt the international agreement has largely dissipated. The consensus that once seemed within reach has fractured.
“The Iran war has certainly complicated things,” said Evelyne Williams, a research associate with the Center on Global Energy Policy at Columbia University. “It’s tricky because if the U.S. does want to kill this thing, it has considerable leverage in its LNG market to threaten countries.”
Williams said the meeting this week will demonstrate where countries stand and what their priorities are, given the current crisis. Several countries have proposed alternatives to the framework in the past few months. One proposal from Japan seeking middle ground considers doing away with the fee structure altogether and allowing shippers that emit excess greenhouse gases to trade away their surplus with companies in compliance — essentially a carbon trading system. Another proposal — by Liberia, Argentina, and Panama — does away with the fees, too, eliminating the crux of the framework that incentivizes compliance. A group of petrostates is calling for the cancellation of the framework altogether, while island states, which are among the most vulnerable to climate change, are calling for the framework to be adopted as originally planned or a more ambitious carbon levy.
For its part, the U.S. has maintained its position that the net-zero framework essentially functions as a carbon tax, a move it predicts will raise costs for American consumers. In a separate proposal, the Trump administration has called for scrapping the framework and calling for a new proposal that doesn’t penalize fuel types that are more carbon-intensive and does not include an “economic element,” such as a tax or levy.
“The United States submits that the most appropriate path forward is to end consideration of the IMO Net-Zero Framework entirely,” it noted in the proposal. “This would be a logical development given the plethora of existing alternative proposals and clear lack of consensus over the IMO Net-Zero Framework.”