Shipping Industry & Emissions

The 83rd session of the International Maritime Organisation ‘s Marine Environment Protection Committee (MEPC-83) discussed introducing a Market-Based Measure (MBM) to curb shipping emissions through a global levy, marking a potential first in mandatory sector-wide carbon pricing.

Key-highlights of the Session

• The MEPC-83 session marked a critical step by agreeing in principle to introduce a Market-Based Measure (MBM) to reduce greenhouse gas (GHG) emissions from international shipping.
• Global Emissions Levy: The committee supported moving towards an emissions pricing mechanism, where shipping companies would pay a set fee per tonne of CO? emitted.
• This would make international shipping the first global sector with a universal carbon pricing structure, if adopted.
• The MBM framework is intended to help meet the goals of the IMO’s Revised GHG Strategy, which aims to achieve:
  • Net-zero GHG emissions from international shipping by or around 2050.
  • Intermediate checkpoints: 20-30% reduction by 2030 and 70-80% by 2040, compared to 2008 levels.
• The committee agreed to finalise the MBM design and adopt a legally binding measure by 2025.

What Were the Positions of Different Countries and Blocs?

• Oil-exporting nations, led by Saudi Arabia, opposed the move. Their primary concern was to protect their fossil fuel-based economies.
• Small Island Developing States (SIDS) and Least Developed Countries (LDCs) supported a strong carbon levy, hoping to channel revenues into green development and climate resilience.
• China and other major shipping nations backed minimal levies, seeking to protect their competitive advantage in global trade while slowly transitioning to alternative fuels.
• Scandinavian countries, such as Norway, sought recognition for their early investments in clean shipping technologies, proposing credit systems to reward past efforts.
• Brazil pushed for a rapid transition to methanol as a marine fuel.
• Maritime powers like Greece remained sceptical about the levy, citing concerns about economic feasibility and implementation complexity.

What Does This Mean for India?

India is expected to benefit in multiple ways from the new emissions framework:

• Short-Term Impact: According to UNCTAD estimates, India’s shipping logistics costs may increase by only 5–8% by 2030 and up to 33–35% by 2050. However, the actual trade volumes are unlikely to be significantly affected.
• Limited Exposure: India operates 236 large ships, but only 135 are involved in international voyages, which are subject to the MBM. Domestic fleets are not covered by this framework.
• Fuel Cost Increase: India currently spends about $400 million per year on ship fuel. This may rise by approximately $108 million by 2030—a manageable increase in the context of India’s growing economy.
• Green Hydrogen Opportunity: India’s National Hydrogen Mission aims to make the country a global exporter of green fuels. Indian hydrogen standards already meet IMO’s emission thresholds, making it eligible for reward mechanisms under the levy system.
• Strategic Ports: Indian ports such as those in Gujarat and Andhra Pradesh are preparing to offer green hydrogen bunkering services, placing India at the forefront of future maritime energy hubs.

Current State of India’s Shipping Industry

• India operates a fleet of around 1,500 merchant vessels, including about 236 ships above 5,000 gross tonnage. However, only 135 of these larger vessels are engaged in international voyages, which makes them subject to global decarbonisation measures like the IMO’s proposed emissions levy.
• India’s Maritime Trade Dependency: Roughly 95% of India’s trade by volume and around 70% by value is carried by sea. While India owns and operates a domestic fleet, a significant portion of trade is still dependent on foreign-flagged vessels.
• India currently spends approximately USD 400 million annually on marine fuel for its international fleet. If decarbonisation measures are implemented (like the MBM), this could increase by around USD 108 million by 2030—a manageable burden in relation to overall trade volume.
• MBMs apply only to international shipping. India’s coastal and domestic shipping sector, which plays a key role in regional logistics, remains outside the purview of these global emissions levies.

Why the Global Shipping Industry is a major polluter?

• Heavy use of Fossil Fuels: Ships predominantly run on heavy fuel oil (HFO) or marine diesel—both high in carbon content. These fuels emit large quantities of CO?, sulfur oxides (SOx), nitrogen oxides (NOx), and particulate matter, contributing significantly to air pollution and climate change.
• Sheer Scale of Operations: Global shipping handles over 80% of world trade by volume, operating across long distances with large, fuel-intensive vessels. This makes it inherently energy- and emissions-intensive, even when compared to other transportation sectors.
• Difficulties in Decarbonisation: Unlike road or rail, shipping lacks cost-effective, scalable alternatives to fossil fuels. Clean technologies like green hydrogen, ammonia, or methanol are in nascent stages and face infrastructural, technical, and financial hurdles.
• International Nature of Shipping: Ships frequently cross multiple jurisdictions. This complicates emissions regulation and enforcement, as no single country is fully accountable—creating a regulatory gap in climate governance.
• Impact
  • The shipping sector emits approximately one billion metric tonnes of CO? annually, accounting for about 8% of total global greenhouse gas emissions.
  • If it were a country, it would be the sixth-largest emitter globally—between Germany and Japan.
  • Apart from greenhouse gases, shipping causes acid rain (due to SOx and NOx) and contributes to black carbon pollution, which accelerates the melting of Arctic ice.