Historic global carbon-reduction deal agreed at IMO 

After nearly a decade of tense negotiations, the international shipping sector has taken a major step towards reducing its environmental footprint. At a meeting of the UN’s International Maritime Organization (IMO) in London, member states agreed on a groundbreaking deal aimed at cutting emissions from the global shipping industry. Starting in 2028, ships will be required to adopt cleaner fuels or face penalties. This deal is the first-ever international mandate on emissions targets for the shipping industry. While the agreement marks significant progress, critics argue it lacks the ambition needed to meet the world’s climate targets. (BBC) 

Why does this matter? 

Shipping is a major emitter of greenhouse gases, responsible for 3% of the global total emissions. Yet, the industry is not covered by the Paris Agreement, leaving a regulatory gap. In 2023, IMO member states agreed to a goal of achieving net-zero emissions by 2050, with interim targets of reducing emissions by 30% by 2030 and 80% by 2040 compared with a 2008 baseline. However, in 2023 nations had not decided on the measures would be used to reach net zero ambitions. Until the last few years, negotiations on concrete measures to reach these targets have been exceedingly slow-moving. The latest framework represents the culmination of nearly 30 years of negotiations within the IMO. And these policies will shape the trajectory of global shipping going forward. 

As one of the world’s largest exporters of bulk commodities reliant on international shipping, Rio Tinto is directly exposed to the evolving regulatory landscape for maritime emissions. The IMO’s new carbon pricing and fuel requirements could raise freight costs, reshape global shipping routes, and accelerate demand for low-carbon logistics solutions. As the company deepens its decarbonisation commitments, partnering with carriers that comply with or exceed IMO targets could become a reputational and financial advantage.

The new agreement from the April meeting of the IMO’s states interim reduction targets for emissions intensity have been brought down to 4% in 2028, which will rise to 30% in 2035. Whereas the upper target will increase from 17% in 2028 to 43% in 2035. To meet these targets ships are expected to switch to less polluting fuels. Ships unable to sufficiently reduce their emissions will pay a penalty. If failing to meet the lower targets, they can purchase “remedial units”, at $380 per unit which funds the newly established “net-zero fund”. Or, in a carbon credit-style exchange, ships could purchase surplus units from others that have excelled in reducing carbon intensity. The second tier of penalty applies to ships that meet the lower targets but fail to reach the more stringent upper aims. These ship owners would pay $100 per unit into the net-zero fund. Overall, the agreed costs and targets fall roughly in the middle of targets proposed by member countries.  

Although the deal at the IMO represents a significant shift in global maritime regulations, the framework is not without controversy. Some emerging economies and oil-producing nations, such as Saudi Arabia, opposed the carbon pricing measures, arguing they would place a financial burden on global trade and raise commodity prices. The US also withdrew partway through the negotiations, calling the carbon pricing system “blatantly unfair.” Despite the opposition, the deal was passed through a majority vote, with the framework aiming to raise funds for climate action, including supporting the adoption of low-carbon fuels. 

Despite many laudatory responses, early analyses by UCL and the NGO coalition Transport and Environment found that the agreed upon framework would likely cut emissions no more than 10% compared with a 2008 baseline by 2030. And 90% of emissions will escape penalties under the IMO’s new rules. The UCL research group sees this agreement as "weak" and a watering down of previous targets from the IMO. 

While the IMO's new framework is undoubtedly a global milestone, more aggressive follow through will be needed to decarbonise the shipping industry fully.