Discussions on the International Maritime Organization’s (IMO) proposed shipping carbon tax have failed to narrow the stark differences between nations. While its introduction was strongly considered last year, opposition from major oil-producing countries and the U.S. led to a delay. This month’s working meeting also failed to reach a consensus, suggesting that the final outline will likely emerge at the year-end plenary session.
As global environmental regulations tighten, shipping companies worldwide are directly linking their vessel ordering and replacement strategies to these developments. This has complicated the calculations for South Korea’s shipbuilding industry, which has been focusing on high-value, eco-friendly vessels.
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According to foreign media and industry sources on Tuesday, the IMO held a working meeting last week to discuss approaches for shipping decarbonization and implementation of the Net Zero Framework (NZF). However, they failed to reach an agreement between supporting and opposing countries.
Specifically, while 38 member countries supported the NZF, 17 expressed opposition. The IMO plans to continue these discussions at the 85th Marine Environment Protection Committee (MEPC) meeting scheduled for late November to early December this year.
The IMO’s Net Zero Framework centers on a shipping carbon tax that would impose a tax of up to 380 USD per ton on carbon emissions from large vessels over 5,000 tons. This massive regulatory proposal is estimated to generate annual carbon tax revenue of around 10 billion USD.
Despite majority support from member countries, the NZF’s implementation remains highly uncertain, primarily due to strong opposition from the influential U.S. The Trump administration has threatened to retaliate against countries supporting the NZF through various means, including blocking U.S. port access, imposing visa restrictions, and levying fees.
At last October’s MEPC meeting, member countries, particularly oil-producing nations including the U.S. and Saudi Arabia, clearly opposed the NZF’s introduction. A Saudi proposal to postpone discussions received majority support, leading to a failed vote on the NZF.
Faced with resistance from the U.S. and several other countries, this meeting saw multiple proposals to ease existing regulatory measures. Liberia, the world’s largest flag state, suggested that greenhouse gas regulation intensity should reflect the actual availability of eco-friendly fuels in the market, arguing that regulations should only be activated when sufficient supplies exist.
Japan proposed creating a fund through voluntary contributions from shipowners instead of imposing mandatory fines. The IMO plans to use funds raised from the carbon tax for investments in green technologies, but Japan suggests replacing this with voluntary donations. There are also reports of proposals to relax annual carbon reduction targets.
An industry insider noted that it’s seeing a growing trend of member countries being cautious of U.S. reactions. While the long-term eco-friendly paradigm remains unchanged, it’s difficult to predict the direction of the IMO discussions, so it’s closely monitoring the situation.
If the introduction of regulations such as the carbon tax continues to be delayed or if regulatory levels are significantly lowered, shipping companies may face disruptions in their ordering plans. This could negatively impact the medium- to long-term business strategies and eco-friendly research and development (R&D) investment plans of South Korean shipbuilders like HD Korea Shipbuilding & Marine Engineering, Hanwha Ocean, and Samsung Heavy Industries.
However, some predict that the ship retrofitting market could become more active. Choi Min-ki, an analyst at Shinhan Investment Corp, pointed out that as the IMO’s regulatory decisions are delayed and the prices and supply chain stability of low-carbon fuels remain insufficient, the economic viability of retrofitting existing vessels to reduce fuel consumption will likely become more pronounced.
