US rejects IMO’s Net-Zero Framework: ING commentary
Following the announcement that the US has rejected the IMO's Net-Zero framework and threatened retaliatory measures against countries that support it, Rico Luman, Senior Economist, Transport & Logistics, at ING, provides the following commentary:
"The US statement to reject the Net-Zero Framework that has been negotiated at MEPC 83 likely complicates the final adoption scheduled in October. Although the proposal is due to be accepted by a two thirds majority, the US seems unwilling to accept its implementation, which puts the authority of IMO at risk.
"The climate agreement makes a start with CO2-pricing and that’s a significant step in the right direction in order to achieve net-zero by 2050 in the shipping sector. It leads to higher shipping prices, but it will also fund the uptake of renewable fuels.
"Obviously, the system, when enforced in 2027, will apply globally and also applies to journeys to and from the US. If the US doesn’t accept the effectuation, this will complicate the whole system. This could also make other countries doubt, because they fear the consequences as the US could retaliate. This puts the final adoption in danger.
"There may be a different – more climate friendly - administration in the US in 2028, when the first reporting kicks in, but delay of the climate strategy will only make it even more difficult to achieve the decarbonisation targets in 2040 and 2050. There’s not much time left as implementation usually takes years of preparation (also to enable companies to prepare themselves) and CO2 emission failed to get on a downward track over the last years. Also, several container liners and large shippers have advocated to put a price on carbon emissions as well to flatten the level playing field with low carbon fuels.
"The proposed strategy is likely not an end stage but a start. All in all, it will be a blow if this derails the adoption and implementation of its new climate strategy, which was meant to be a breakthrough on a global level."