Q&A: The shipping industry climate goals backed – and blocked – by China
Anika Patel
07.14.23Anika Patel
14.07.2023 | 1:35pmLast week, the International Maritime Organization (IMO) set new climate goals for shipping, including a target of net-zero “by or around” 2050.
However, it did not agree on fuel standards or a shipping carbon levy, to help drive and pay for the transition.
China, seen as a key opponent of a levy, is a major player in the sector. It is home to the world’s largest shipping fleet, biggest and most numerous ports and largest shipbuilding sector.
In a diplomatic memo circulated at the IMO talks and seen by Carbon Brief, China set out its concerns about “overly ambitious” climate goals for shipping and the potential impact of emissions reduction measures.
In particular, it opposed a levy on the carbon content of shipping fuels, arguing this would place a disproportionate burden on developing nations.
Instead, it called for more “practical” timelines, a trading scheme to encourage emissions cuts and a narrower scope of emissions included.
In this article, Carbon Brief looks at China’s role at the talks and its efforts to tackle shipping emissions.
- What was China’s role at the IMO talks?
- What was behind China’s position at the talks?
- Why was China worried about shipping costs?
- Is China doing anything to decarbonise shipping?
- What happens next for the IMO and climate?
What was China’s role at the IMO talks?
Talks at the IMO headquarters in London last week agreed a new climate strategy for the world’s shipping sector, including a net-zero emissions target for the first time.
The deal also sets “indicative checkpoints” for emissions in 2030 and 2040, as well as a goal for at least 5% of shipping fuel to come from zero- or near-zero sources.
At the talks, however, China had opposed “unrealistic” proposals for shipping to reach net-zero emissions by 2050 “at the latest”, according to a diplomatic memo seen by Carbon Brief.
It had also opposed emissions interim targets for 2030 and 2040, shipping fuel carbon standards based on the full lifecycle from “well-to-wake” and a shipping carbon levy.
In place of “well-to-wake” fuel standards, which China argued would “transfer the national emissions reduction responsibility to international shipping”, it called for controls on the “actual emissions” from ships on a limited “tank-to-wake” basis.
Instead of aiming for net-zero by 2050 “at the latest”, China proposed the use of “flexible expressions” to frame the IMO’s ambition, such as net-zero emissions “around mid-century”, which it said was “more practical”. The deal, ultimately, aims for net-zero “by or around” 2050.
And, instead of a carbon levy, China proposed an “International Maritime Sustainable Fuels and Fund” (IMSF&F), noted Chinese shipping news outlet Eworldship. The IMSF&F would set emissions limits, with traded credits for over- or under-achievement and an alternative option to make payments into a “sustainable shipping fund”.
According to Chinese consultancy Xinde Haishi, China’s proposal would control emissions, but minimise administrative burdens and impacts on developing countries.
What was behind China’s position at the talks?
As the talks opened in London, foreign ministry spokesperson Wang Wenbin responded to questions on the memo at his regular press conference, saying China “highly values and actively supports IMO’s efforts to address climate change”. Wang said:
“[The] IMO should follow the principle of common but differentiated responsibilities, take into consideration different national conditions, accommodate the legitimate concerns of developing countries, and promote the formulation of a fair and practical greenhouse gas (GHG) emission reduction strategy and relevant measures for the international shipping industry.”
China’s memo, previously reported by the Financial Times and Reuters, warned that “overly ambitious” targets would harm global trade and “basic livelihood[s]”:
“An overly ambitious emission reduction target will seriously impede the sustainable development of international shipping, significantly increase the cost of the supply chain, and will adversely impede the recovery of the global economy and cause detrimental impacts to the basic livelihood of the people.”
The state-controlled newspaper Global Times also called attention to a phrase in the IMO’s statement that “we have to pay more attention to support developing countries”.
Yasiru Ranaraja, co-founder and director of Belt & Road Initiative Sri Lanka (BRISL), tells Carbon Brief that many global-south nations face “delicate challenges” in balancing their commitment to fighting climate change with other national priorities, such as poverty alleviation, energy security and industrial growth.
Abbasov tells Carbon Brief that wider geopolitical tensions soured the IMO talks: “Most of the conversations in the room were about the geopolitical tensions outside the room.”
Participants at the IMO meeting, speaking to Carbon Brief on condition of anonymity, say another factor was the contrast between a “by 2050” net-zero target for shipping – a so-called “hard-to-abate” sector – and China’s own goal for carbon neutrality by 2060.
One delegate also postulated that China’s objection to the levy was that it would have generated revenues that China did not control. (China’s memo called for any funds raised on shipping to be managed by the IMO and used “only” within the sector.)
Why was China worried about shipping costs?
One of China’s biggest concerns, according to the memo, is that emissions reduction measures would increase shipping costs. It said measures based on “aggressive targets” would “lead to a significant increase in maritime transport costs”.
The original proposals for a shipping levy were put forward by a group of Pacific Island nations. “Pacific island countries always come with the highest ambition and push to the end for it,” Vanuatu climate minister Ralph Regenvanu told journalists earlier in the week.
However, China framed the levy as a “developed country” proposal in the diplomatic memo. It was instrumental in the building of a coalition of nations to oppose the motion, including India, Brazil, Saudi Arabia, and other developing countries, plus Australia.
It warned that using the proceeds from a shipping levy to fund wider climate action would “make developing countries bear the climate change financing responsibility which should be borne by developed countries”.
Faig Abbasov, director for shipping at NGO Transport & Environment, tells Carbon Brief that he sees China’s efforts to build the coalition as “more aggressive” than at previous IMO meetings.
In his view, this was driven by a recognition that the meetings could have led to the “deal of the decade” in decarbonising the sector. He credits this urgency with the high level of coordinated opposition to the proposals.
Abbasov tells Carbon Brief that while China’s position at the IMO talks mirrors its stance at previous climate negotiations, he found it to be “more aggressive” in building a coalition of opposition to the shipping levy, including Saudi Arabia, India and others.
(A comment for the Sydney Morning Herald by environment and climate editor Nick O’Malley says Australia and Brazil also opposed the levy to protect seaborne trade from higher costs.”)
Is China doing anything to decarbonise shipping?
China is home to the world’s largest shipping fleet, biggest and most numerous ports and the world’s largest shipbuilding sector. As such, the IMO targets are a challenge for China, but also an opportunity.
The shipping industry is responsible for around 3% of global greenhouse gas emissions. National data is sparse, but one study puts China’s contribution at 8% of the global total.
(The Organisation for Economic Cooperation and Development is working on national figures, Robbie Andrew of Norwegian climate institute Cicero tells Carbon Brief.)
At the national level, China has several policies, such as the 14th five-year plan on green transportation, which include targets for lowering shipping emissions.
Several local governments, such as Shenzhen, have issued legislation on the “green and low-carbon transformation” of shipping. Meanwhile, the Shanghai regional emissions trading scheme covers the shipping sector.
China is also exploring the use of low-carbon “alternative fuels”, with state-owned China Merchants Group developing ammonia-fueled ships. China’s first hydrogen fuel cell-powered boat was launched earlier this year.
China accounted for half of global shipbuilding orders in 2022, says Hellenic Shipping News. It also “bag[ged]” half of orders for “dual-fuel green vessels”, SeatradeMaritime reports, quoting Li Yanqing, secretary-general of China Association of the National Shipbuilding Industry, saying “green fuel for vessels is the general trend”.
Analysis from Lloyd’s List says: “Shipbuilding contracts for dry bulkers and tankers adopting new fuel technologies are expected to grow substantially from 2025 onwards.”
Some of China’s decarbonisation efforts are happening in tandem with other nations: China Merchants Group is working with Japanese and Italian partners to develop ships fuelled by ammonia or other new energy sources; the Port of Shanghai has established a “green shipping corridor” with the Port of Los Angeles; and Sri Lanka’s Hambantota Port, which was funded and built by China, supplies fuel designed to meet the IMO’s 2020 sulphur regulations.
What happens next for the IMO and climate?
While talks at the IMO will continue over how to actually cut emissions to net-zero “by or around” 2050, Abbasov argues national or regional action will need to become the main focus. He says: “For us it’s very clear, the 1.5C goal for shipping is dead at the IMO.”
Other organisations, as outlined by Carbon Market Watch, believe the agreement is indicative of “a pattern of behaviour” that raises “further questions about the institution’s suitability as a venue for tackling shipping’s serious impact on the climate and oceans”, particularly in terms of the IMO’s “institutional transparency”.
Ranaraja disagrees, telling Carbon Brief that the IMO should remain the key venue for international efforts to tackle shipping emissions:
“Apart from addressing a just transition for the cleaner shipping industry, there is a greater communication challenge between specific divides over GHG emissions, and underrepresentation of issues of global south when it comes to regulations GHGs, and to undo the long-standing legal conflict of the ‘common but differentiated responsibilities’ approach…Strengthening the participation of IMO rather than weakening its position by implementing regional regulations bypassing the proceedings…will be essential for international cooperation.”
Josh Gabbatiss’s reporting for Carbon Brief at the IMO talks contributed to this article.
A shorter version of this article first appeared in Carbon Brief’s China Briefing newsletter on 13 July 2023.