World’s first global carbon tax was about to be introduced. Trump dealt a ‘devastating blow’ to the deal.
With relatively little fanfare, the first-ever global carbon tax was poised to be formally adopted as an international agreement this year.
The International Maritime Organization, or IMO, the United Nations agency overseeing global shipping, had drafted a net-zero framework to move the sector toward cleaner fuels — a crucial step in the energy transition, since the industry that handles around 90 percent of global trade also accounts for 3 percent of the world’s emissions.
Then, in April, the Trump administration abruptly withdrew from IMO negotiations. As a vote over the framework approached this month, the administration began pressuring other nations to abandon the deal. The administration also released a statement, warning that the U.S. was considering additional tariffs, visa restrictions, additional port fees, and sanctions on officials from countries that voted for the framework. President Trump himself took to Truth Social, calling the proposal a “global green new scam tax on shipping.”
The campaign succeeded. Last week, at the tail end of negotiations, Saudi Arabia abruptly called for a vote to adjourn the IMO meeting for one year without making a decision on the net-zero framework. Since IMO rules dictate that a call to adjourn precedes all other considerations, the proposed delay was voted on immediately and passed with 57 countries in favor and 49 against. (Twenty-one countries abstained from the vote.) That means that it will be another year, at least, before the framework can be officially inked.
Close observers of the IMO’s decarbonization efforts told Grist that U.S. obstruction was a decisive factor in preventing the framework’s adoption.
“It’s fair to say that the retaliatory measures and punitive threats that were shared by the U.S. administration in advance of the meetings played their part,” said Em Fenton, a senior director at Opportunity Green, a U.K.-based climate group that has been closely tracking the IMO negotiations. “The outcome last week is a devastating blow for climate multilateralism.”
The IMO has been inching toward emissions rules for several years, but the effort ramped up in 2023 when the agency’s 176 member countries agreed to a greenhouse gas strategy that would commit them to net-zero emissions by about 2050. In order to reach that goal, countries began negotiations on legally binding measures that included a standard capping the carbon-intensity of fuel used by shipping companies, as well as an economic measure to enforce that standard, which could take the form of a levy or carbon trading mechanism.
On the economic measure, countries were split. An ambitious coalition of more than 64 countries, including European Union countries, the United Kingdom, Pacific and Caribbean nations, and African countries, proposed a relatively high flat tax on all maritime emissions. Under their proposal, every ton of their greenhouse gas emissions would be priced at the same level across the board. Another set of countries led by China, however, were in favor of a carbon trading mechanism that allowed countries to offset their emissions through carbon credits. (China and other emerging economies are large exporters, and a flat fee, they argued, would hurt businesses and reduce their competitiveness.)
Ultimately, the countries landed on a compromise with a two-tier system: High emitters in the top tier could engage in some amount of carbon trading. Those in the bottom tier would pay the levy based on a fee per ton of emissions. And those who comply with the zero or near-zero emissions fuel requirements would receive financial rewards. This approach became the net-zero framework that was supposed to be voted into effect this year.
The shipping industry largely welcomed the framework. For one, the industry has had record profits in recent years. A report by Opportunity Green found that 139 of the world’s largest shipping companies, which make up more than 90 percent of the global fleet, made $340 billion in profits from 2019 to 2023. The 10 largest companies were effectively taxed at less than 10 percent on average — far lower than the average global corporation tax rate of 21.5 percent.
The industry was also eager for regulatory certainty. Ahead of the meeting last week, a group of trade organizations representing the shipping industry issued a statement calling for the adoption of the framework. “Only global rules will decarbonize a global industry,” they noted. “Without the framework, shipping would risk a growing patchwork of unilateral regulations, increasing costs without effectively contributing to decarbonization.”
With the framework now in jeopardy, the path forward is unclear. Although the shipping talks won’t resume for another year, Fenton said countries should push for additional technical clarity during other interim meetings to reach a consensus and ensure the framework is adopted next year.
Meanwhile, cities and ports across the world have been taking steps to green their infrastructure. Alisa Kreynes, a director of the ports and shipping program at C40, a global network of mayors taking climate action, pointed to various initiatives already underway to reduce carbon emissions from the shipping industry. Cities have built green shipping corridors, which are trade routes where ports and other partners work together to transition to zero or near-zero emission fuels. Ports have also begun establishing stricter emission standards for trucks, and supported the development of offshore wind.
“The way we are reacting is that cities continue to deliver a just maritime transition, despite what happened at the IMO last week,” Kreynes said. “The cities will continue to push forward with advancing equitable port and shipping decarbonization.”
But those measures won’t put a significant dent in the industry’s primary source of emissions, which is the massive, fuel-hungry boats that crisscross the globe delivering goods. And the collapse of IMO negotiations rings as a warning about the fragility of international cooperation. The dynamic could continue at COP30, the international climate conference taking place in Belém, Brazil, next month.
“The sort of playbook of delay-and-obfuscate is more likely to be on the table and visible at COP30 than it would have been if it had not prevailed here at the IMO,” said Fenton. “And that is hugely disappointing.”
This story was originally published by Grist. Sign up for Grist’s weekly newsletter here.
