U.S. withdrawal from IMO decarbonization talks worries shipping, shipbuilding sectors

The IMO is a United Nations agency established to address international issues related to shipping and shipbuilding.

The IMO is strengthening environmental regulations related to ships, aiming for net zero greenhouse gas emissions by 2050, but has faced a setback due to U.S. opposition. If environmental regulations fall through, shipping companies will see a reduction in expense burdens, but the shipbuilding industry may experience a decrease in demand for eco-friendly ship replacements.

According to the shipping industry on the 10th, the IMO will hold the 83rd Maritime Environment Protection Committee (MEPC) meeting in London from the 7th to the 11th, where it is expected to adjust the carbon tax amount for shipping. Ships that carry goods and navigate the seas emit vast amounts of greenhouse gases, which are considered a primary contributor to global warming, hence the aim to implement a tax on greenhouse gases to reduce carbon emissions. The carbon tax is estimated at around $100 per ton of greenhouse gas and is expected to be applied starting in 2027.

The United States, as a member of the IMO, has suddenly declared its withdrawal from the negotiations. President Trump mentioned that he would retaliate against member countries if economic burdens are placed on U.S. ships. Noting his opposition to eco-friendly policies, Trump criticized the decarbonization negotiations as expensive and as imposing unverified fuel usage on the shipping industry, which he claimed would cause inflation.

Without the United States, the shipping decarbonization negotiations are expected to lose momentum. There are currently 179 member countries in the IMO, including many developing nations. Developing countries have criticized the carbon tax, led by developed nations, as a form of “kicking away the ladder” that prevents others from achieving success.

 The IMO is currently led by Europe.

The shipping industry is closely watching the results of the IMO negotiations. If a carbon tax is not imposed, expense burdens will decrease, and the timeline for replacing existing ships with eco-friendly ones can be pushed back. However, there are opinions that the change in the U.S. stance will only exacerbate confusion, as the direction of shipping decarbonization is unlikely to change. If the carbon tax falls through, the shipbuilding industry may see a reduction in orders for eco-friendly ships. Korean shipbuilders have secured substantial contracts due to demand for eco-friendly ship replacements such as liquefied natural gas (LNG) carriers. The IMO has categorized ships according to carbon emission efficiency standards (AER) into grades A through E, where the lowest grade E cannot operate if it does not improve its grade within a year. If the shipping carbon tax amount is finalized, it will become the first instance globally where a carbon tax is levied on a specific industry.

The World Bank projects that if the shipping carbon tax is set at $100 per ton, the shipping industry will incur expenses reaching up to $60 billion (approximately 87.4 trillion won) from 2025 to 2050.