Written by: Aly Shaw and Christiaan De Beukelaer, Article No. 93 [UNCTAD Transport and Trade Facilitation Newsletter N°96 - Third Quarter 2022]
Trade is a foundational element of our globalised economy. In 2020, global GDP was 96.1 trillion USD meaning that the average amount of money circulating per person in 2020 was some $12,345. Though this income is not divided equally among all humans. More than six hundred million people live in destitute poverty - that is, on less than $1.9 a day or less than $700 a year. The share of the global population living in such poverty has shrunk from over 40% in the early 1980s to below 10% today. However, we continue live in a world of serious disparities, where hundreds of millions have barely anything to spend on their most basic needs, an issue exacerbated by the COVID-19 pandemic. Meanwhile, the richest subset of society lives in incomprehensible luxury, splurging on superyachts, private jets, and holiday homes.
As fossil fuels are currently used for production, manufacture and transportation of goods and resources, this financial imbalance renders GHG emissions similarly unequal: the world’s richest 10% collectively responsible for 52% of global carbon emissions. Nevertheless, the impacts of climate change are being felt by all. The most impacted and vulnerable such as small island developing States (SIDS) and the least developed countries (LDCs) are often at the frontline, despite carrying little historic responsibility for causing climate change.
The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, sets out 17 sustainable development goals with the aim to provide “peace and prosperity for people and the planet, now and into the future”. These Sustainable Development Goals are “set in recognition that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.”
Meanwhile, IPCC reports continually highlight the urgent need for climate action to prevent extreme effects by limiting global warming to 1.5 degrees. This means that every nation and every sector must reduce GHG emissions in accordance with this goal - not just carbon emissions. Yet, ahead of COP27, talks at the G20 Joint Environment and Climate Ministers’ Meeting in Bali signal a risk that some countries are backtracking on their Paris Agreement commitments. The summary of the meeting indicates that only “some members commit to accelerate the transition of the shipping sector to zero-emission fuels and technologies, placing the sector on a pathway that aligns with the goal to limit global temperature rise to 1.5°C.” This poses a grave challenge to decisive climate action.
The shipping industry is the driver of our globalised economy and transports well over 80% of international trade. In doing so, ships burn some 300 million tonnes of fossil fuels a year, resulting in more than one billion tonnes of CO2 emissions a year, which is more than the UK and France combined. If business carries on as usual, shipping emissions will continue to rise. Shipping must therefore undertake a wholescale transition to new scalable zero emissions fuels and technologies. In this context, particularly bearing in mind the disparities in income and contributions to GHG emissions noted above, a growing group of countries under the auspices of IMO and negotiating measures to curb emissions from shopping insist that shipping’s transition should be just and equitable.
‘Just and Equitable’ discussions launched
In 2018, the International Maritime Organisation (IMO), the UN Agency mandated to regulate international shipping, set its first ever target to reduce greenhouse gas (GHG) emissions from shipping, namely to peak GHG emissions as soon as possible and “to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008”. While the strategy calls for “emissions reduction consistent with the Paris Agreement temperature goals,” the current targets and measures fall short of what is needed to limit warming to 1.5 degrees Celsius. Additionally, since shipping emissions doubled between 1990 and 2008, a 50% reduction would reduce emissions to 1990 levels.
In mid 2023, in less than a year, the IMO will adopt a revision of its initial GHG strategy to provide a new and more ambitious target for 2050. Recent policy discussions signalled a willingness-in-principle for a price on either GHG or carbon dioxide emissions as part of a basket of measures, which could also include a fuel standard, and other economic measures currently tabled for discussion at IMO.
There is a major caveat: Irrespective of the exact combination of the technical, operational, and market-bases measures taken; the cost of shipping will increase. This is because the MBMs will likely be designed to address the price differential between incumbent and new fuels, i.e. to increase the cost of using fossil fuels while bringing down the cost of zero emission fuels.
Higher costs will initially be borne by the industry, before being passed on to end consumers. In rich countries, these costs may be relatively easy to bear, representing a small share of total shipping costs. However, poor countries, including SIDS and LDCs, may see their already disproportionately high shipping costs increase, exacerbating cost of living crises – beyond the current inflationary pressures arising from the pandemic, geopolitical tensions, and crop failures due to climate change. This means that shipping decarbonisation would likely make raising living standards for the world’s poorest difficult, costing development opportunities, as already limited resources would be consumed by higher shipping costs.
Many SIDS face an existential threat of climate change impacts, both to individual livelihoods and to national development, as they’re often low-lying islands. With that in mind, the Republic of the Marshall Islands and the Solomon Islands jointly proposed a GHG levy to the IMO in March 2021, starting at $100 per tonne. Both countries are remote SIDS that rely on shipping for virtually all their necessities. In proposing a levy, these states realise their shipping costs will likely increase, while climate impacts continue to affect their vulnerable communities, which are already suffering serious consequences of climate change, including rising seas.
With the threat of disproportionately high shipping costs in mind, the Republic of the Marshall Islands, the Solomon Islands proposed that a part of the revenues raised by the levy would support climate change mitigation and adaptation efforts in vulnerable countries with the remaining funds allocated for Research & Development and administrative costs of the measure. In March 2022, these States, joined by Tuvalu, called for the IMO to ensure an equitable transition in its consideration and adoption of policy measures, citing the United Nations 2030 Agenda for Sustainable Development principle of leaving no one behind, along with other elements of the Paris Agreement. This call echoes the sentiment of the 2021 Dhaka-Glasgow Declaration of the Climate Vulnerable Forum, which calls for ‘the majority of the levy’s revenues be employed as additional financial support for urgent climate actions, particularly by the vulnerable developing countries.’
The terms ‘just’, ‘equitable’, ‘fair’ and ‘inclusive’ are now common in discussions around shipping’s transition. In the most recent Marine Environment Protection Committee (MEPC; 78th Session) almost all IMO delegations used these terms, or a combination thereof, as they set out their position on the revision of the IMO strategy to reduce GHG emissions from ships. External stakeholders, including the World Bank, NGOs and industry stakeholders, also referred to the terms ‘just’, ‘equitable’, ‘fair’ and ‘inclusive’ in their contributions to on-going debates.
Despite the significant uptake of these terms, there is currently no consensus on their meaning or use, let alone how to enact such a transition. In many ways, this lack of clarity is helpful as the absence of a conclusive definition allows and encourages an open discussion. While these concepts are often invoked interchangeably and conflated to serve divergent objectives, distinct narratives streams are coalescing around the different words just and equitable. Absent a definition, we hereby discuss what “just and equitable” means in the context of shipping decarbonisation and how to create a collective understanding.
What is a ‘Just and Equitable’ transition?
When looking at decarbonizing shipping, it is crucial to consider three key elements that make climate change unjust, and inequitable. First, the historically unequal contributions to the climate crisis we face. Second, the climate mitigation and adaptation costs for LDCs and SIDs are disproportionately high - both in relation to their historic responsibility and their ability to cover the cost given structural factors such as economic and geographical sizes, location and human capacity. Third, rich countries continue to emit higher-than-average amounts of GHG emissions domestically while also relying on emissions in poorer countries to support existent lifestyles, making their consumption-based emissions higher through “net appropriation” (that is, emissions and other environmental impacts embedded in imports), beyond what their domestic per capita emissions might suggest.
Indeed, if these existing inequalities remain unaddressed in the environmental regulation of the shipping industry, it risks deepening the disparities between countries. This need not be the case, if policy and action focus on facilitating a transition that is environmentally effective, procedurally fair, socially just, globally equitable, and technologically inclusive, as we explain below.
We, therefore, think it is useful to summarise and organise some of the elements that appear to be constitutional for each term from current transition-related discussions. We present this synthesis in the graphic below in full acknowledgment that there is no consensus around exact details. It is neither definitive nor prescriptive in how these ideas should be used or applied. We, therefore, consider the content and scope to be non-exhaustive. We do, however, illustrate that when discussing a ‘just and equitable’ transition, there are multiple interconnected terms to consider.
The two largest circles, environmental effectiveness and procedural fairness, are the sine qua non for shipping’s transition. Attaining environmental outcomes and observing fair procedural approaches are non-negotiable, as they are grounded in climate science and good governance principles, respectively. Most importantly, the three smaller circles that focus on social justice, global equity, and technological inclusiveness, are the conduits that both rely on and strengthen the connection between what is environmentally effective and procedurally fair in shipping’s transition.
The remainder of this section discusses the different parts of the graphic in some more detail. Further, we would caution any attempt to definitively define any of these elements outside of multilateral political governance processes. We suggest that there may need to be a fluidity to each term that allows them to evolve with the transition which will take place over decades. Nevertheless, the current level of interchangeability and ambiguity could undermine progress in policy debates and climate diplomacy. That is why we offer this overview of current discussions and vision of elements to potentially incorporate or enact in shipping’s transition.
The shipping industry’s energy transition is necessary to avoid catastrophic effects of climate change and must be environmentally effective in order to fulfil this goal. This requires policies and measures which can achieve the Paris Agreement 1.5 degree temperature goal and heed IPCC calls to develop necessary pathways. In the shipping sector specifically, this would likely require a Well-to-Wake approach to avoid pushing Tank-to-Wake emission at sea ‘upstream,’ by not counting GHG emissions resulting from the production of new zero emission fuels. Failing to take a Well-to-Wake approach would drive investment in short term solutions, which over a longer horizon become ineffective. Additionally, the high greenhouse gas potential of some alternative fuels and effects of various non-carbon emissions suggests that a full GHG scope is most appropriate as an ambition as the basis for measures. The application of widely accepted environmental principles (the prevention principle; the rectification at source principle; the polluter pays principle; the precautionary principle) and circular economy principles are similarly relevant.
Ensuring procedural fairness relies on diverse and effective representation in the decision-making process. It is imperative that countries and peoples around the world are involved in discussions and decisions about climate policy measures. All countries are affected by climate change, both directly and indirectly, albeit in different ways and to different extents. All countries are affected by emissions from ships, whether they have large fleets registered to their flags, no registered ships, are landlocked or coastal. Even within countries, people experience the effects of climate change differently, for example, many indigenous communities represent pockets of vulnerability, overlooked on a wider stage, yet they are often the sovereign caretakers of ecosystems and the historic cultures fighting to protect them.
In the shipping sector and in the IMO, the most vulnerable nations struggle with effective representation, because of limited capacity (too few people) and financial constraints (high travel costs) as well as time zone differences (during online meetings) and the dominance of the English language. For the transition to be procedurally fair, the participation of diverse, vulnerable and affected nations and communities in policy meetings, which take place in London, should be encouraged and could be financially supported. A significant body of literature shows that when individuals perceive a political process as fair, they are more willing to accept the outcomes of these processes. This has bearing for the IMO which is a consensus-led organisation, dependent on agreement for progress. Good governance principles, including at the very least openness and accountability are particularly key elements to consider, as Transparency International is deeply critical of the IMO’s opacity.
The use of the term just in relation to the transition has strong social components, including workers’ rights, gender, and community relations. As it stands the Just Transition taskforce, established in 2021, takes a people-centred approach that aims to support workforces and communities around the world through the transition. In shipping this applies to seafarers and port workers but as shipping represents a huge market for new zero emission fuels the just transition can also be connected to land-based energy workers who will be involved in the production and handling of these fuels. The overarching aim of a just transition is to support workers through the transition with consideration applied to education, training, re-skilling, and safety. More broadly, a just transition is also one that responds to existing gender gaps, ensuring equal opportunities for all in a low-emission economy. National action and industry initiatives can play a significant role in addressing this factor of shipping’s transition.
Climate impacts have been shown to disproportionately affect developing countries, most notably SIDS and LDCs. These countries have sustainable development goals and yet are faced with redirecting resources to deal with climate impacts and future-proof their infrastructure. Responding to the challenges arising from vastly different historic responsibility for emissions as well as environmental and economic vulnerability to emissions, requires an approach that is globally equitable. An equitable transition includes consideration of disparities between nations that would likely increase if the design and implementation of policy measures to address climate change does not explicitly seek to diminish them.
Many IMO Member States support, at least in principle, the use of revenues generated from MBMs to support adaptation and mitigation effects, particularly to assess and address at the very least the disproportionately negative impacts of measures. This is crucial, since the need for climate adaptation and disaster response already diminishes the budgets of SIDS and LDCs to spend on sustainable development opportunities. This undermines the right to develop into prosperous societies, which ‘is an inalienable human right by virtue of which every human person and all peoples are entitled to participate in, contribute to, and enjoy economic, social, cultural and political development.’ Moreover, vulnerable nations and indigenous communities often have significant cultural connection to the environments in which they live. The threat to those landscapes posed by climate change therefore undermines their right to access and celebrate cultural heritage.
While the IMO, in principle, treats all flags and ships equally, it does occasionally make exemptions in regulation, predominantly based on ship size. If this exemption-based approach were applied as an answer to the issue of vulnerable nations' adaptive capacities, it would likely result in these states being frequented by ‘dirty’ ships running on fossil fuels, whilst richer nations experience the benefits of new zero emissions vessels. This imbalance would be slow down the transition.
Adopting a ‘basket’ of measures could offer a more equitable solution, whereby an MBM allows for funding to support the industry to speed up the uptake of clean fuels as well as facilitate an equitable transition by helping SIDS and LDCs fund the transition and adapt to the effects of climate change. Meanwhile, a fuel standard would signal the imminent end of fossil fuel use. Indeed, many IMO Member States consider that there is an inherent connection between adopting a revenue generating price on greenhouse gas emissions and the ability to ensure an equitable transition.
A polluter-pays based levy would generate revenues and offer the potential for equitable disbursement of funding to support nations-in-need in a way that other approaches would not. This contrasts with a fuel standard, which in isolation, would mandate and stimulate transition from dirty to clean fuels. However, a fuel standard alone would not raise revenue that can be distributed in an equitable fashion, which would likely leave poorer countries behind.
Sharing technology and know-how is crucial to ensuring that the energy transition happens as quickly and widely as possible. Current industry focus on creating green corridors - or ‘trade routes between major port hubs where zero-emission solutions have been demonstrated and are supported’ - are welcome. However, as they are mostly established between pairs of developed-developed or developed-developing countries, connectivity between developing-developing countries (including SIDS and LDCs) through such corridors is already lagging behind. This risks further widening the gap between rich and poor countries.
Technological inclusivity aims to capture the desire by many member states to see greater access to innovative technologies, transition opportunities, technology transfer, and capacity building. By promoting technological inclusivity, the aim is to spread and cultivate research, development and deployment of both fuels, energy technology, and infrastructure more evenly across the globe, rather than having this situated solely or largely in the developed world. This would allow all nations access to strategic and sustainable development opportunities in the new energy and fuels markets created by this transition. The alternative would see only the reperformance of current disparities.
What should shipping’s transition accomplish?
There are three ways shipping’s transition can play out. First, disparities could widen and inequalities worsen. At the lowest levels of ambition and action, gaps in wealth and quality of life widen globally with irreversible climate damage to the environment. If we consider the similarities of the Covid-19 pandemic and climate change, namely, a global crisis with a global response we can see how this effect is entirely possible. While the virus decimated poor communities with many countries struggling to get access to vaccines, US billionaires alone have seen their combined wealth rise over $1.7 trillion, a gain of over 58 percent during the pandemic. As rewards from capital gains now outstrip those from labour, it will take decisive and targeted action to turn the tide on global inequality. When considering that 252 men have more wealth than all 1 billion women and girls in Africa and Latin America and the Caribbean, combined, it should be clear that global inequality combines issues of class, gender, geography, and education.
Second, in terms of ambition and action is a transition that would see disparities and inequalities remain static. This would mean that things don’t get any worse than they currently are.
Third, a more ambitious just and equitable transition could mean treating the decarbonisation of shipping as an opportunity to make global trade fair by drastically increasing the food security and global connectivity of the poorest. Following this trajectory, the energy transition would significantly help closing disparities and reducing inequalities while addressing climate change. In this view, the transition is an opportunity to do better.
There is of course no expectation that the shipping sector will solve either global inequality, nor all issues created or worsened by climate change. But shipping is one of the few truly globally governed sectors. And it is also one of the biggest enablers of trade and development. This combination offers the sector an opportunity to take the lead in defining and enacting an ambitious transition. While a ‘just and equitable’ transition may be the current discursive shorthand for shipping, we have demonstrated the need to undertake a transition that is environmentally effective, procedurally fair, socially just, technologically inclusive and globally equitable.
This article articulates the views of its authors based on their research and analysis in a bid to help launch the debate and make progress on these important issues.
Aly Shaw is the Policy Lead of the Shipping Team in the Energy Institute at University College London.
Christiaan De Beukelaer is a Senior Lecturer in Culture & Climate at the University of Melbourne whose book Trade Winds: A Voyage to a Sustainable Future for Shipping appears on 31 January 2023. He is currently a visiting researcher at the University of Copenhagen.