Potential Impact of IMO Mid-term Measures: Pacific Island Country Case Studies

The IMO is set to adopt a combination of technical and economic measures in early 2025. These legally binding measures should ensure the ambitious decarbonisation strategy unanimously adopted by IMO member states in July 2023 will be met – or exceeded. Many countries have expressed political concern about the possible impacts of such measures on states. As a response, the IMO commissioned research to probe how taking climate action in shipping might affect states.
Pacific nations have long been underrepresented in trade and shipping data. This is in part due to a lack of reliable data, however another crucial factor is that, due to small populations and trade volumes, data for the Pacific becomes nearly invisible in the aggregation of global trade impacts.

With these challenges in mind, six Pacific Small Island Developing States, namely Kiribati, Marshall Islands, Nauru, Solomon Islands, Tuvalu, and Vanuatu, commissioned research by University College London and the Micronesian Center for Sustainable Transport to provide in- depth granular data on these countries’ imports/exports and the vessel fleets used to facilitate them.

The resulting report, Potential Impact of IMO Mid-term Measures Pacific Island Country Case Studies, highlights that all commodities are expected to see positive increases in the costs of maritime transport paid. The study results suggest a wide range of impacts can be expected depending on the commodity flow studied.

Projected cost increases range between 0.1%-36.9% paid per 20-ft container and 1.2%-6.8% per tonne of bulk across 2030-50, with impacts on lower-valued commodities (including food and disaster-relevant goods) greater than those of higher value. These results are consistent with those of Task 4 of the IMO’s Comprehensive Impact Assessment.
Moreover, contextual factors within the Pacific (e.g. increased voyage distances, remoteness, end-of-line effects, trade imbalances, lack of market size and a lack of competition between shipping service providers) combine to ensure that any increase in final price paid for maritime transport by consumers tends to exceed the basic marginal cost increase. The results shown here are therefore likely to be lower-bound estimates of impact.

Finally, multiple shipping agencies interviewed in 2024 expressed concern that very-little cost impact as a result of the midterm measures would be absorbed by shipping agencies, with virtually all passed-on directly to customers. There is also very little capacity for modal shift of the commodity flows analysed to air freight services.

Lead author James Stewart stresses that “it is crucial to recognise the variation in economic structure and provision of shipping services that exists across these six countries. When designing and implementing responses to expected disproportionate negative impacts, the contrasting economic realities and domestic challenges of the individual countries need to be taken into account.”

The report thus provides further evidence that a comprehensive approach to a just and equitable transition should inform the decisions on the basket of measures to be adopted. UNCTAD modelling suggests that the negative impacts of the disproportionate cost increases can be remedied by a high universal GHG levy. This levy should, in the first place, speed up the transition. But it should do so while simultaneously using targeted spending of revenues to ensure no one is left behind.
Read the full report on Potential Impact of IMO Mid-term Measures Pacific Island Country Case Studies here.
Source: Micronesian Center for Sustainable Transport (MCST)