Sustainable Shipping: Modeling Economic and Greenhouse Gas Impacts of Decarbonization Policies (Part II)

Maritime transport carries over 80% of global trade by volume and remains the most energy-efficient mode for long-distance goods movement. However, the sector contributes approximately 3% of global Greenhouse Gas (GHG) emissions, a share that could rise to 17% by 2050 without effective regulation. In response, the International Maritime Organization (IMO) has introduced initial and short-term measures to enhance energy efficiency and reduce emissions. In 2023, IMO Strategy expanded on these efforts with medium-term measures, including Market-Based Mechanisms (MBMs) such as a GHG levy, a feebate system, and fuel intensity regulations combined with carbon pricing. This study evaluates the economic and environmental impacts of these measures using an integrated computational simulation model that combines Ocean Engineering and Economics. Our results indicate that all proposed measures support the IMO’s intermediate emission reduction targets through 2035, cutting absolute emissions by more than 50%. However, economic impacts vary significantly across regions, with most of Africa, Asia, and South America experiencing the greatest adverse effects on GDP and trade. Among the measures, the GHG levy exerts the strongest pressure on economic activity and food prices, while a revised fuel intensity mechanism imposes lower costs, particularly in the short term. Revenue redistribution mitigates GDP losses but does so unevenly across regions. By leveraging a general equilibrium model (GTAP) to capture indirect effects often overlooked in prior studies, this analysis provides a comprehensive comparison of policy impacts. The findings underscore the need for equitable and pragmatic decarbonization strategies in the maritime sector, contributing to ongoing IMO policy discussions.