THE adoption of a carbon price in October is not without risk, but the numbers would suggest it will pass.

That’s not going to stop those adamantly opposed to it from trying to derail it.

The minority opposition includes some Opec heavy hitters, but crucially it does not include China, now the single most powerful state inside the IMO.

China effectively sets the baseline of what is politically possible; the plan that can pass muster is the plan China will accept, which is why any serious player inside that debate has spent their time understanding China’s position and seeking to influence that.

The US, however, has opted for direct threats and diplomatic pressure, albeit from outside a multilateral system they no longer see as being sufficiently ‘America First’.

There is a danger that the Opec awkward squad and US antagonism is sufficient to sway more of the fence sitters than we currently assume. But the smart money is not betting against China as the long-term winners here.

China wants an energy transition, and they want a greenhouse gas emission reduction. But they want it on their terms to benefit their interests.

All of this is sufficiently conceptual at this stage to have effectively stymied most Western investors from making any serious moves in terms of final investment decisions in the pivotal green energy projects.

But for those operating inside countries with a strong industrial policy, investment cases are easier to back up. So a lot of inner Mongolian capital has flooded into green hydrogen production and Chinese state-owned enterprises are happily doing ammonia bunkering.

Where Western businesses are nervously waiting, the Chinese ecosystem has not slowed down waiting for clear guidelines and guaranteed returns calculations to come in October.

Just as China was able to take a commanding lead in batteries, photovoltaics, wind and electric vehicles, they are already securing the future of shipping on their own terms.

Arguably that is a fundamental flaw in the Western business model that IMO policy is unable to satisfy. But that won’t stop China.

We could be about to see a bigger fight than anticipated at the IMO this autumn, but the odds are against those pitching a last minute stand against carbon pricing.

Richard Meade
Editor-in-chief, Lloyd’s List

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