Can the IMO implement a universal price on GHG pollution from international ships? Not unless it can be applied to the shadow fleet

Peter Nuttall

if the IMO is unable to enforce its existing regulatory framework to prevent or control oil pollution being discharged to water from the shadow fleet, how will it be able to enforce a universal price on atmospheric pollution from the same ships using proposed MARPOL amendments. If it cannot, it appears IMO will not be capable of delivering a universal regulatory regime to achieve the 2023 IMO Strategy but only a partial one. As the IMO targets for emissions reduction are set at fleet level, the compliant portion of the fleet would then need to achieve additional reductions to offset those not being achieved by the shadow fleet.

The Secretary General of the International Maritime Organization, the specialized UN agency for regulating world shipping, is highly confident that the IMO is on track to deliver agreement in April 2025 on a combination of measures, including a global price on emissions, that can be applied fleet wide to drive full decarbonization by 2050 in line with the 2023 IMO Strategy for GHG emissions reduction from shipping1.

While it is still moot as to whether IMO will reach agreement on measures according to its pre-agreed timeline, this paper questions the ability of IMO to universally apply a mandatory global pricing instrument on shipping’s GHG pollution2 given the existence of the so-called shadow fleet that currently operates outside of IMO’s ambit.

A joint investigation by POLITICO and the not-for-profit journalism group SourceMaterial found at least nine instances of covert shadow fleet vessels leaving oil spills in the world’s waters since 2021, using satellite images from the SkyTruth NGO paired with shipping data from market analysis firm Lloyd’s List and commodity platform Kpler. POLITICO claims that “hundreds of the world’s so-called shadow fleet, a collection of often aging, poorly maintained ships is sailing in defiance of Western sanctions — and spreading environmental harm without consequences.”3

Evidence of a possible violation usually requires the vessel’s flag state to investigate potential MARPOL violations and sanction any breaches, which could result in certain certificates being revoked. But with the shadow fleet operating largely outside the international regulatory environment, little or no enforcement action is currently possible to control illegal discharges from this section of the global fleet4.

Surely this begs the question that if the IMO is unable to enforce its existing regulatory framework to prevent or control oil pollution being discharged to water from the shadow fleet, how will it be able to enforce a universal price on atmospheric pollution from the same ships using proposed MARPOL amendments. If it cannot, it appears IMO will not be capable of delivering a universal regulatory regime to achieve the 2023 IMO Strategy but only a partial one. As the IMO targets for emissions reduction are set at fleet level, the compliant portion of the fleet would then need to achieve additional reductions to offset those not being achieved by the shadow fleet.

What is the grey/dark/shadow fleet?

Shadow fleets are a direct response to sanctions imposed on a nation’s trade by other nations or groups of nations. The term refers to practices of sanction busting in the maritime domain through the use of unregistered or fraudulent vessels. Goods commonly exported and imported include raw materials such as oil and iron, luxury goods, weapons and defense technologies etc5.

Nguyen, T. (2023) considers a vessel in a shadow fleet, also referred to as a dark fleet, is a "ship or vessel that uses concealing tactics to smuggle sanctioned goods".6 A very small portion of the global fleet has probably always operated outside of the global regulated order, engaged in smuggling or transfer of illicit goods. But the rise in the use of sanctions as an economic tool to coerce nations to conform to the demands of the international community over the past two decades has now led to a fast expanding fleet of ships where compliance with the international regulatory regime is either opaque, weakened or completely avoided.

Literature increasing identifies two main subsectors of the shadow fleet. The "grey fleet" refers to vessels where the legitimacy of their operations and their compliance with sanctions are ambiguous. These ships often change flags to obscure their affiliation with sanctioned entities. Following the outbreak of war in Ukraine, overseas companies have been quickly established, to obscure vessel origins and ownership, and to appear law-abiding/non-sanctioned. This fleet is described as “grey” because it is difficult to determine legality and sanctions compliance in many cases.

The "dark fleet", on the other hand, consists of vessels that deliberately avoid international regulations through a number of means, including disabling their automatic identification systems, falsifying identification data, and misreporting their locations. Increasingly this includes ship-to-ship transfers of oil products, where ships can avoid flag and port state control by transferring cargoes in international waters or in complaint States national waters where there is poor State enforcement capacity for a variety of reasons7.

The shadow fleet emerged in earnest twenty years ago with the impositions of sanctions on North Korea in response to its nuclear ambitions. The US-led 2003 Proliferation Security Initiative aimed at blocking the use of unregistered ships to evade sanctions is notable in that, while a voluntary cooperative initiative, the enforcement necessitated stopping and searching vessels in international waters, contrary to the norm of Mare Liberum and the right of flag states to give or withdraw consent for searches enclosed in UNCLOS8. Since 2016, an IMO imposed sanction regime on North Korea has tightened significantly and North Korea has responded by developing ever more sophisticated means of disguising its shipping trade, using third parties, shell companies and open registry flags from various jurisdictions. The size of this shadow fleet however is still minute.

International sanction regimes leading to further increases in the shadow fleet have also been now been effected against various countries, including Iran, Libya, Venezuela and Cuba but these had still resulted in a shadow fleet that was comparatively limited in number and tonnage of vessels. However, the introduction of US and Europe led sanctions on Russian oil since the advent of the Russia-Ukrainian war in 2022 has resulted in a fast growing shadow oil tanker fleet that may now affect nearly a quarter of the wet product fleet.

Ampatzidis found in October 2024, that while 91.7% of the world's vessels operate openly, a troubling 6.4% belong to this opaque category, with an additional 1.9% directly engaged in activities that breach sanctions. Over the last twelve months, these fleets have transported more than 390 million barrels of oil, often using ageing ships over 16 years old with concealed ownership and poor safety standards9.

According to UNCTAD, there were 12,309 registered oil tankers worldwide in 2023. Windward, a maritime analytics firm, identified more than 900 "grey" ships and around 1,100 vessels in the "dark" fleet. This means that roughly 16% of the global tanker fleet falls into these shadowy categories. In mid 2024 Windward found about 2300 ships in the grey and dark categories10.

According to Vortexa and Windward, the top five countries in 2023 under whose flags "dark fleet" vessels operated included Panama, Liberia, Russia, Malta, and the Marshall Islands11 The companies owning the ships were primarily headquartered in Greece, Russia, Turkey, UAE, China and India

Gray and Dark Fleets by Flag and Company Location: Windward, 2024

 

As those imposing sanctions are continually tweaking the sanctions regimes to improve their effectiveness, those working to avoid such sanctions are increasingly refining their methods to maintain their shipping connectivity through increased measures to avoid detection or enforcement. The US and other western powers have responded to the growing Russian use of a shadow fleet by identifying and sanctioning individual ships engaged in such traffic. But this has so far only caught a handful of ships. Those operating the shadow fleet have moved to establish intermediary companies in third countries, supposedly ‘neutral’ to the competition between super powers such as UAE and India. These intermediaries then establish a web of shell companies in various jurisdictions (e.g. India, Malta, Marshall Islands, Hong Kong) to own both cargoes and ships with the latter then revolving though the flags of numerous jurisdictions. Lloyd’s List found that by mid 2024 many smaller registries had an increasing portion of dark ships in their open registries.

 

Percentage of dark fleet ships in national registries: Source Lloyd’s List, Oct 2024

The good news for the international shipping order is that the greater majority of oil tankers are fully compliant and act in accordance with the global regulations. The bad news is that this number is declining, the shadow fleet is growing and is now spreading to include LNG tankers and additional vessel types. While a handful of ships have been named and sanctioned, the opaqueness of the global maritime and corporate registry system, the appeal of cheaper oil products for a number of large emerging economies such as China, India, UAE and Brazil and the seemingly easy large profits of companies in third jurisdictions for acting as intermediates in the grey margins of UNCLOS, mean that port and flag states control cannot be relied on to deliver enforcement and compliance.

With the increasingly deepening political division internationally, it is difficult to see this problem subsidising or being brought under stricter international control. The implications for the introduction of a global price on shipping's GHG pollution are obvious. If increasing numbers of vessels are able to avoid enforcement of the current IMO regulations for protecting the environment from ship caused pollution, what possible incentive is there for them to adhere to a new regime imposing a GHG price on emissions. Given this, it appears that in reality a price on emissions will only be able to be imposed on a portion of the global fleet, and not universally on all eligible ships.

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1 https://www.seatrade-maritime.com/regulations/imo-sees-convergence-on-net-zero-framework-but-much-work-to-be-done

2 The2024 ITLOS advisory opinion found that shipping's GHG emissions were pollution

3 https://www.politico.eu/article/revealed-putins-sanctions-busting-shadow-fleet-is-spilling-oil-all-over-the-world/

4 ibid

5 https://en.wikipedia.org/wiki/Shadow_fleet#cite_note-:31-1

6 Nguyen, T. (2023). "The Challenges of Dark Ships to the Safety and Security of Commercial Shipping and the Way Forward". Asia-Pacific Journal of Ocean Law and Policy. 8 (2): 310–328

7 https://www.veridica.ro/en/opinions/russias-shadow-fleet-a-response-to-sanctions-and-a-new-business-model

8 Kraska, J. (2019). "Maritime interdiction of North Korean ships under UN sanctions". Ecology Law Quarterly. 46 (1): 215–238.

9 https://www.marinetraffic.com/en/maritime-news/34/risk-and%20compliance/2024/11583/understanding-the-global-distribution-of-grey-and-sanctioned

10 https://windward.ai/knowledge-base/illuminating-russias-shadow-fleet/ 

11 https://www.veridica.ro/en/opinions/russias-shadow-fleet-a-response-to-sanctions-and-a-new-business-model