The previous decade has seen a rapid breakdown in the ability of supranational organizations to promote the public good. Climate change, human rights, and democratization have all fallen by the wayside as anti-order states attempt to break down these norms for their own advantage.

The Paris Accord, itself non-binding, and deeply flawed because of the arbitrary distinctions made between developed and developing countries is nothing but a memory. The UNHCR has been emasculated as regime after regime backslides into egregious and publicly documented human rights violations. The WTO has almost completely lost its power as the US and China play a tug of war evading the rules to attack eachother. The IOC has become a hotbed of deep-seated corruption kowtowing to the cash of large TV markets in China and Russia, ignoring cheating and playing political games as the whore bureaucrats who make up the ranks suck the rotten teats of autocrats in exchange for token favors legitimizing failed states.

One area where the international system has apparently succeeded, against global trends, is the regulation of bunker fuel, one of the largest shifts in international energy consumption in our time.

International cargo shipping is one of the largest global contributors to cargo emissions, and is one of the last remnants of the archaic transportation industry which still allows for sour, high-sulfur, fuels unrestricted use in international waters. The UN International Maritime Organization, though, through the limited power that it has, is set to enforce much stricter rules in 2020, lowering the acceptable sulfur content of ship fuel from 3.5% to 0.5%, essentially crippling the market for sour fuels.

This drive to reduce sulfur content in fuel is a magnificent example of a solution to the classical case surrounding “common” threats in the international sphere, with reductions made in the 1980’s in car fuel mimicking this process. At the time, it slowly became clear to the world that the environmental costs accrued by sulfur releases were collectivized as the acid rain issues spread to neighboring states while the economic costs for reductions in fuel sulfur levels were localized. This creates a dilemma mirroring climate change, in which sacrifices made by one state to create reductions can be totally negated by another defector state, necessitating cooperation and collective action in order to make real improvements.

With the power allocated to this international organization, the IMO finally took the initiative to make the costly and unpopular decision to cut the acceptable sulfur levels for ships on international waters. Enforcement of this change can be carried out on several levels: it is firstly punishable by fines, further, ships found not in compliance can be declared unseaworthy, and lastly and most importantly, with the cooperation of the insurance industry, they can cut insurance to offenders. This partnership may be the crux of the IMO’s ability to enforce these standards in a global anarchical order where states and sub-state actors regularly cheat international organizations’ regulations.

The costs to international shippers will be significant, and this has generated significant resistance as well as alarmist news reports threatening an armageddon of fuel supplies at the beginning of next year. This would happen when international shipping conglomerates simply switch to more thoroughly refined or sweeter fuels to avoid installing scrubbers on their ships which can cost several million USD to install. There is speculation that gasoline prices could go up anywhere from 30 to 100% as refiners switch away from gasoline towards middle-refined grades to meet demand. Meanwhile, countries who produce sour crude with higher sulfur content, including Mexico, Ecuador, and Venezuela could see their fuel become almost worthless as the costs to refine may exceed the falling prices as demand plummets.

Some countries, such as Indonesia, have already said their domestic fleets will not comply with the requirements for ships that don’t leave domestic waters, and there are estimates that as many as 30% of the global fleet of cargo ships may attempt to cheat these regulations.

Higher refined fuels will mean higher overheads for these shipping companies, with some fleets fuel costs representing nearly 50% of their overhead costs. The increased cost will largely fall on consumers, drivers, and travelers as jet fuel costs increase in tandem. However, it should be noted that the original pricing of these low quality, sludge like low quality fuels fail to account for the public environmental damage and health costs associated with their burning. The switch is simply a correction that bans the use of a dangerous and toxic fuel source, just as lead was banned from fuel in the 1990s.

The typical problem with common threats like these is that international organizations often lack the enforcement mechanisms to independently sanction firms for violations, and lack the sovereign power to pressure states to sanction their violators. With these common threats, the incentive to secretly defect to reduce costs on domestic actors or reduce enforcement costs is very high, meaning that most states and actors will aim to not comply and shift the costs to actors and states in an anarchic setting. The sheer number of states that need to comply to face these challenges and the limited awareness of the issues implies that it is unlikely that there would be large public pressure against either states or firms to comply.

In this case, the unique set of circumstances, and cooperation with private insurers has meant that the IMO’s regulations has “teeth,” and will be able to adequately enforce this new regulation.

Staff writer: Ari B

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