Global carbon emission tax applied to the sea transport

The latest meeting of the International Maritime Organization (IMO) in London, which concluded on March 22, garnered special attention from many countries. Here, countries discussed how to apply climate regulations to the shipping sector – responsible for transporting over 90% of global commerce and considered one of the most challenging sectors to decarbonize.

1. Conflict in Carbon Tax Policy

According to Reuters, the IMO meeting reflected a diversity of opinions among participating countries. While 47 countries supported the imposition of a fee for each ton of greenhouse gasses emitted by the shipping industry, countries like China and Brazil expressed opposition, concerned about the negative impact on the economies of developing nations.

In the negotiation round, most participating countries agreed to apply some form of emissions tax by 2025, aiming to reduce the price disparity between fossil fuels and green energy. However, there were also proposals to combine the emissions tax with other measures, supported by at least 14 countries.

Countries from the Caribbean, Pacific, Africa, Canada, and the European Union (EU) all saw a great opportunity in taxing emissions. This is a welcome signal for the green transition of the shipping industry, ensuring that all developing countries can participate and benefit from this tax.

The Central American country of Belize and some Pacific island nations called for a $150 tax per ton of carbon emitted. Campaigners described this as "the most ambitious proposal on the negotiation table." Supporters of this policy believe that implementing the tax could generate over $80 billion annually to invest in clean energy for the transportation sector  and support developing countries in transitioning to environmentally friendly transportation methods.

In the past year, United Nations agencies have agreed to set emission reduction targets of up to 20% by 2030 and achieve net-zero emissions by around 2050. Although there has been consensus in recent negotiations, the official summary of the meeting shows that countries have not yet agreed on several issues.

“It’s unfortunate that a few countries still do not support this proposal,” said Sandra Chiri, Ocean Shipping Emissions Manager at Ocean Conservancy, a US-based organization supporting the emissions tax. A study by the University of Sao Paulo in Brazil indicated that a carbon tax on shipping could reduce the GDP of developing countries by 0.13%, with Africa and South America being the most affected regions.

Alongside this opposition, Argentina, Brazil, China, Norway, South Africa, the United Arab Emirates, and Uruguay proposed a global fuel emission intensity limit, with financial penalties for violations, instead of taxing all maritime emissions. This means that if countries fully comply with fuel standards, there would be no charges for emissions.

"We do not support the imposition of a uniform tax that could harm developing countries, but we support the imposition of a reasonable tax only on emissions that exceed a certain standard," said a Brazilian negotiator.

In this context, achieving consensus among countries is extremely important. Diplomats have proposed a compromise focusing on deciding on a carbon price without considering it a tax, while proposing policies aimed primarily at reducing emissions rather than just increasing revenue.

2. Negotiation Proposals for the Next Round

Despite differing viewpoints, countries continue to strive for a unified global approach, avoiding individual national standards that could fragment the market and affect the business operations of global shipping companies.

If the IMO does not agree on a global carbon price by 2028, the European Union may include international shipping emissions in its local CO2 market. This raises an unresolved issue regarding who will be responsible and how the revenue from the fee will be used.

Given the tense situation regarding carbon taxation, experts suggest that the IMO could introduce a carbon price without considering it a tax, for example, by designing policies aimed at emission reduction goals rather than increasing revenue.

With a challenging and opportune schedule, the next round of negotiations in September this year will be a crucial time to make specific decisions and achieve consensus from all stakeholders. In the future, the shipping industry has a significant opportunity to advance further on the path of sustainability and green development of our planet.