Analysis-Pressure builds on the CO2 emissions of the global shipping sector

By | March 18, 2024

By Kate Abnett

BRUSSELS (Reuters) – The European Union, Canada, Japan and climate-vulnerable Pacific island states are among 47 countries rallying support for a tax on greenhouse gas emissions from the international shipping sector, documents reviewed by Reuters show.

The documents, which are being discussed at an International Maritime Organization (IMO) meeting now in its second week, outline four proposals with a total of 47 backers to impose a fee on every tonne of greenhouse gas the industry produces.

Support for the idea has more than doubled from the 20 countries that publicly backed a carbon tax at a French climate finance summit last year.

Supporters argue that the policy could generate more than $80 billion in financing annually, which could be reinvested in developing low-carbon marine fuels and supporting poorer countries in the transition. Opponents, including China and Brazil, say it would penalize trade-dependent emerging economies.

These countries are competing over dozens of other countries – including most African countries – that diplomats say have not yet taken a strong position on the issue. The IMO makes decisions by consensus, but can also do this with majority support.

The UN agency last year agreed to a 20% reduction in emissions by 2030 and net zero emissions by around 2050. While countries agreed during talks last week to continue emissions price negotiations, an official summary said of the meeting noted that they were “divided over several issues.” “about the idea.

Albon Ishoda, IMO delegate for the low-lying Marshall Islands, said a levy is the only credible route to achieving the IMO’s objectives.

“If this is not adopted, what are the alternatives? Because we have already agreed on certain objectives,” he said. “Are we going back to the drawing board?”

Shipping, which carries around 90% of global trade, is responsible for almost 3% of the world’s CO2 emissions – a share that is expected to increase in the coming decades without stricter anti-pollution measures.

A proposal from the Marshall Islands, Vanuatu and others – which have been demanding an emissions tax for years despite their heavy dependence on shipping for transport and trade – proposes a levy of $150 per tonne of CO2.

Researchers have said a $150 carbon price could make investments in low-carbon, ammonia-based systems economical compared to conventional ships.

“We need a transition of unprecedented scale and speed,” said Vanuatu Climate Minister Ralph Regenvanu. “Low cost solutions and hybrid proposals will not be enough.”

Another submission, from the EU’s 27 countries, Japan, Namibia, South Korea, the International Chamber of Shipping and others, calls for combining a price on shipping emissions with a global emissions standard for maritime fuel.

An IMO meeting in September serves as a deadline for countries to decide whether to advance both the fuel standard and the emissions price. A senior EU official said the bloc believes “only the two together can suffice” to meet the IMO’s targets.

Diplomats said a fuel standard was at least likely to be introduced.

DIFFERENCE

China, Brazil and Argentina scaled back the idea of ​​a carbon tax during IMO talks last year. A study from Brazil’s University of Sao Paulo shows that a carbon tax on shipping would reduce the GDP of developing countries by 0.13%, with Africa and South America among the worst affected regions.

A Brazilian negotiator said Brazil and other developing countries are seeking a rapid energy transition with the least disruptive impact on their economies, especially for countries dependent on sea trade.

A proposal from Argentina, Brazil, China, Norway, South Africa, the United Arab Emirates and Uruguay calls for a global limit on fuel emissions intensity, with a financial penalty for violations, as an alternative to a levy on all emissions from shipping.

This would mean that if countries were to fully comply with the fuel standard, no compensation would be paid for any emissions.

“We will not support a flat tax that is likely to harm developing countries, but we would support a good tax that would only apply to emissions above a certain benchmark,” the Brazilian negotiator said.

PLAY ROOM

Despite disagreements, member states are still trying to agree on global measures to prevent more countries from targeting the industry at a national level. That would fragment the market with varying local standards, and create headaches for companies that ship goods globally.

For example, the EU has said it could bring more international shipping emissions to its local carbon market if the IMO does not agree on a global emissions price by 2028.

Questions about who would administer a levy and how its proceeds would be reinvested are also still open.

Diplomats have suggested that a compromise could involve the IMO deciding on a carbon price designed to ensure it does not have to be accounted for as a tax – for example by designing policy with the main aim of reducing emissions, instead of increasing revenues.

A proposal from Canada suggests the IMO agree on the gist of an emissions price but delay a decision on how to spend the revenue – a politically divisive issue that has hampered previous talks.

Ishoda of the Marshall Islands said he hoped disputes over details would not stand in the way of a deal.

“If we can move a mile, we’ll end up moving an inch because we argue about everything under the sun,” he said.

(Reporting by Kate Abnett; additional reporting by Jake Spring, Jonathan Saul; Editing by Jan Harvey)

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