- In preparation for the upcoming IMO meeting, the French presidency has garnered support from over 20 countries and regional organizations.
- If the IMO were to introduce a tax on carbon emissions, it could incentivize shippers to adopt greener practices at an accelerated pace.
- The objective of this strategy is to align the international maritime transportation sector with the goal of limiting global temperature rise to 1.5 degrees Celsius.
In preparation for the upcoming International Maritime Organization (IMO) meeting, a Paris summit convened by the French presidency has garnered support from over 20 countries and regional organizations for a levy on shipping industry emissions.
Support grows for shipping emission levy
The proposed levy aims to address the environmental impact of the shipping sector, which currently accounts for 2.9% of global greenhouse gas emissions (GHG).
As the high seas fall beyond the jurisdiction of any single government, the shipping industry has largely evaded taxation.
Incentivizing shippers to adopt greener practices
However, if the IMO, the United Nations body responsible for regulating shipping, were to introduce a tax on carbon emissions, it could incentivise shippers to adopt greener practices at an accelerated pace.
Furthermore, the funds generated from such a levy, estimated at approximately $100 billion per year, could be directed towards supporting developing nations in their efforts to mitigate and adapt to climate change.
IMO’s GHG strategy
The recently released chair’s summary from the Summit on a New Global Financing Pact confirms the commitment of 23 countries and regional organisations to adopt a revised IMO GHG strategy during the committee meeting scheduled for 3-7 July 2023.
The objective of this strategy is to align the international maritime transportation sector with the goal of limiting global temperature rise to 1.5 degrees Celsius, as outlined in the Paris Agreement.
The summary highlights the collective support for the principle of implementing a levy on shipping’s greenhouse gas emissions.
It emphasises that the revenue generated from such a levy should contribute significantly to facilitating a “just and equitable transition” within the shipping sector.
Levy implementation remains uncertain
Notable nations and entities endorsing this approach include Denmark, Norway, Cyprus, Spain, Slovenia, Monaco, Georgia, Vanuatu, South Korea, Greece, Vietnam, Lithuania, Barbados, Marshall Islands, Solomon Islands, Ireland, Mauritius, Kenya, Netherlands, Portugal, New Zealand, and the European Commission.
While the tax-free status enjoyed by the shipping industry already faces challenges, such as the forthcoming requirement for ships to purchase emissions permits within the European Union starting next year, the possibility of implementing a levy remains uncertain.
However, the IMO could potentially establish a timetable for the introduction of such a levy, signalling its commitment to addressing the industry’s environmental impact.
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Source: Trade Finance Global
