EU Backs Down on Carbon Levy for Shipping, Risking Climate Finance Shortfall

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  • The EU is set to compromise on a carbon levy for international shipping, allowing companies to trade carbon credits instead of direct payments.
  • Critics argue this shift would reduce funds for climate finance and slow down decarbonization efforts.
  • The proposed levy, supported by many developing nations, the EU, and the UK, is opposed by China, Brazil, and Saudi Arabia.
  • Talks at the International Maritime Organization (IMO) continue, with the final decision expected on 11 April.

EU’s Shift on Carbon Levy Proposal

The EU, initially in favor of a direct carbon levy on shipping emissions, is now open to a compromise involving carbon trading. According to the Guardian, the shift follows resistance from major exporting and fossil fuel-dependent nations, including China and Brazil, who argue that a levy would increase consumer prices.

Tristan Smith, Associate Professor at UCL, criticized the move: “This compromise fundamentally ignores the needs of some of the most vulnerable countries. There is a better compromise available.”

Opposition and IMO’s Consensus Approach

The levy, aimed at raising funds for climate finance, faces strong opposition from countries fearing economic impacts. While some member states advocate for a majority vote, China has warned it would not accept such a decision and may even withdraw from the IMO if forced.

IMO Secretary-General Arsenio Dominguez emphasized the importance of consensus: “We work on consensus, that’s always the focus of the IMO.” He aims to find a solution acceptable to all member states while maintaining unity.

Alternative Carbon Pricing Proposals

Singapore proposed a carbon trading system, but experts argue it may incentivize short-term solutions like biofuels over long-term investments in cleaner fuels such as ammonia.

Smith warned: “Carbon trading is uncertain and volatile, and not investable. It will not result in more investment for long-term technologies.”

Another proposal from the ICS suggests a more flexible carbon charge, which could be more acceptable to China and Brazil as it aligns with existing fuel standards.

Call for Strong Action

Andrew Forrest, a proponent of hydrogen-powered shipping, criticized those pushing for slow-moving agreements: “I challenge anyone who advocates for a consensus, because they’re not actually advocating for a consensus, they are a wolf in sheep’s clothing intending to hold the status quo of fossil fuel and accelerate the pollution of our environment and the inefficiency of our shipping industry.”

With a final decision approaching, Friederike Roder from the Global Solidarity Levies Task Force highlighted the urgency: “In two weeks, we could have the world’s first international levy on shipping emissions. This would be a milestone in our efforts to raise climate finance, hold polluters to account and support the global south.”

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Source: The Guardian