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A carbon tax for shipping is firmly back on the agenda as a way to get zero emission ships ordered before 2030. Members of the Getting to Zero Coalition made the case for a carbon tax on shipping at a high-level webinar convened by the World Economic Forum earlier this month. “We ask the International Maritime Organization to put a price on carbon to make it profitable to order a zero emission vessel by 2030,” said Lasse Kristoffersen, CEO of Torvald Klaveness, in one of the most high profile quotes from the event. "We need to look into policy instruments and market-based measures to close the competitiveness gap between conventional and zero emission fuels. There is also a need to explore policies, demand drivers and funding mechanisms to motivate and de-risk first mover investments," Johannah Christensen, managing director of the Global Maritime Forum, told Splash Extra. At the Global Maritime Forum’s annual summit in Singapore last October, maritime leaders proposed a global carbon levy to accelerate shipping’s decarbonisation through investments in technology and design of new propulsion systems, alternative fuels, and scaling and infrastructure to deliver these fuels, while taking into consideration the impact on trade and developing states. In the proposal, the starting level for a carbon levy would be $10 per ton of CO2, and $50 to $75 per ton CO2 by around 2030. A price of $10 per ton CO2 would correspond to an annual fund of $8bn. A price of $75 per ton CO2 would correspond to an annual fund of $70bn. Shipping has a history of disappointment in policy In December last year, several leading industry organisations including the International Chamber of Shipping (ICS), the Cruise Lines International Association (CLIA), Bimco, Intercargo, Intertanko, Interferry, and the World Shipping Council (WSC) proposed a $5bn research and development fund to help reduce emissions from shipping with financing coming via a mandatory $2 per tonne bunker levy. However, with numerous interest groups involved, a carbon pricing mechanism on a global level is proving hard to achieve. “Oil producing countries fear a future without heavy fuel oil and marine diesel. Countries on the periphery of main shipping routes fear that higher shipping costs will translate in less competitive exports and more expensive imports,” said Olaf Merk, a ports and shipping expert at the International Transport Forum, part of the Organisation for Economic Co-operation and Development (OECD). Discussions in the past on market-based mechanisms - which include carbon taxes, but also emission trading schemes - took years but did not lead to any agreement. Merk said a regional carbon tax for shipping is more likely in the short term. The European Commission has indicated that it will integrate shipping into the EU’s emission trading scheme. "Although that does not sound like a carbon tax, it will in practice resemble a carbon tax. The most likely way that including shipping in the scheme is going to be implemented is by creating a carbon tax with revenues flowing into a fund that could be partly used to finance projects to decarbonise shipping,” Merk said. Peter Nuttall, scientific and technical advisor at the Micronesian Center for Sustainable Transport University of the South Pacific in Fiji, has been vocally calling for a universal carbon tax on shipping for years. "The tax should contribute the majority of the revenue generated to the needs of the climate most vulnerable. This would still leave more than enough for the R&D needs of shipping that ICS is calling for," Nuttall said. Dr Tristan Smith, a lecturer at UCL Energy Institute, has long argued that a carbon tax can directly act to close the price gap between the incumbent fossil fuels and a more expensive zero carbon future fuel. "The big challenge though, is that most see carbon taxation as a tool for mitigating greenhouse gases (GHG) only," Smith pointed out. According to Smith, at the IMO, which is the most obvious forum to introduce a global levy, the initial GHG strategy is guided by principles that are not just about mitigation. The not-so-catchily-titled principle of Common But Differentiated Responsibility Respective Capabilities (CBDRRC) is hard to pin down but needs to be thought about as part of any policy solution. CBDRRC is a principle within the United Nations Framework Convention on Climate Change (UNFCCC) that acknowledges the different capabilities and differing responsibilities of individual countries in addressing climate change. It has served as a guiding principle as well as a source of contention in UN climate negotiations. "It originates from the basic concept that climate change whilst a challenge for all to solve, was created by developed economies, and so a greater share of responsibility should be carried by developed economies. This creates an obvious tension with the oft repeated desire that policy should create a level playing field, especially in a sector which has emissions, assets, costs and profits which are hard to allocate to any one state," Smith explained, adding that proposals that do not include adequate acknowledgment of CBDRRC/equity are not likely to move very far, even if in all other respects they look like a key part of addressing the GHG reduction challenge. Smith said carbon pricing can create a demand for new fuels including hydrogen and ammonia, but if there is not a way that the equivalent incentivisation can be directed to ensure that these are produced with no GHG emissions, then the system solutions that the industry needs will not appear. "Shipping has a history of disappointment in policy. One source of that disappointment is the assumption that any one policy is a silver bullet to solve all problems. Carbon pricing might be hugely important for shipping’s future, but it also risks being overblown into a silver bullet for a landscape of issues that are about mitigation, equity, system change," Smith warned. The IMO is set to hold informal virtual discussions on short-term GHG reduction measures next month.

Carbon levy back on the agenda

Growing risk Europe takes the lead on controversial GHG measure

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