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Shipping has been a longstanding contributor to climate change. However, integrating vessels into global emission reduction efforts has been challenging due to the dependence on individual countries committing to targets. Despite shipping being responsible for almost 3% of global greenhouse gas emissions, alternatives to highly polluting bunker fuel are either expensive or underdeveloped. The industry is now on the verge of aligning itself with international ambitions to limit global warming to 1.5°C above pre-industrial levels, but China is rallying poorer countries against a vital measure to achieve these targets: a global levy on shipping emissions.
The UN’s International Maritime Organization, responsible for regulating shipping, has previously committed to halving the industry’s greenhouse gas emissions by 2050 compared to 2008 levels. A key IMO committee is expected to agree to a net-zero emissions target by around 2050 after secretive talks. However, a strategy to accomplish this goal still needs to be developed.
One crucial element of the strategy should be mandating vessels to switch to zero-carbon fuels, similar to the transition happening in the automobile industry. Implementing a carbon emissions pricing mechanism is also essential. While the European Union has plans to include shipping in its emissions trading scheme, a global initiative would have a much greater impact.
A levy on shipping emissions would provide a strong incentive for shipping companies to invest in zero-carbon fuel vessels. Given the long lifespan of vessels, which can last 20 to 30 years, this shift needs to begin immediately. Additionally, the levy could generate significant revenues to fund the development of new fuel technologies like green hydrogen or ammonia, as well as the transformation of shipping and port infrastructure.
According to the World Bank’s estimate, an international shipping levy could generate an average of $40-60 billion annually between 2025 and 2050. Some of these revenues could be reinvested in maritime transport, while others could aid developing countries in their green transition or compensate vulnerable countries for climate change impacts. However, French President Emmanuel Macron’s efforts to rally support for the levy at a recent summit fell short of expectations.
China is urging poorer countries to oppose a flat levy and stronger decarbonization targets, citing potential supply chain cost increases that could impact the global recovery. Brazil and Argentina are also concerned about the impact of a levy on their commodity exports. However, implementing a levy would take several years, and the long-term costs of not reducing emissions would be far greater. Some poorer countries highly exposed to rising sea levels, like the Marshall Islands, support the levy and are home to one of the world’s largest ship registries.
China has a history of advocating for developing countries, often aligning its own interests with its Belt and Road Initiative. Nevertheless, participants in the IMO talks have observed a clear geopolitical divide between developed and developing countries.
Wealthier countries supporting a shipping emissions levy need to make a stronger case for its implementation. If properly designed, the levy could provide significant funding for modernizing shipping, including in emerging markets, while ensuring an equitable transition. It could play a pivotal role in accelerating decarbonization efforts within a truly global sector that has been slow to respond.
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