The first step towards a global carbon price

First step

The proposal would require shipping companies to pay a fee for every ton of carbon they emit when they burn fuel. In other words, a tax. That could raise a significant amount of money and lead to far-reaching changes in the shipping industry.

It would also be a first step toward the lofty goal of a tax that is not limited to a single country but global. (About 70 countries and states around the world have put a price on carbon, either through taxes or cap-and-trade mechanisms.) Many activists and economists have argued that carbon pricing is crucial to addressing the overall threat of climate change, because it can both curb pollution and fund a cleaner, more sustainable economy .

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Big money

The world ’s attention turned to the shipping industry in the last week of March when the giant container ship Dali lost power and crashed into Baltimore’s Key Bridge. But there are at least 50,000 cargo ships like the Dali, constantly on the move, moving the vast majority of the world’s goods. Shipping accounts for about 3% of global greenhouse gas emissions, slightly more than aviation. Taxing carbon emissions could potentially raise tens of billions of dollars a year for climate policy.

By comparison, developed nations have donated $9 billion to the Green Climate Fund, a United Nations program to help developing countries tackle climate change, but activist groups say that is far less than what is needed. There is still much work to be done. But moving forward could be easier than in global climate negotiations, which require unanimous support. Decisions at the IMO are made by a majority of member states.

What have countries agreed to do?

The International Maritime Organization says it is simply delivering on a commitment it made last year to decarbonize the entire shipping industry by 2050. Its member countries agreed that they would need to start charging for shipping's heat-trapping emissions by 2027.

In a consensus vote, the IMO and member states detailed the decisions that still need to be made about carbon pricing. How will the price be calculated? Will it be a fixed fee or part of a trading mechanism between companies? Who will collect and distribute the money? And what fuels will be considered low-carbon?

The maritime organization said countries are considering seven different proposals, with prices ranging from $20 to $250 per ton of carbon emissions. They hope to decide on all of them next year. Albon Ishoda, the Marshall Islands negotiator who proposed a $150-per-ton carbon tax, said getting to where he is now has been an incredibly difficult process.

What could the impact be?

How would the proceeds from the carbon tax be distributed? World Bank analysts have suggested in a study that countries use the money to decarbonize the shipping industry, invest in efficiency measures that could reduce shipping costs for poorer countries, and implement broader climate action.

Charging a price for ships’ carbon emissions could have an impact on basically everything we buy. Coffee from Colombia, T-shirts from Vietnam and mobile phones from China all reach consumers around the world by ship. Roel Hoenders, the IMO’s head of climate action, warns that small countries could end up paying higher prices for basic goods.

Countries that have built their economies on shipping goods could lose significant revenue because shipping accounts for a large part of their export prices. The impact each measure would have is a significant part of the equation, especially for developing countries, whose ability to compete globally would be affected by increasing the price of carbon.

Lessons for the rest of the world

Some of the shipping industry’s biggest companies have recognized the need for cleaner fuels and are looking to develop them faster. Maersk, the second-largest container shipping company, has invested billions in decarbonization efforts. Many of the world’s biggest shipping companies are pushing for more ambitious carbon pricing, because it means they won’t have to pay the same tax in Europe.

Ideally, companies want to avoid paying carbon taxes in multiple jurisdictions, which would involve a lot of complicated and expensive accounting work. There are many difficult compromises ahead.

But experts hope the shipping industry’s experience with carbon pricing will send a signal to the world about how effective such a policy can be. When done properly, carbon pricing “is the most cost-effective and simplest policy, offering the widest range of flexibility to all economic stakeholders.”

Source: https://congthuong.vn/buoc-tien-dau-tien-huong-toi-gia-carbon-toan-cau-311688.html