Support for a shipping emissions levy is growing internationally as the International Maritime Organization (IMO) meeting approaches. A summit in Paris, organized by the French presidency, has garnered support from more than 20 countries and regional organizations for a shipping emissions levy.
The purpose of this proposed levy is to tackle the environmental effects of the shipping sector, which currently contributes 2.9% of global greenhouse gas emissions.
Due to the jurisdictional complexities of the high seas, the shipping industry has largely avoided taxation. However, if the IMO, the United Nations body responsible for regulating shipping, were to introduce a carbon emissions tax, it could incentivize shipping companies to adopt more environmentally friendly practices at a faster pace.
Additionally, the revenue generated from a shipping emissions levy, estimated to be around £80 billion annually, could be allocated to assist developing nations in their efforts to mitigate and adapt to climate change.
The recently released chair’s summary from the Summit on a New Global Financing Pact confirms the commitment of 23 countries and regional organizations to adopt a revised IMO greenhouse gas (GHG) strategy during the upcoming committee meeting scheduled for July 3-7, 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 implementing a shipping emissions levy. It emphasizes that the revenue generated from such a levy should significantly contribute to facilitating a “just and equitable transition” within the shipping sector.
Prominent 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.
Although the tax-free status currently enjoyed by the shipping industry already faces challenges, such as the upcoming requirement for ships to purchase emissions permits within the European Union starting next year, the implementation of a levy remains uncertain. However, the IMO has the potential to establish a timetable for the introduction of such a levy, demonstrating its commitment to addressing the environmental impact of the industry.
