The cloud of a carbon tax eased away from the global shipping industry at the conclusion of U.N. talks on climate change, but the prospect of new and specific charges for the movement of goods on the water isn’t going away entirely.
The two-week meeting in Durban, South Africa, produced an outline of a Green Climate Fund, one of the major agreements in the talks that involved some 190 nations and produced deep concern in global shipping that the sprawling international operations would start a meter running to pay for the fund.
But the U.S. removed any reference to specific financing sources, notably shipping, for the fund designed to transfer up to $100 billion annually by 2020 to poorer nations to help them adapt to reduced emissions.
Several major trading nations, including China, India, Australia, South Korea and Brazil, supported the U.S., which argued funds should come from national budgets rather than a tax on shipping. Still, there is general consensus that the shipping business that supports global trade in time will become a major private contributor to the fund, partly because the International Chamber of Shipping, which speaks for more than 80 percent of the world fleet, favors the approach.
The London-based ICS joined forces with U.K.-based Oxfam, a major international charity, and the World Wildlife Fund in Durban to propose that the International Maritime Organization, the U.N. shipping agency, adopt a compensation mechanism to ensure that a significant share of any revenue from shipping goes to poorer nations.
Shipping and aviation are the “most likely areas to yield early dividends when it comes to funding finance,” said Chris Huhne, the U.K.’s energy and climate change secretary. The World Bank estimates a carbon tax of $25 per metric ton on shipping would raise around $26 billion a year, equivalent to 0.2 percent of global trade.
Shippers already are arguing against such a program. At a meeting last month in Atlanta, the newly formed Global Shippers Forum said the cost to shippers could reach $20 billion a year and global container shipping rates could rise some 5 percent. And that would come without actually removing or limiting greenhouse gas emissions, GSF Secretary General Chris Welsh said.
“We have to be really careful that we tackle this challenge in a way that works to limit emissions and, secondly, in a way which doesn’t hinder world trade at a time when economies around the world are feeling the pressure,” he said. “We also need an approach that will encourage industry to use technical and operational efficiency measures to make reductions rather than simply opting for a financial mechanism, such as a carbon tax.”
In the draft text in Durban, however, international shipping was the only concrete source of private finance identified that would raise billions of dollars in addition to contributions from governments. The shipping industry can “probably support” a bunker fuel tax in principle, as long as details are decided at the IMO, according to Peter Hinchliffe, secretary general of the ICS.
Shipowners also have a “clear preference” for a market-based mechanism for a compensation fund linked to the fuel consumption of ships rather than an emissions trading scheme, according to the ICS.
Oxfam estimates a bunker tax program would take up to two years to finalize and could be imposed within three years after ratification. The proposal for a shipping carbon tax is widely expected to re-emerge when the U.N. climate change negotiations resume next November.
That means shippers, and their carriers, may only have gained time and not a reprieve from a tax even though, Welsh said, “Shippers have no way of actually reducing carbon emissions from shipping. There is no published scheme on how to reduce shipping emissions. We have no idea how the technical aspects would work except that the shipper is going to foot the bill.
“We want to cut carbon reductions, but not at any cost,” he said.
Still, the GSF leaders say they understand the costs of doing nothing.
“If the liner companies have to invest in new ships and that translates into higher freight rates, if that is what has to happen to save the world, shippers will be willing to pay the cost,” said John Lu, chairman of the Asian Shippers Council.
Contact Bruce Barnard at firstname.lastname@example.org.