International shipping has pledged to at least halve its GHG emissions by 2050 from 2008 levels, with many stakeholders pushing for full decarbonisation by that date. One policy option that could boost the green transition of the sector would be the introduction of a market-based measure, for instance carbon pricing, either in the form of a carbon levy or by capping GHG emissions and allowing operators to buy and trade emissions allowances. A new World Bank report looks at various options for implementing carbon pricing in the shipping industry and explores how carbon revenues could strategically be used to enable an effective and equitable energy transition in and beyond the sector. In shipping alone, carbon revenues could reach an estimated $1 trillion to $3.7 trillion by 2050 (or $40-$60 billion annually).

The report concludes that the bulk of carbon revenues from shipping should be allocated to the governments of those countries with lower ability to address climate change or shipping emissions—primarily low- and middle-income countries. The reasoning is simple: developing economies are more likely to suffer from disproportionately negative impacts by carbon pricing and may not have the necessary resources to invest in low-carbon solutions. Making them the primary recipients of carbon revenues would help correct this imbalance and ensure a more equitable transition toward a climate-smart future. The money raised through carbon pricing could be allocated toward many purposes. At the top of the priority list is the decarbonisation of the shipping industry itself. This would include supporting the development of zero-carbon vessels and zero-carbon fuels, building production facilities and distribution networks for clean bunker fuels, upgrading port infrastructure to accommodate these new technologies, and more.

Part of the funds could also help upgrade maritime infrastructure more broadly, for instance, by improving the overall resilience of maritime ports suffering not only from climate-induced extreme weather events but also from congestion, poor digitalisation, or a lack of skilled workers. Given the considerable revenues that carbon pricing could generate, while reducing GHG emissions from ships effectively, there are also opportunities to direct at least some of these resources beyond the maritime sector, such as the production of greener electricity, which would eventually also benefit the shipping industry, whose new fuels will rely heavily on the large-scale supply of renewable power around the world. The executive summary and full report are available from The World Bank’s website.

The use of revenue from market-based measures will be discussed at the World Ports Conference in the ‘Towards a just and equitable energy transition in shipping’ session on Tuesday 17 May, in which IAPH managing director Patrick Verhoeven will be having a conversation with Binyam Reja, acting global director Transport Global Practice at The World Bank, and Neil Stuart, strategy and communications director at the International Chamber of Shipping.
Source: IAPH