According to the World Bank, carbon pricing or carbon levies are economic instruments that can be used to reduce greenhouse gas (GHG) emissions by putting a monetary price on carbon dioxide (CO2) or other GHG emissions.
The US and EU officials have endorsed carbon levies as one of the market-based measures to incentivise the shipping sector to cut down its GHG emissions. Citing official sources, The Financial Times reported that French President Emmanuel Macron is expected to push for a carbon tax at the 80th IMO Marine Environment Protection Committee (MEPC) meeting next month.
A carbon tax on fossil fuels has attracted long-standing and broad backing from shipping and environmental organisations like the Global Maritime Forum’s Getting to Zero Coalition, the Clean Shipping Coalition and the International Chamber of Shipping.
As interest in a carbon tax grows, the World Bank has presented a proposal on how carbon tax revenues can be used to speed up shipping’s decarbonisation drive. This comes two weeks before MEPC 80.
A major portion of the revenue generated could be allocated to develop zero-carbon fuel production capacity and supply infrastructure, including bunker infrastructure in ports, according to the World Bank. This could help the transition away from fossil fuels and promote uptake of cleaner marine fuels.
A portion of the funds could also be earmarked to develop other port infrastructure like shore power supply and to assist developing countries in making their transitions to greener technologies.
Pricing maritime emissions
“Estimates show that, in shipping alone, putting a price on carbon could raise $40 to $60 billion dollars each year between 2025 and 2050,” says the World Bank report.
The Getting to Zero Coalition explained in a report last year that reaching net-zero emissions by 2050 requires a carbon levy average of $191/mt. The levy would need to reach $230-260/mt by 2035-2045, and $360/mt by 2050 to stimulate the switch from fossil fuels to zero-emission fuels.
This could also help to ensure there is an emergence phase of the transition during the 2020s (e.g. funding RD&D to reach five percent zero-emission fuel penetration by 2030), which enables shipping-specific cost reductions prior to the more rapid uptake of new fuels scheduled for the 2030s,” said Getting to Zero Coalition.
Source: Engine