The first worldwide carbon tax appears to be steaming into view. In late March the United Nations agency that regulates the shipping industry essentially committed to requiring shipping companies to pay a fee for every ton of carbon they emit by burning fuel.
“I’m very confident that there is going to be an economic pricing mechanism by this time next year,” Arsenio Dominguez, the secretary general of the International Maritime Organization, said. “What form it is going to have and what the name is going to be, I don’t know.”
This step is “potentially world-changing,” Manuela Andreoni and Max Bearak wrote in The New York Times. They reported that there are at least 50,000 cargo ships like the ill-fated Dali, which crashed into Baltimore’s Francis Scott Key Bridge, constantly on the move, transporting the vast majority of the world’s goods. Shipping accounts for roughly 3 percent of global greenhouse gas emissions, slightly more than aviation.
About 70 countries and states around the world have put a price on carbon, either through taxes or trading mechanisms. But if the IMO finalizes this proposal, it would be the first carbon fee to apply around the globe.
The IMO has been considering carbon pricing and other market-based measures for more than 10 years. The organization said that by adopting the proposal it was simply living up to its pledge, made last year, to decarbonize the entire shipping industry by 2050. Its member countries have agreed that they need to start charging the shipping industry for emissions of heat-trapping gases in 2027.
The organization still must make many decisions about pricing carbon, The Times’ reporters noted. “How would a price be calculated? Would it be a flat fee or part of a trading mechanism between companies? Who would collect the money and distribute it? And which fuels are considered low-carbon?
“Countries are looking at seven different proposals, in which prices range from $20 to $250 per ton of carbon emissions... They hope to decide on all that by next year.”
Such a fee would very likely raise tens of billions of dollars a year. That revenue could accomplish a lot. "The Pacific is pushing for a majority of the revenue to support the most climate vulnerable in responding to climate change," the Marshall Islands' envoy Albon Ishoda said in a Reuters dispatch last summer.
Economist DominikEnglert and his colleagues from the World Bank suggested in a study that countries should use the money to decarbonize the shipping industry, invest in efficiency measures that could reduce shipping costs for poorer countries and deploy it for broader climate action.
Many of the world’s biggest shipping companies are pushing for a more ambitious carbon price because that would mean they wouldn’t need to pay for the same tax in Europe, The Times explained. Companies ideally want to avoid paying carbon taxes in multiple jurisdictions, which would result in a lot of complex and expensive accounting.
“If I think back three years ago, the IMO was just about the most conservative organization I have ever encountered,” the European Commission's Green Deal chief Frans Timmermans told a side event at last June’s Paris climate finance summit. “And now the atmosphere has completely changed.”