Pacific Should Ask For Carbon Tax

Shipping is a heavily capitalised and major profit-making sector.
24 Jun 2020 17:14
Pacific Should Ask For Carbon Tax

When the pandemic hit and borders closed around the world, the International Maritime Organisation (IMO) negotiations over how this critically important emitting sector, is already moving at an unacceptable glacial speed, ground to a halt.

But in the e-space of the ‘new normal’ discussion and debate has accelerated.

“Shipping Decarbonisation – a Trillion Dollar investment Opportunity” was last week’s headline for a major webinar of large shippers and financiers. Such discussions are going on around the world right now. In London, Athens, New York, Oslo and Hamburg, the captains of this multi-trillion dollar industry are gearing up to capture the benefits of this transition. They know that first movers will reap the early rewards. Within a decade, zero emissions ships powered by new fuels will be operating commercially on major routes.

But will this major industry shift be equitable and just? Will the benefits also be delivered to our small-scale island routes? And what are the trade-offs our leaders will be asked to make as these negotiations harden up in IMO?

Profit-Making Sector

Shipping is a heavily capitalised and major profit-making sector. The real benefits from this essential but high polluting activity go primarily to the coffers of industry majors in large trading nations and developed economies. Shouldn’t some of these profits be directed now to the large and urgent needs of the climate vulnerable nations, such as our Pacific large ocean states?

Next week the International Chamber of Shipping is holding a webinar. They want global support for their proposal to tax international shipping at $2 per tonne of fuel to contribute to a $5billion global research and development fund over the next 10 years. The “carrot” they are dangling in front of States like the Pacific is to give perhaps 10 per cent of this to the shipping needs of Small Island Developing States (SIDS) and Least Developed Countries.

Sounds attractive. $500 million over 10 years is what we have been modelling for the Pacific Blue Shipping Partnership. We calculate this is sufficient to act as a catalyst to transition six to eight Pacific States to full shipping decarbonisation. So, on the surface, the International Chamber of Shipping (ICS) proposal sounds like a good fit. Surely, we should support this. It sounds like a responsible offer from world shipping. What’s not to like, where are the downsides?

Vulnerable Countries

In 2009 the world agreed to collectively pay $100 billion a year to fund the most pressing mitigation and adaptation needs of the climate most vulnerable countries – the “small” and “least” of the global community. It hasn’t happened. So far, the Green Climate Fund has been given less than $12 billion. Total, not per annum.

Shipping is a global industry that creates about 2.2 to 3 per cent of all greenhouse gas emissions – producing emissions on a similar scale to a large industrialised country such as Japan or Germany. It has been an increasing global polluter since shipping started burning coal. Over decades and centuries, it has proved a highly profitable industry, in large part from moving huge quantities of carbon in coal, oil and ores around the planet. But it has never paid for the cost of the pollution it has already contributed to global warming, let alone the increasing emissions it will continue to make.

So, from this perspective and applying the Principle of Polluter Pays, we can easily argue that shipping should be contributing to the climate finance so desperately needed by countries such as ours right now. Who else will defend against the fast increasing impacts our countries face from the climate crisis. The Polluter Pays Principle is already well recognised at IMO, from when it began so successfully addressing the issue of big oil tanker spills, so there should be no obstacle to IMO applying it to carbon. At 2.2 to 3 per cent of global carbon pollution, surely shipping should be already paying more than $2 billion per year to GCF? But so far it pays nothing.

The best solution is for the Pacific to go back to the IMO and call strongly and calmly for a real and universal carbon tax as an immediate priority.

The tax should contribute the majority of the revenue generated to the needs of the climate most vulnerable.

This would still leave more than enough for the R&D needs of shipping that ICS is calling for.

Our international colleagues in leading research centres are telling us the carbon tax would need to be north of $100 per tonne by 2030 to be effective. So why not start at a minimum $10 a tonne now, increasing $10 per year to 2030. The first $8 goes to the climate vulnerable, the other $2 to shipping R&D as the industry requests. How is that unfair for any actor?

When looked at through this lens, the ICS offer is less of a “carrot” and more of a “crumb”. Surely strong proactive pressure to move directly to a full carbon tax is the only way to get a win-win for Pacific States. IMO and UNFCCC diplomats and negotiators, please take note.

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