A First: Shipping Industry Will Now Be Liable to a Carbon Tax
New Delhi: In a first, the United Nations has finally agreed on a carbon tax on a major polluting industry. The shipping industry – which accounts for a whopping 3% of carbon emissions – will now be liable to a carbon tax, as per an agreement arrived at by the International Maritime Organization, a specialised agency under the United Nations which monitors the safety and security of shipping and prevents marine and atmospheric pollution by ships.
The development came on April 11, at the 83rd session of the Marine Environment Protection Committee that was conducted at London in the United Kingdom. According to the agreement, countries will adopt a global framework that will put a carbon price on shipping emissions.
The funds will go towards decarbonising the shipping industry and encouraging the use of cleaner technologies. Starting in 2028, ship owners will have to use increasingly cleaner fuels – or be subject to fines if they do not.
According to the Associated Press, ships will have to pay a minimum fee of USD 100 for every ton of greenhouse gases they emit, above certain thresholds. Taxes are estimated to rake in between USD 30–40 billion in revenues by 2030: that’s roughly USD 10 billion annually.
63 countries including India voted in favour of agreement, US absent
India is among the 63 countries that have voted in favour of this agreement. Other countries that backed the policy include BRICS members such as China, Brazil and South Africa. Sixteen countries including Saudi Arabia and Venezuela, however, opposed the agreement and voted against it.
The policy is expected to be formally adopted in October 2025. Several technical details, however, still remain unresolved. For instance, the BBC reported that small island states and environmental groups called the agreement “unfit for purpose” because it does not impose a blanket tax. Additionally, the funds will not be available as climate finance for developing countries; instead, it will be used only to decarbonize the maritime sector.
As the shipping industry accounts for 3% of carbon emissions and is not covered under the Paris Agreement, this makes the agreement a “significant development”, Suranjali Tandon, Assistant Professor at the Delhi-based National Institute of Public Finance and Policy, said in a statement. However it is also a “compromise”, she added.
“The shipping levy agreed on is a compromise, with the US not in support of many elements of the plan,” Tandon said.
“It will apply to emissions above a certain target of decarbonisation as opposed to per ton of emission. It is expected that although there will [be] an incentive to shift to alternative fuels, this shift will be slower…it remains to be seen if the US responds with retaliatory actions and how the revenues are redistributed.”
Incidentally, the US was absent from the vote on April 11 and had also encouraged delegations to walk out from negotiations on April 9.
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