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Talks intensify on shipping emissions levy

Tianjin port in China. Globally, shipping is estimated to be responsible for 3 per cent of global carbon emissions but, according to the OECD, delivers 90 per cent of trade worldwide. (Photo: Qilai Shen/Bloomberg)
Tianjin port in China. Globally, shipping is estimated to be responsible for 3 per cent of global carbon emissions but, according to the OECD, delivers 90 per cent of trade worldwide. (Photo: Qilai Shen/Bloomberg)

Public opposition to an emissions tax on shipping vessels made consensus seem a distant hope at this week’s UN meeting – but in private, talks might be advancing.

Heated debate around the taxation of shipping emissions is continuing at the International Maritime Organization in London this week. Delegates from the 175 member states of the UN agency that supervises the maritime sector took the stand in the plenary session, arguing for or against the measures being considered to reduce the sector’s emissions.

The industry is estimated to be responsible for 3 per cent of global carbon emissions but, according to the OECD, delivers 90 per cent of trade worldwide. The impacts of a shipping levy on trade have therefore played a repeated part in the arguments against the measure.

Brazil, in particular, has been leading a pack of Latin American countries strongly contesting the benefits of such taxation. In the plenary meeting on Monday, Brazil argued the tax would reshape trade routes and exports, and disproportionately affect developing countries whose trading partners are located further away – effectively calling the levy a “tax on distance”. It defended its position, saying that “being against a levy does not mean being against an ambitious approach”.

Separately, one of Brazil’s representatives told Sustainable Views on Monday the country is willing to discuss all other economic measures on the table but won’t move from its stance on the tax until research on trade impacts demonstrates different outcomes.

The representative also said that incorporating shipping in an emissions trading system such as the EU’s on a global scale would be too complicated due to its use of allowances.

Meanwhile, Argentina called the levy a “shock” measure, claiming it would mostly benefit the Global North, while Chile argued that any revenue raised under the tax would not equal actual emission reductions.

Interventions on the plenary floor also included China making a point that climate change should not be used to increase the cost of trade.

Where do negotiations stand?

However, Sustainable Views understands that the latest closed-door negotiations have eased tensions on the matter: “There was strong and coordinated opposition from a number of countries to the levy, which appears now to be associated with a particular levy proposal that they perceive to be costly,” a source inside the negotiations said. 

The creation of a shipping levy – of which, de facto, several proposals and versions exist – has been pushed by the Marshall Islands and the Solomon Islands and is openly backed by small Pacific Island states such as Vanuatu, Fiji, Kiribati and Tuvalu.

EU countries have also voiced support, including at June’s New Global Financing Pact summit in Paris. On that occasion, 23 countries and regional organisations agreed in principle to a tax on shipping emissions on the condition that the revenue generated should be deployed towards a just transition.

They included the European Commission, South Korea, Vietnam, Kenya, New Zealand and Barbados.

However, experts from non-governmental organisations noted there was a gap between the countries supporting the levy at the Paris summit and the ones actively lobbying the measure at the IMO talks. 

For instance, Barbados, which has been at the forefront in demanding reforms to speed up climate finance at last year’s COP and last month’s Paris summit, has not been seen at the UN talks this week. Its seat in the plenary has been empty and no country delegates have been spotted making comments. Sustainable Views has reached out to the Barbados High Commission in London for comment.

On the other hand, Vanuatu has taken a central role in lobbying for a shipping levy. On the sidelines of the IMO talks, one of its representatives told Sustainable Views it has sent half a dozen ministers to London to gather support for the shipping levy, given the fight to lower emissions is “really existential for us”

Vanuatu is one of the countries most exposed to rising sea levels, and its government is already implementing plans to relocate its citizens in the next two years. However, the Vanuatu representative was less hopeful on what could be achieved in London this week regarding a shipping levy.

“The minimum we’re aiming for is some sort of announcement on an economic measure,” the representative said, adding that private capital is urgently needed to combat the impacts of climate change on their territories.

The latest from the negotiations is that countries opposing the levy are now agreeing that all levy proposals should be assessed, even the more contentious ones, according to the source inside the negotiations.

Back in the plenary, Norway – which chaired last week’s closed-door working group on greenhouse gas emission reductions – had conceded on Monday that there was more agreement on the technical measures than on the economic measures, adding that the “strength lies in the totality” of the revised strategy.

Potential outcomes

This revised strategy relies on technical measures, such as a fuel intensity standard, as well as economic ones, such as a price on carbon, to reach decarbonisation targets in the future.

The new strategy is expected to be adopted by IMO’s Marine Environment Protection Committee on Friday but details on its ambition will be subject to negotiations until then. According to an observer, countries spent the whole of Wednesday night talking behind closed doors with a draft paper on the greenhouse gas strategy expected to be released on Thursday morning.

Bureaucratic hurdles are widely known to affect the progress of UN meetings, with formalities often overtaking time constraints.

At the beginning of this week’s meeting, the MEPC chair, Harry Conway of Liberia, urged the delegates not to use social media to talk about the negotiations. He also clarified that the press was not allowed into the discussion rooms where the different working groups negotiate the measures on the table.

Still, alarmed by alleged “disinformation”, Vanuatu minister of climate change adaptation Ralph Regenvanu tweeted a long thread on “six myths” he had picked up on earlier this week, including one saying “a levy would mess with markets”.

Experts at the UN talks said that regardless of this week’s outcome, a shipping levy will continue to be discussed. If no consensus was reached by the end of the week, the levy would probably be added to a basket of economic measures with further timelines for discussion and adoption in the longer term, they said. This would include continuing talks on setting a figure on carbon pricing, and on the spending and distribution of revenues raised from it.

A proposed timeline seen by Sustainable Views shows that the impact assessment of mid-term technical and economic measures to reduce emissions would be finalised by October 2024, with potential approval of the measures in April 2025. 

Once the assessment of these measures has been done, many countries that oppose the levy may change their position, the source inside the negotiations said. The measure itself would not enter into force sooner than May 2027, according to the provisional timeline.

The 2018 initial greenhouse gas strategy stipulated that the shipping sector should aim to cut emissions by at least half by 2050, with no short or mid-term targets.

The current level of ambition is set at reducing emissions by 20 per cent by 2030 and 70 per cent by 2040. However, according to two observers, private meetings between a few countries are currently ongoing to increase the ambition in the targets in order to keep the 1.5 degree Paris goal alive.

“Nothing will be certain until the end of this week, because this balance could still be traded,” said the source inside the negotiations, adding however that “the levy is very much alive”.

Any agreement reached this week on setting short-term and mid-term decarbonisation targets would be a significant step forward for the shipping industry, which has lagged behind other sectors in implementing ambitious targets.

However, implementation and supervision remain contested issues under any UN agreement. Answering a question from Sustainable Views, the MEPC’s Conway admitted it is up to member states to enforce any agreements domestically and that the UN body’s primary focus stays on reaching consensus among countries.

A service from the Financial Times