A CO2 tax: is this coming or not?

By: Jeroen Berger, September 13, 2017

Although shipping is one of the lowest carbon dioxide (CO2) emitting freight transport options per tonne-kilometre, the global marine shipping sector is nowadays so big that the maritime transport is responsible for approximately 4% of the climate change. The expectation is that, without measures, this percentage is only going to grow. A CO2 tax is therefore a famous instrument to reverse this situation.


Before the United Nations Climate Change Conference Paris 2015


The six major oil companies (BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total) say that they are already taking a number of actions to help limit emissions a long time ago. Because of that, they have sent an open letter to governments and the United Nations saying that they can take faster climate action, if governments provide even stronger carbon pricing and eventually link it all up into a global system that puts a proper price on the environmental and economic costs of greenhouse gas emissions.


Although the CO2 tax, also referred to as “carbon tax”, is a much-discussed topic at the climate change conferences, there is still not a global CO2 tax. Why actually? In my research, I’ve learned, for instance, that big polluting countries like China and the United States of America (USA) were unable to reach agreement.


Only the European Union (EU) takes a serious approach to the challenges related to the trade in CO2 allowances, but unfortunately it was not very effective. In order to reduce the use of cheap oil, coal and gas, a CO2 tax of at least EUR 30 per tonne of CO2 is more than likely necessary.


Shipping is being left out of the Paris deal


At the Paris climate change conference (COP21) in December 2015, almost 200 countries adopted the first-ever universal, legally binding global climate deal. The agreement sets out a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C with the aim to limit the increase to 1.5°C. Although shipping is a big emitter of CO2, it is being left out of the Paris deal.


Developments after the United Nations Climate Change Conference


Although the maritime transport is being left out of the Paris deal, the International Monetary Fund (IMF) will not let go the idea for a CO2 tax for shipping. By raising the cost of using fossil fuels, a CO2 tax would tend to increase the cost of goods and services that involve relatively large amounts of CO2 emissions.


The IMF has calculated that with a global CO2 tax of 30 dollars a tonne, 25 billion dollars a year can be collected. For example, this is a quarter of the 100 billion dollars a year that must be found to limit the impact of climate change for developing countries.


Also according to the European Community Shipowners’ Associations (ECSA) and the Royal Association of Netherlands Shipowners (KVNR), it is a missed opportunity that the maritime transport is being left out of the United Nations climate agreement. For example, the Secretary-General of the ECSA says: “We really hope that the negotiating parties serious consider to reinstate the maritime transport into the international climate agreement.”


CO2 tax


Although the shipping industry is being left out of the Paris deal, there have been more and more proponents which call for a CO2 tax for shipping too. And together with the fact that we now have to deal with an extremely low oil price, we wouldn’t be surprised if there comes a CO2 tax in the foreseeable future.


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