A groundbreaking proposal for a flat tax on shipping emissions has gained significant momentum as Liberia and Panama, the world’s leading shipping registries, announced their support. These nations join 43 others, including key EU countries, in backing the initiative, according to a report by the Financial Times.
The endorsement means that countries representing 66% of the global shipping fleet, with a collective capacity of 1.6 billion deadweight tonnes, are now advocating for the levy. This diplomatic alignment signals a potential shift for an industry heavily reliant on fossil fuels and under growing pressure to decarbonize.
“It is really significant [that Liberia and Panama have backed the levy],” a delegate involved in International Maritime Organization (IMO) negotiations told the Financial Times. The delegate noted that while these countries do not hold more voting power, their substantial contributions to IMO funding and their role on its executive council amplify their influence.
Proposal Details and Divisions
The proposal outlines an annual flat tax on carbon dioxide emissions from ships, calculated on a life-cycle basis. While details remain undecided, there is considerable disparity in proposed levy amounts. Liberia supports a modest $18.75 per tonne, while the Marshall Islands advocates for a much steeper $150 per tonne.
Tristan Smith, an energy and shipping expert at University College London, emphasized that a lower levy would be insufficient for a meaningful energy transition. “You don’t get an energy transition without [a levy of] $100 to $150,” he told the Financial Times, suggesting this must be paired with financial rewards for zero-emission ships.
Despite the differing views, the proposal has been welcomed by stakeholders from nations vulnerable to climate change, such as the Marshall Islands. “We are grateful for the spirit of collaboration [and] welcome the additional support,” said Atina Schutz, a negotiator for the Marshall Islands. She added that the text provides a basis to ensure the IMO delivers on the ambitious climate goals agreed upon in July 2023.
Challenges Ahead
The initiative has faced resistance from key players, including China, Brazil, and the United States, who favor alternative economic measures like emissions trading schemes. These schemes would allow higher-polluting shipowners to buy credits from lower-polluting peers, a concept gaining traction among some delegates.
The funds generated from the proposed levy would be used to incentivize the adoption of low-emission fuels, such as green methanol or ammonia, and potentially support poorer nations in their energy transitions. However, the scope of these funds remains under debate, with some advocating for a narrower focus on decarbonizing shipping alone.
A Pivotal Moment for Shipping
The IMO has committed to achieving net-zero emissions for the shipping industry “by or around” 2050, with a deadline of 2026 to establish an economic measure. Support from Liberia and Panama strengthens the case for a flat tax, offering a unified approach to addressing emissions in one of the world’s most polluting sectors.
