Shipping faces crossroads with carbon pricing as global talks begin

The IMO is considering a carbon tax as a tool to cut the shipping industry’s substantial emissions. (Photo: Maersk)

The International Maritime Organization (IMO)’s Marine Environment Protection Committee (MEPC) kicked off a five-day meeting on April 7, focusing on technical regulations, energy efficiency, and pollution in the shipping industry.

A key topic under discussion is whether to implement a carbon tax to reduce greenhouse gas (GHG) emissions from ships. Member states remain divided on the issue. The European Union is leaning toward accepting carbon offset mechanisms through emissions trading—a move that could undermine the push for a carbon tax and weaken climate finance efforts.

Carbon tax to push shipping to cut emissions? EU hesitates, China opposes

Maritime shipping accounts for about 3% of global GHG emissions, yet progress on decarbonization has been slow. A carbon tax based on emissions is seen to narrow the cost gap between fossil fuels and cleaner energy alternatives. It could also generate crucial revenue to support clean tech development and help the IMO reach its 2050 net-zero goal.

The carbon tax proposal, led by Pacific and Caribbean island nations, is backed by over 60 countries including the UK, New Zealand, and Kenya. However, more than a dozen countries—mainly export-oriented or oil-producing economies like China, Brazil, and Saudi Arabia—have voiced strong opposition.

Critics argue a carbon tax would drive up prices and increase the cost of biofuels such as palm oil, grain, and corn, disproportionately affecting developing nations. China has even warned it may consider withdrawing from the IMO if a carbon tax is forcefully imposed.

The Guardian reports a shift in the EU’s stance, noting that the bloc is now leaning toward Singapore’s proposed carbon credit trading system. This would allow companies to offset emissions by purchasing credits from the market instead of paying a direct carbon tax—provided that the funds raised through trading are comparable to potential carbon tax revenues.

Maritime shipping accounts for about 3% of global GHG emissions, yet progress on decarbonization has been slow.  (Photo: Maersk)

Experts warn emissions trading may undermine clean tech investment

Tristan Smith, associate professor at University College London’s Energy Institute, cautioned that carbon markets are volatile and lack the certainty needed to attract long-term investment. He warned that emissions trading could incentivize short-term fixes, such as heavy reliance on biofuels, over emerging technologies like green ammonia, which require more substantial, sustained capital.

IMO Secretary-General Arsenio Dominguez urged countries to engage in constructive discussions and reach consensus during the meeting, rather than forcing a decision through a majority vote. If the carbon tax plan moves forward as intended, the shipping industry could become the first sector to adopt a global carbon pricing mechanism by 2027.

Source: France 24, The Interpreter, The Guardian