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Key shipping nations are supporting a flat tax on greenhouse gas (GHG) emissions, a move which could see shipowners pay for every ton of the emissions they produce, the Financial Times reports. Panama and Liberia have backed the levy, along with 43 other jurisdictions, according to a joint statement submitted to the UN’s International Maritime Organization (IMO).
Sound familiar? We first heard of the levy in 2023, with proposals being submitted from the group of Pacific nations to encourage it to transition away from hydrocarbons. Revenues collected from the tax could be put towards developing low-emissions shipping fuels and funding the energy transition of poorer states.
The pitch: The tax should “stimulate energy efficiency, reduce the price gap between fossil fuels and zero-near zero (ZNZ) [greenhouse gas] fuels, as well as generate revenues to support uptake of ZNZ fuels, technologies and energy sources,” according to the letter sent to the IMO, which was seen by FT.
Panama and Liberia are home to the world’s two biggest shipping registries, meaning the tax now has support from two countries that register 66% of the global total merchant ships, with a combined capacity of 1.6 bn deadweight tons.
The flat tax has been heavily pushed for by the EU and the climate-change-vulnerable Pacific island states. Some leading ship-owning nations, including Japan and Greece, have also backed the levy.
Who isn’t on board? Several other key shipowning nations and exporters have opposed the flat fee, including China, Brazil, and the US.
The details of the proposed tax are still being hashed out, including the amount to be paid by shipowners for every ton of emissions. Liberia has pushed for a flat fee of USD 18.75 a ton, while the third most significant registry, the Marshall Islands, is pushing for a levy of almost USD 150.
Anything less than USD 100 will not be enough: For the levy to properly support a transition, the levy rate should be between USD 100-150, coupled with some financial incentives for zero-emission ships, energy and shipping researcher at University College London Tristan Smith told FT. “You don’t get an energy transition without [that],” he said.
