Japan has told a global shipping regulator that it would support a carbon tax to raise more than $50bn a year, in a major step by the world’s second-largest shipowning nation to address emissions from maritime transport.
The proposal to the International Maritime Organisation is one of the most significant by a leading shipping country and comes as debate intensifies over how to decarbonise maritime trade, which generates almost 3 per cent of global greenhouse gas emissions, more than produced by Germany.
The sector, the lifeblood of global trade, is difficult to decarbonise because of its diversity from ferries to huge tankers and because clean fuels such as green hydrogen, ammonia or methanol are not yet available at scale.
Japan’s proposal suggests the industry pays $56 per tonne of CO2 from 2025 to 2030, which would raise more than $50bn a year on shipping’s almost 1bn tonnes of emissions. It then suggests ramping it up every five years, going up to $135 per tonne from 2030.
“We want to propose a scheme that would collect money from fossil fuel [powered] vessels and return the money to zero-emission vessels,” to help the operators of environment-friendly ships recoup their upfront investment costs, said a Japanese maritime bureau official involved in the proposal.
Japan is the world’s third-biggest shipbuilder and Tokyo is widely expected to be able to help chart a course between western ambitions on climate change and developing nations’ economic concerns ahead of key IMO meetings this spring.
To date, only the Marshall Islands and the Solomon Islands have proposed a meaningful financial incentive to decarbonise shipping, at $100 per CO2 tonne. The International Chamber of Shipping, the industry lobby group, is pushing for a levy at the equivalent of 63 cents per CO2 tonne to set up a research fund, which many member states say is a distraction from more substantive discussions over a carbon tax.
Developing countries want any revenues raised from a carbon tax on shipping to be used to compensate them for the climate impact of global warming and the negative impact on their trade. The industry wants to channel the funds back into paying for decarbonisation and needed infrastructure.
The multilateral negotiations within the IMO are attempting to decide on the type of financial incentives to pursue to cut emissions in shipping, ranging from carbon trading systems and levies to rebates for “green” vessels.
China with the support of Argentina, Brazil, South Africa and the UAE, has proposed levying a charge on ships below a certain benchmark of carbon efficiency — instead of depending on the fuel they use, as Japan is proposing — and rewarding ships above a certain threshold.
The Japanese official said the shipping industry believed a carbon tax system “allows them to calculate how much they need to pay, so they can make a financing plan accurately”.
He said that the numbers given by Japan could change depending on how the costs of ammonia and hydrogen for zero-emission fuels develop in coming years.
Aoife O’Leary, chief executive of Opportunity Green, an environmental action group, said the “incredibly quick” speed at which Japan was aiming for agreement — by next year for implementation in 2025 — was encouraging.
However, activists were disappointed that the Japanese proposal only covered emissions produced on board a ship and failed to cover emissions generated during the production of the fuels. That would mean fuels produced using hydrocarbons would be treated equally as those made using renewable sources of energy.
“It would be unfair to make developing countries bear disproportionate cost for addressing a global problem they didn’t create,” said one Latin American delegate about the proposal.
