A slight tax on fuel oil for ships stumbles at the United Nations

A mini carbon tax for the traffic of merchant ships is struggling to materialize. Debated at the meeting of the International Maritime Organization (IMO), held in London since Monday, November 22, the low charge on CO2 emitted by ships will not be approved has been referred to another assignment. The United Nations agency responsible for regulating this sector responsible for 3% of carbon dioxide emitted, acknowledged this on Thursday, marking another failure after the meager record of COP 26 in Glasgow (Scotland).

This “R&D fee” was launched in 2019. The Marshall Islands, threatened by submersion, took it up and proposed it to the IMO in March. It is supported by many countries, including France, and countries very involved in maritime transport (Japan, Denmark, Panama, Greece, Liberia, United Kingdom, etc.).

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It is also defended by the International Chamber of shipping (ICS), representing more than 80% of operators in the maritime sector. Its leaders stressed during the discussions that the fund would not mobilize public money since it would be financed by the industry itself. In this sector, funding for private research has fallen sharply since 2017, according to the International Energy Agency.

Hurry up

At 2 dollars per tonne of fuel oil with very low sulfur content (i.e. 0.5% of the cost), the royalty would bring in 5 billion dollars (4.5 billion euros), paid to a UN fund responsible for financing research and development on the fuels and engines of tomorrow. This levy would put the price of CO2 at 62 cents per tonne, a level to make steelworkers, cement and glassmakers smile.

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Nothing to do, in any case, with a real tax on fuel oil filling its price gap with this fuel. According to calculations by AP Moller-Maersk and Trafigura, cited by the Bloomberg agency, it would instead amount to hundreds of billions for carriers. Unique, comprehensive and mandatory, the proposed fee would nonetheless set a precedent. It would be, in fact, the first carbon price established on a planetary scale, according to the World Bank, which lists sixty tax systems.

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Time is running out, according to the United Nations maritime agency, which has set a goal: the total decarbonization of maritime transport by 2050. “If we do not manage to find a way to speed up R&D quickly, we risk delaying this decarbonisation by several years”, warned Simon Bennett, deputy secretary general of the ICS. For its secretary general, Guy Platten, governments have a great opportunity to align their actions with their Glasgow declarations.

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Mark Holland

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