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Shipping Urges Global Approach To Taxing Carbon

by Ulrika Lomas, Tax-News.com, Brussels

27 July 2012


The Chairman of the International Chamber of Shipping (ICS), the international trade association which represents 80% of the world merchant fleet, has reiterated in a letter to the head of the International Monetary Fund (IMF) that any tax on shipping emissions must be imposed by all nations, and should be agreed through the International Maritime Organization (IMO) at a level commensurate to the industry's contribution to global emissions.

In a letter to IMF Managing Director, Christine Lagarde, which was recently made public, ICS Chairman, Masamichi Mooroka, warned against new market-based carbon reduction measures for the shipping industry while economic conditions are depressed, and while a method to apply a fiscal mechanism on emissions has yet to be agreed.

"The position of the ICS and its member national shipowners’ associations is that if all governments so decide then shipowners, in principle, will have no objection to contributing, at some point in the future, to the Green Climate Fund, or a similar mechanism that might be established by IMO, provided that such money is indeed used for climate change adaptation or mitigation, and that the same charges apply to all ships internationally regardless of flag," Mooroka wrote.

However, he underscored that, "market-based measures are very controversial and most shipowners believe, given the severely depressed state of global shipping markets, that now is certainly not the time to impose an additional major cost on international shipping".

"Any contribution by shipping must be proportionate to shipping's share of total global emissions (less than 3%) and the forum where the details of such a mechanism should be developed is the IMO," he asserted.

The letter responds to comments made by Lagarde in a recent speech which touched on the challenges of meeting climate change targets. In her speech, she called for nations to speed efforts towards the introduction of a fiscal mechanism to apply a price to the environmental damage that their industries cause.

Lagarde suggested the shipping and aviation industries could raise about a quarter of the USD100bn needed to meet climate change mitigation objectives in developing nations by 2020 - resources that developed countries have committed to mobilize under the United Nations Framework Convention on Climate Change Green Climate Fund.

She noted however, that countries which have adopted carbon pricing mechanisms are "only at 'base camp' in terms of getting the prices right. Right now, less than 10% of worldwide greenhouse gas emissions are covered by formal pricing programs," she said.

However, Mooroka warned that if changes were introduced as an extension of the Kyoto Protocol it would likely create significant distortions to competition between nations included in Annex I of the Kyoto Protocol (those that have committed to reduce output of polluting gases), and non-Annex I nations (mainly developing nations that have not agreed a legally-binding commitment).

"If any carbon changes were only to apply to ships registered in Kyoto Protocol nations, these ships would be at a major competitive disadvantage to ships registered in Annex I nations. Because of the serious market distortion that would be created, many of these ships would simply change their flag to a jurisdiction where the carbon charge did not apply," Mooroka's letter states.

"For any carbon charges to be acceptable to the international maritime community, it is important to understand that the IMO principle of uniform global rules for shipping will have to be reconciled with the UNFCCC principle of Common but Differentiated Responsibility. This is why the negotiations with respect to shipping that are taking place at IMO and at UNFCCC are so complicated," he adds.

Concluding, Mooroka wrote: "I wish to stress that the shipping industry is committed to playing its part in further reducing its CO2 emissions. We fully support the IMO agreement on technical measures which will help shipping achieve its goal of significantly reducing emissions. We are also participating constructively in the international negotiations about a possible market-based measure that might apply to international shipping. However, it is vital for all concerned to recognize the global character of the shipping industry which transports about 90% of world trade. The application of any carbon charges to shipping, without causing serious market distortion or impeding the smooth flow of world trade, is a very complex matter."

TAGS: environment | tax | marine | International Monetary Fund (IMF) | environmental tax | carbon tax | trade association | trade

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