Japan submits to IMO ‘most ambitious’ carbon tax plan


Japan submits to IMO ‘most ambitious’ carbon tax plan


The Japanese government has submitted a proposal to the International Maritime Organization (IMO) to impose a hefty carbon tax, adding to a growing list of possibilities for the regulator’s Marine Environment Protection Committee (MEPC) to consider at its next meeting.

The 78th meeting of the MEPC will take place from June 6 to 10. IMO member states will face new pressure to reduce carbon dioxide emissions from the shipping sector.

The IMO’s current goal for decarbonization calls for a 50% decrease by 2050. The organization has yet to settle on a concrete plan to meet this goal, although it has introduced a new fuel-efficiency reporting mechanism.

According to the Japanese government’s proposal, it wishes for a global tax of US$56 per tonne of carbon dioxide emitted by shipping industry beginning in 2025. The tax rate would climb to US$135 per tonne in 2030, US$324 per tonne in 2035, and US$673 per tonne in 2040.

A Japanese official revealed to the Financial Times that the goal is to use the money to finance zero-emissions ships. The IMO may be able to artificially level the playing field and give renewable technologies a better chance in the marketplace by taxing fossil fuels and subsidizing green fuels.

Although the tax rate begins at a moderate price point, the escalating tax schedule proposed by Japan is by far the most ambitious plan. Maersk CEO Sren Skou laid forth a proposal for a fixed US$150 per tonne carbon equivalent tax in June 2021. The Marshall Islands has proposed a tax on US$100 per tonne, and Trafigura has calculated that an efficient tax scheme would be between US$250 and US$300 per tonne.

MEPC will also have the option of considering a China-proposed efficiency-focused scheme known as the International Maritime Sustainability Funding and Reward System (IMSF&R). Rather than taxing bunkers or subsidizing green fuel, the IMSF&R would rely on data from the IMO reporting system to ensure compliance with the Carbon Intensity Indicator (CII).

The IMSF&R system’s main premise is to establish a ship’s upper and lower benchmark carbon emissions level based on its ‘C’ rating boundaries, in conjunction with its capacity and actual distance traveled in a year. Ships with emissions above the upper benchmark level will be asked to provide funding, while ships with emissions below the lower benchmark level would be rewarded.

EU drafts sustainability disclosure standards for businesses
India’s central bank urges cement sector to cut emissions

More from Renewable Energy Certificate