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.