Measures such as a levy of €170 per tonne of CO2 emitted by each ship would impact Ireland more than most countries due to our island status.
John Whelan: Shipping carbon tax is next major challenge for Irish exporters
The latest estimates suggest that carbon emissions from the sector will more than double by 2050, unless urgent measures are taken. Picture: PA
SUN, 02 JUL, 2023 – 15:39
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The dirtiest of fossil fuels, heavy fuel oil and marine gas oil, are used in the shipping industry that moves the vast majority of goods globally and to date has made little progress on decarbonisation.
The latest estimates suggest that carbon emissions from the sector will more than double by 2050, unless urgent measures are taken.
This may be about to happen, as the pressure to reach net zero emissions by 2050 increases daily. However, some of the more draconian measures being proposed, such as a levy of €170 per tonne of CO2 emitted by each ship, would significantly increase the costburden on Irish exporters at a time of increasing volatility on global markets.
The impact would hit Ireland more than most countries due to our island status on the edge of Europe.
French president Emmanuel Macron last month at the Global Financing summit in Paris called for a carbon tax on shipping, saying: “We are in favour of taxing shipping, it’s a sector that isn’t taxed’’.
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No decision on the matter was reached by 40 heads of state at the summit, but it remains on the agenda at the International Maritime Organisation (IMO) later this month, and at the UN Climate Ambition summit in September.
For the EU and its member states, the ultimate aim is a net-zero world by 2050 at the latest. However, so far, the IMO and its ship-owning members have only committed since 2018 to a 50% reduction, a goal which is clearly insufficient.
To reach net zero by mid-century, the EU delegation to the UN said new climate targets for the shpping sector, which includes standards for “green gas” fuels, demand that international shipping massively reduces its fossil fuel emissions by a guaranteed target.
Problems with green fuels
Moving to cleaner fuels would make an immediate difference, but alternative green fuels are in their infancy. Green ammonia is one option that is competitively priced, but the industry is working through its safety implications. Green methanol is more technically advanced, and there are orders for 130 ships that are capable of using methanol as a fuel.
Green hydrogen, which is currently considered the cleanest, is the most expensive on international markets at an estimated €2,500 per tonne. The price would only appeal to ship owners if a levy on carbon emissions of €170 per tonne was set. That’s a long jump from the EU Emission Trading System levy of €90 per tonne on shipping emissions, that will be applied from 2024.
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States will meet this month at the IMO, which is the little-know but highly influential UN regulator of international shipping. They will decide whether the sector is taking the climate challenge seriously, and push shipping to set targets that ensure zero greenhouse gas emissions by 2050.
Equally important, they will determine if a greenhouse gas levy on global shipping can be used to make clean fuels cost-competitive, while generating the funds necessary to finance this transition and ensure that the most vulnerable countries are supported as they deal with the impacts of climate change. Estimates show that, in shipping alone, putting a median price on carbon could raise €37bn to €55bn a year between 2025 and 2050.
Need for global standard
Regardless of the pain to Irish exporters and importers, a patchwork of shipping emissions regulations by the EU, the US, China, south American states, and others would be both inefficient and more costly to implement.
This threat is already being realised through the EU’s go-it-alone inclusion of interntional shipping in both its Emission Trading Scheme and Fuel Standard regulations. The US House of Representatives’ Clean Shipping Act of 2022, which calls for carbon intensity standards for marine vessel fuels, which has limits more stringent than those proposed by the EU, requires 100% zero-emission fuels from 2040.
The more welcome solution would be a global standard set by the UN through its IMO agency, which should avoid disruption to international trade and avoid making global inequities worse.
As an island nation, sea freight is the backbone of Ireland’s international trade, with a shipping sector that generates €2.3bn in turnover and employs more than 5,000 people. A global standard mandated by the UN is important for exporters and importers.