IMF Wants Shipping Carbon Tax

A report released this week by the International Monetary Fund (IMF) states that carbon taxes should be levied against the shipping industry.

The December 2015 Paris Agreement laid the foundation for meaningful progress on addressing climate change, now the focus must turn to the practical policy implementation issues, states the report, After Paris: Fiscal, Macroeconomic, and Financial Implications of Climate Change. 

“At the heart of the climate change problem is an externality: firms and households are not charged for the environmental consequences of their greenhouse gases from fossil fuels and other sources. This means that establishing a proper charge on emissions—that is, removing the implicit subsidy from the failure to charge for environmental costs—has a central role.”

For reducing carbon emissions (mitigation), carbon pricing (through taxes or trading systems designed to behave like taxes) should be front and center, continues the report.

“For climate finance, carbon pricing in developing countries would establish price signals needed to attract private flows for mitigation. Substantial amounts could also be raised from charges on international aviation and maritime fuels. These fuels are a growing source of emissions, are underpriced, and charges would exploit a tax base not naturally belonging to national governments.”

In the lead-up to the December climate talks, a carbon tax for shipping, an absolute emissions target and more responsibility for the IMO were among the recommendations made in a policy brief published by the International Transport Forum (ITF). The brief argued that a carbon tax would be relatively easy to implement, and setting its value at around $25 per ton of CO2 would have a marginal impact on maritime trade.

The report is available here.