Odds of an Ambitious Carbon Tax at MEPC Look Less Certain

For months, climate campaigners and industry insiders have projected optimism about the odds of a long-debated global carbon levy on bunker fuel at the IMO Marine Environment Protection Committee's 83rd meeting (MEPC 83). Shipping's carbon is regulated by IMO, outside of the framework of the Paris Climate Agreement, and MEPC has repeatedly deferred the question of how to achieve a target of a 50 percent emissions cut by 2050. Consensus appeared to be building around a carbon levy in the run-up to MEPC 83, including a tax proposal from the International Chamber of Shipping.  

With the change of administration in Washington, continued opposition to a bunker levy from certain petroleum-producing nations, and the global economic uncertainty created by the new U.S. tariff regime, the odds of getting an ambitious bunker tax passed at this MEPC are looking slimmer, campaigners now acknowledge.

"In recent years I have often commended the changed course in IMO, as it did indeed seem like there was a credible plan towards a global tax of significance," commented Søren Have, Mobility and Infrastructure Lead at Danish think tank CONCITO. "Now this unfortunately seems much more uncertain. I urge Danish government and shipping firms to keep the course, and push others to follow."

"This week’s talks at the IMO have been a rollercoaster, with no clear path toward securing an ambitious universal GHG pricing mechanism," agreed Anaïs Rios, Shipping Policy Officer at Seas At Risk. "A universal GHG pricing mechanism isn’t just one of many tools; it’s the only viable way to decarbonize shipping fairly and effectively, ensuring no one is left behind." 

If it were passed, a strong MEPC bunker levy would be a major win for the clean-shipping sector and a major setback for opponents of climate action. It would be more than just a new shipping regulation: the levy would be the first international carbon tax, implemented and overseen by the United Nations.

"It would represent a huge moment of solidarity in the fight to tackle climate change," said Emma Fenton, senior director for climate diplomacy at Opportunity Green, speaking to the AP. "For the first time, we will have, hopefully, an effective global framework tackling this international issue. Most emissions are tackled domestically."

Climate researchers and advocate groups have long maintained that a strong, global carbon levy is the only way to provide shipping with an economic incentive to reduce its emissions to meet IMO targets. Green fuels are not commercially competitive with bunker fuel, the lowest-value residual fuel product from oil refining. Reversing this equation would require regulatory action to distort market prices for all players at once, making bunker fuel more expensive (with a levy) and green fuel less expensive (with a subsidy). Independent estimates for an effective bunker levy come to at least $150 per tonne of carbon emitted, which would nearly double the price of HFO.