The International Maritime Organization (IMO), the UN’s shipping body, agreed to adopt a levy price on the 1 billion tonnes of annual greenhouse gas emissions produced from the international shipping industry. The IMO’s 175 member states have until 2025 to reach an agreement.
While we know that shipping – an untaxed, multi-billion dollar industry – will finally have to pay for its pollution, questions remain around the levy price and the distribution of the revenue.
Here is a quick overview of the main proposals for a global shipping levy:*
Pacific Island nations
The most prominent proposal, seen by experts as the most ambitious, climate-friendly and equitable, is for a levy of $150/tonne of greenhouse gas put forward by countries in the Pacific, led by the Marshall Islands and the Solomon Islands. The World Bank estimates this levy could generate around $80 billion per year, which, according to the proposal, could be used for climate-related projects inside and outside the maritime industry in developing countries, but primarily in SIDS and LDCs.
This proposal is backed by a number of other nations in the region, such as Fiji, Tuvalu, Vanuatu, Kiribati and New Zealand.
The World Bank also came in support of the revenue distribution proposed by the Pacific states in March 2023.
Japan is proposing to the IMO a levy with a starting price at $56/tonne of carbon in the first phase from 2025 to 2030, before rising to $135 from 2030, and up again every five years, to over $1,000/metric tonnes in 2040s. The country suggests keeping the revenue inside the maritime industry, namely investing it in zero-emission vessels. The only flows of money to SIDS and LDCs would be to help them develop green shipping infrastructure.
Rocky Mountain Institute
The US think-tank argues that an IMO levy needs to be set at $130-180/tonne of carbon to make switching from fossil fuels onto clean alternative economic, adding that their proposal is “not an outlandish level.”
In a study commissioned by the shipping industry associations, the maritime consultancy estimates that the shipping industry could afford a levy of up to $400/metric tonne of greenhouse gas, as this rate falls within historical volatility of marine fuels prices.
The boss of Maersk, one of the biggest and riches shipping companies world-wide, Soren Skou, backed on LinkedIn a levy of $150 per tonne of carbon.
The influential trading group Trafigura previously suggested a levy of $250-300 on greenhouse gas emissions from ships.
* Only the Pacific Island states and Japan submitted their levy proposals to the IMO, and can therefore be considered as proposals.