Charting a new course on shipping emissions

Panama could not be a more fitting place to reboot the negotiations on controlling the high and rising emissions from international shipping. Last month’s G20 finance ministers’ discussions on raising climate finance from international transport suggest there is a huge opportunity to do so.

The magnificent sight of the Panama canal is a reminder of the scale of emissions from the international maritime fleet. Shipping is already responsible for 3% of global emissions – more than those of Germany, and twice those of Australia. Without urgent action, emissions could triple by 2050, likely ruining any chance of keeping global warming below the 2°C target agreed in Cancun, let alone the 1.5C target needed. Tackling the emissions from this sector is a vital part of the efforts needed to close the emissions gap.

A step in the right direction was taken this June when governments in the International Maritime Organisation (IMO) established energy efficiency design standards for new ships. But welcome though this was, it will only reduce shipping emissions by around 1% below business-as-usual levels by 2020.

It is clear that weak efficiency standards alone are not enough. A carbon price for shipping is needed to drive emission cuts at the scale needed – applied either through a bunker fuel levy or the auctioning of emissions allowances in a new sectoral emissions trading scheme.

As the preliminary report of the World Bank and IMF shows, a carbon price of $25 per tonne would raise the cost of global trade by approximately 0.2% - or $2 for every $1000 traded – and would raise $26 billion per year by 2020. The report suggests that to make a global agreement stick, this revenue should be used to compensate developing countries for the economic impact of higher shipping costs – ensuring they face no net incidence as a result – and as climate finance.

Even after some revenues are used as compensation, this should still leave at least $10 billion per year to be directed to the Green Climate Fund. That would be a significant step towards the $100 billion per year that developed countries have promised to mobilise by 2020, which – unlike Fast Start Finance pledged to date – should be genuinely new and additional to existing promises of development assistance.

The World Bank and IMF report shows the way to a new approach to tackling shipping emissions which Parties meeting in Panama must seize. Building on the work in the G20, a decision in Durban on the key principles of this approach would give the IMO all the guidance needed to get to work on designing and implementing a scheme that delivers a double dividend for the climate. By helping to close the emissions gap, and fill the Green Climate Fund, such a deal on could be a flagship of success in Durban.