IMF staffers urge carbon tax on shipping

 IMF  HQ in Washington, DC IMF HQ in Washington, DC

JANUARY 12, 2016 – Shipping and aviation may not have been explicitly included in the text of the Paris Agreement adopted at last month's COP21 conference on climate change, but that does not mean that they will escape special treatment.

Imposing some sort of carbon tax on the two industries is an idea that is not going to go away and that will surface again, labeled as a "market based mechanism," as IMO continues to work on reduction of GHG from ships.

Those in favor of that approach will find ammunition in a recent discussion paper on "Macro-fiscal Policies for Climate Change" prepared by International Monetary Fund (IMF) staff members.

Here, in part, is what they write:

"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."

And again,

"Charges on international aviation and maritime emissions (about 4 percent of global CO2 emissions, but rising rapidly) are promising. National governments have a weaker claim on these tax bases than they do for domestic fuels, making them appealing as a possible source of climate finance. There are challenges, including the need for international coordination (especially important for maritime, given the mobility of the tax base) and legal issues (especially for aviation, due to treaties and bilateral air service agreements limiting fuel taxes) but the practicalities should be manageable. A global $30 per ton CO2 charge on these fuels could have raised about $25 billion for climate finance in 2014, even after compensation for developing countries."

And,

"On climate finance, the IMF emphasizes the attractiveness of carbon pricing instruments. Applied to developing countries these instruments attract private flows, and applying them to fuel used in international aviation and maritime transport can raise significant public sources."

Read the discussion document HERE

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