Climate finance: Shipping tax not sunk

A proposal to tax global shipping was dropped at the last minute at COP17, but industry watchers say it is still very likely to become the Global Climate Fund's first source of financing.

LONDON (Thomson Reuters Point Carbon) - The international maritime sector remains firmly in the UN's crosshairs when it comes to finding cash to fill a global fund to help poor countries tackle climate change.

UN climate talks last week agreed the design of a Global Climate Fund to channel up to $100 billion a year by 2020 to poorer nations, but failed to make headway on where the money will come from to fill it.

While a proposal to tax global shipping was dropped at the last minute at the talks in Durban, industry watchers say enough political momentum has built up and shipping will very likely become the fund's first source of financing.

"The writing is on the wall. Every independent report into innovate sources of finance for the GCF mentions revenues for the international maritime sector," said Andre Stochniol, a consultant on sustainable shipping.

Shipping is seen as a clear target because it is not yet regulated under any international climate regime and is a new source of revenue that would not drain public purses of cash-strapped governments, he said.

"It is quite clear this is the most talked about idea as a potential source of revenue for the fund," agreed Lies Craeynest, EU climate change policy advisor at aid group Oxfam.

"Just because it was not in the final text (in Durban) does not mean it is off the agenda and we are hoping to see some real progress next year," she said, adding that shipping's inclusion in a draft U.N. text was a sign of progress.

During the Durban talks, the UK's climate minister Chris Huhne said a levy on shipping fuel or aviation emissions would be the "preferred option" to raise part of the fund's target compared to other proposals such as a tax on financial transactions.

"I think the bunker fuels route is much more likely to be successful," he said.

IMPASSE EASE

Maritime emissions were omitted from national commitments under the UNFCCC's 1997 Kyoto Protocol, which ceded control to the UN body responsible for the sector, the International Maritime Organization (IMO).

For many years the body made little progress, but earlier this year agreed energy efficiency measures that will have a small bearing on the sector's output of climate-changing gases.

The IMO's delay was widely blamed on its insistence on equal treatment for all vessels, while the UNFCCC puts more onus on industrialized nations though its ethos of "common but differentiated responsibilities".

Ideas for global measures that also compensate poorer nations have gained ground and the previous standoff could ease after the Durban talks ended with a deal to bind all countries to emission limits from 2020.

"We have said that whatever happens, a portion of the funds generated should be used for addressing climate change in developing countries, but a significant portion must also feedback into the industry to fund low-carbon research and development," said Peter Hinchliffe, secretary general of the International Chamber of Shipping, a global shipowners' association.

"We will continue to work on market mechanisms to reduce emissions from the shipping sector within the IMO," he added.

An IMO spokesman said the organization had no comment as it had not formally discussed the idea of the industry being a source of revenue for the climate fund.

CASH DEBATE

Oxfam and green group WWF tabled a proposal before the Durban talks that suggested $25 billion a year by 2020 could be raised and emissions cut by imposing a carbon levy of $25 per tonne on shipping fuel.

However, Hinchliffe said the maritime sector had yet to discuss how much cash it could raise.

"We have not discussed the potential cost because we believe it is unacceptable for the price of carbon seen by the shipping industry to be different from other sectors such as aviation," he said.

The aviation industry has yet to firm its plans for tackling emissions but from next month most aircraft using EU airports face emission caps under the EU Emissions Trading Scheme, where the right to emit a tonne of CO2 is currently valued at around €7 ($9.13).