The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Out of the bunker: Momentum mounts for a global carbon price on shipping emissions

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Representatives from the World Bank and IMF presented their findings from a draft report on sources of climate finance to G20 finance and development ministers on Friday. The report responds to the request of G20 Finance Ministers in exploring scaled up finance for climate change adaptation and mitigation actions in developing countries. Its recommendations significantly […]

Representatives from the World Bank and IMF presented their findings from a draft report on sources of climate finance to G20 finance and development ministers on Friday. The report responds to the request of G20 Finance Ministers in exploring scaled up finance for climate change adaptation and mitigation actions in developing countries. Its recommendations significantly move the debate forward on innovative sources of climate finance and come weeks before Bill Gates is expected to deliver similar findings to the G20 leaders on sources of development finance.

The WB/IMF recommendations support the key findings of a report released by Oxfam and WWF earlier this month calling for a global carbon price in the international shipping sector. A global carbon price for shipping would raise billions of dollars for tackling climate change in developing countries. The sector transports 90 percent of world trade and contributes about three percent of the world’s greenhouse gas emissions.

A global carbon price for shipping would raise billions of dollars for tackling climate change in developing countries. Photo by Luis Galdámez/Oxfam America.
A global carbon price for shipping would raise billions of dollars for tackling climate change in developing countries. Photo by Luis Galdámez/Oxfam America.

Here are a few key points made in Oxfam/WWF’s report that are generally supported in the WB/IMF recommendations to G20 leaders:

There is a double-dividend from carbon pricing international transport – reducing emissions and raising finance. A $25/ton price on carbon will raise approximately $25 billion from shipping, reducing emissions 5-10% from the sector.

The overall impact of a carbon price for shipping will be small. A moderate carbon price for shipping means that import costs are likely to rise by approximately 0.2-0.3%. A surcharge at that level would add 0.2% to shipping costs, or $2 on every $1,000 traded.

Developing countries should be compensated from the revenues generated by the carbon price and revenues should support adaptation and mitigation actions. Because shipping emissions cannot practically be attributed to individual countries, a carbon price for ships must be universal. But to ensure that a scheme does not unfairly penalize developing countries, it must guarantee that there are no net costs for developing countries. Of the $25bn raised from the scheme, Oxfam/WWF recommends that approximately 40% of the revenue is used to compensate developing countries for their losses; remaining funds should finance adaptation and mitigation actions through the Green Climate Fund.

A global price on shipping emissions is technically and economically feasible and is gaining political momentum. G20 finance ministers should reach a political agreement that substantial climate finance be raised through a carbon price for international shipping, with no net costs for developing countries. This should happen in advance of the G20 summit in Cannes, France at the beginning of November and COP17 in Durban, South Africa in November/December 2011.

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