FPJ Analysis: India Backs Carbon Tax On Shipping

India voted in favour of a global carbon tax on shipping at a United Nations’ International Maritime Organisation (IMO) closing plenary on April 11 along with 62 other countries, including Brazil, China, Japan and South Africa. The European Union (EU) also voted in favour of the tax, which will become effective from 2028 after the details are finalised in October this year. The levy was opposed by petroleum producers like Russia, Saudi Arabia, Venezuela and the United Arab Emirates. The United States pulled out of the negotiations, sending out a clear message that the Trump administration opposed the imposition. Island nations like Vanuatu abstained from the vote, saying the proposed measures did not go far enough. Significantly, Brazil, China and several emerging economies initially opposed the tax but eventually voted in favour of the compromise formula, with the US and petro-states pushing down the numbers to an untenable level and blocking progress at every turn. Though this is a weak compromise, it is welcome in that it brings the emissions of the shipping sector within the ambit of some kind of regulation for the first time. India’s backing for the tax shows good environmental support and solidarity with the Global South in the face of US obstructionism, which, of course, is par for the course, given US President Donald Trump’s profound contempt for action on climate change and global warming and strong support for the fossil-fuel lobby to which he has long been hostage. It is unclear whether the US will accept the formula, but proponents are confident they can enforce it.

The shipping industry contributes 3 per cent of global emissions and was not covered by the Paris Agreement on reducing greenhouse gas emissions to limit global temperature rise to 1.5ᵒC. In their revised strategy of 2023, the IMO had set a target of a 20 per cent reduction in emissions by 2030, possibly stretching to 30 per cent. In contrast, the agreement reached envisages a reduction of 8-10 per cent. On the other hand, the tax is expected to generate an annual revenue of $30-40 billion. It is expected that the shipping industry will transition to a mix of greener fuels to decarbonise. The concern of the small island nations is principally that the compromise formula will not set the shipping industry on the pathway to help contain global temperature rise to 1.5ᵒC. The other concern could be that the funds generated from the tax will be lesser than needed to help poorer countries to access clean technologies and undertake mitigation measures. Nevertheless, this is a significant beginning to discouraging the use of heavy, polluting fuels and a shift to biofuels, which are expected to receive a boost.