Global trade costs could increase by $800 billion by carbon tax

The International Maritime Organization (IMO) has proposed that by 2030, 5% of the fuel used by ships will be clean fuel.

After the cargo segment, the shipping industry will be the next to be hit by a carbon tax as the International Maritime Organization (IMO), a specialized agency of the United Nations, plans to set a net zero carbon emission target by 2050, according to a report from Financial Express (FE). Meanwhile, the European Union (EU) has decided to collect a carbon tax on imports and exports from 2027.

Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said in a policy note that the cost of imported and exported products will increase by 3 to 4 percent, or $600 to $800 billion per year.

"80 per cent of the world's merchandise trade, valued at over $20 trillion, is transported by 6,400 cargo ships. The shipping industry is responsible for three per cent of global greenhouse gas emissions," the note said.

On 7 July, the IMO published its zero-emissions strategy by 2050. It calls for reducing emissions in the shipping industry by 20-30% by 2030 and by 70-80% by 2040 compared to 2008 levels.

Member States are expected to be able to meet the new targets, although the IMO recommendations are not legally binding. Several countries at the IMO meeting proposed imposing tariffs on emissions exceeding their targets, but this plan was shelved due to objections from China and other developed countries.

Mr. Srivastava said that due to the new regulations from the IMO, Indian traders will have to pay larger amounts to foreign shipping companies because 90% of India's commercial cargo is being transported by foreign shipping lines. He added that if they want to comply with the standards being implemented in the industry, Indian shipping enterprises will have to spend $100 billion for additional investment.

To reduce carbon emissions, ships must switch to low-carbon fuels such as liquefied natural gas (LNG), industrial ammonia and methanol. Industry players must also invest in optimizing hull designs and deploying more efficient engines to increase their ships' operational efficiency.

See more:

• Evergreen orders 24 metanol-powered container ships worth $5 billion

Source: Phaata.com (According to Business Standard)

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