Global shipping firms will have to shell out about $400,000 annually for each ship they own, if the International Transport Federation’s (ITF) proposal to introduce a carbon tax on ships is accepted.

Olaf Merk, author of an ITF policy paper, said: “As some sort of very rough average, the $25-per-tonne of CO2 tax would imply additional costs of $400,000 per year per ship (domestic shipping not included), considering that the global fleet is around 50,000 ships and carbon emissions from international shipping around 800 million tonnes.”

For fuel efficiency In an emailed interaction with BusinessLine , he said carbon tax is “linked to fuel use” in a move that will incentivise ship owners to make their ships “more fuel efficient”. They could practise slow steaming (operating transoceanic cargo ships at significantly less than their maximum speed) to consume less fuel.

There is a case to levy a carbon tax of $25 per tonne of CO2 emission for the shipping sector, according to the ITF, an OECD think-tank.

The report has pointed out that it is not possible to have country-specific emission reduction targets in the shipping sector, given the multiple stakeholders, such as supply chain firms, ports, financiers and shipping firms. In a particular shipping leg, each stakeholder could belong to multiple countries.

In this context, the ITF wants the International Maritime Organisation to drive the sectoral carbon tax. The impact will be marginal if the tax is set at $25 a tonne of carbon dioxide, said Merk.

The carbon tax can make substantial contributions to the Green Climate Fund, which could, in turn, compensate developing nations affected by the tax, on shipping, he added.

The ITF has further pointed out that an absolute emission reduction target can be set for the shipping sector, but it would be “impossible” to set such a target for nations. Considering the size of its current and projected emissions, it would be odd if countries are expected to adhere to emission targets but not the shipping sector, it observed.

Meanwhile, the International Chamber of Shipping has expressed its displeasure at the ITF suggestion, pointing out that the proposed tax would be almost three times higher than the carbon levy paid by shore-based industries in developed nations.

However, it has said that a fuel tax is preferable to complex, market-based measures such as “emission trading schemes”.

About 70 per cent of the world merchant fleet is registered as part of the United Nations Framework Convention on Climate Change’s ‘non-Annex I’ developing countries, and maritime trade is critical to rich and emerging economies alike.

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