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Carbon Tax Set to Increase Freight Charges

June 23, 2021

The call by global shipping lines to tax their carbon emission will see a surge in the cost of freight in order to meet the extra levy.

The shipping companies that represent more than 90 percent of the global fleet say the measure is needed to tackle climate change.

Maersk, the largest shipping line in the world has already given an indication of a hike in cost of shipping as a result of the carbon tax.

At the moment Maersk spends $4bn a year on fuel but to go carbon free, the firm said they may have to spend double that amount.

Covering those extra costs would mean the prices Maersk charges its own customers would need to increase 20 percent, according to the shipping line.

International Maritime Organization (IMO), a United Nations body that regulates shipping, targets to cut greenhouse gas emissions by half in 2050.

According to players, the tax would encourage ship owners to invest in the new technology that is aimed at cutting the emission of carbon and save a planet that is in peril of climate change.

"A global solution is the only one that's going to work", Guy Platten, secretary-general of the International Chamber of Shipping told the BBC in an interview recently.

Maersk recently announced it will start the world's first carbon-neutral liner vessel in 2023 that will run on a methanol engine.

According to experts, whereas the use of methanol certainly offers a longer-term way to decarbonized shipping, it can only be effective in its renewable forms, which are currently in very short supply.

It is projected that scaling up production and distribution will require huge capital investment and take many years. The shipping industry as a whole is working on a $5bn plan to fund zero-emission vessels.

Climate experts have argued before that ships are a key source of pollution, producing a billion tonnes in CO2 emissions each year.

The G7- the world’s seven most powerful industrialized countries that include US, Japan, Germany, the UK, France, Italy and Canada have before made commitments to cut carbon emission by up to 70 per cent by 2050 and to completely phase out fossil fuels by 2100.

More businesses see carbon pricing as ultimately inevitable and are therefore pushing for clear and consistent policy.

In 2015, six oil major companies that included BP, Shell and Total called on governments to introduce carbon pricing and a global framework to connect national pricing systems.

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