Maritime Emissions Taxation: An Alternative to the EU Emissions Trading Scheme?

Abstract

The advent of the eighteenth session of the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP18)1 internationalized a new sense of urgency2 towards preventing the planet from spiraling towards an unsustainable rise in global temperatures, with an emphasis that states must simply do more than fulfill their existing obligations.3 Prior to the summit, the European Union (EU) raised the issue of maritime greenhouse gas (GHG) emissions, where an absence of any binding international agreement meant that the shipping industry was not privy to the same emissions reduction imperatives4 as other sectors.5 Having previously bound itself to reducing emissions,6 the EU proposed including GHG emissions from the maritime transportation sector in the EU Emissions Trading Scheme (EU ETS),7 but also raised alternative options for internal measures including the imposition of an emissions tax.8 Such action from the EU could have far-reaching implications for the rest of the world,9 potentially instigating other states to take any number of possible actions.10 These actions may include objecting to such a scheme, seeking instead to capitalize by attracting new shipping registrations through carbon leakage;11 seeking an international agreement to avoid unilateral action by one legislature; or taking similar measures themselves rather than risk losing important revenues.12 Focusing on the EU’s alternative proposal of an emissions tax, this article analyzes the possibility for the imposition by an EU Member State of a targeted environmental tax to reduce maritime emissions. It considers how such a tax can be imposed in a manner that will not be detrimental to commercial interests and can instigate the desired impact.13 Importantly, it focuses upon providing a greater incentive for the maritime industry to invest in the most efficient shipping fleet to reduce emissions. It concludes by comparing whether such a perceived maritime emissions tax could be more advantageous than including maritime emissions in the EU ETS.