Why in the News?

India and 62 other countries voted in favour of the world's first-ever global carbon tax imposed on the shipping industry by the United Nations' shipping agency.

What’s in Today’s Article?

• Global Carbon Tax on Shipping (Background, Significance, India’s Role, Impact, Road Ahead)

India Backs Global Carbon Tax on Maritime Emissions

• In a historic development, India has joined 62 other nations in supporting the world's first-ever global carbon tax imposed on the shipping industry.
• The agreement was reached at the International Maritime Organisation (IMO) headquarters in London recently.
• This marks a significant step in the global fight against climate change, especially in a sector previously untouched by the Paris Agreement.

Background and Significance of the Global Tax

• Commercial shipping contributes about 3% of global greenhouse gas emissions. Despite this, it had remained outside the scope of global climate pacts like the Paris Agreement. The new decision by the IMO aims to plug that gap.
• This carbon pricing system, which will come into effect in 2028, will require large vessels (above 5,000 gross tonnage) to either adopt cleaner fuel technologies or pay a penalty based on their emission intensity.
  • A carbon pricing system is a mechanism to address climate change by assigning a monetary cost to carbon dioxide (CO2) emissions, encouraging reductions in emissions and investment in cleaner technologies. 
• According to the agreement:
  • Ships will pay $100 to $380 per tonne of CO₂ emitted, depending on compliance thresholds.
  • The policy aims to generate up to $40 billion by 2030, which will be reinvested to decarbonise the maritime sector.

India’s Role and Position

• India, along with countries like China, Brazil, South Africa, the EU, Norway, Japan, and Singapore, voted in favour of the resolution.
• Their collective support highlights a growing international consensus on the need to decarbonise maritime operations.
• However, oil-producing nations such as Saudi Arabia, the UAE, Russia, and Venezuela voted against the resolution.
• Interestingly, the United States abstained from voting altogether, maintaining its stance of not participating in the negotiations.

Expected Impact and Limitations

• While the agreement is a bold step, experts argue that the current framework falls short of climate goals:
  • It is projected to reduce shipping emissions by only 10% by 2030, whereas the IMO's own target is a 20-30% cut by that year.
  • Additionally, revenues will be exclusively allocated to the maritime sector, excluding broader climate adaptation or mitigation efforts, which has sparked criticism from vulnerable island nations.

Concerns from Developing Nations

• Many developing countries and small island nations expressed disappointment:
  • They advocated for a portion of the revenue to support broader climate finance
  • Countries like Tuvalu and Vanuatu criticized the lack of transparency and the weakened ambition in the final design.
  • The policy’s failure to support the 1.5°C temperature goal under the Paris Agreement was seen as a missed opportunity.

The Road Ahead: Technical Details Pending

• Though the framework has been approved, several operational aspects remain undecided:
  • The policy is set to be formally adopted in October 2025.
  • Mechanisms for revenue distribution, emissions verification, and compliance tracking are still being negotiated.
• Environmental advocates have vowed to continue pushing for a more ambitious and inclusive approach in subsequent rounds of negotiation.