Denmark floats idea of global bunker fuel tax

Revenues from a maritime greenhouse gas tax on bunker fuel should be kept away from national exchequers and instead be used to mitigate emissions in the developing world, according to documents filed this week with the International Maritime Organization.
The ambitious proposal, to be discussed at MEPC 59 in July, would entail a new convention and the establishment of a fund administrator, who would control billions of dollars.
The proposal is part of an attempt to create a worldwide scheme for shipping, thereby avoiding the need for regional schemes, such as the one the aviation sector is facing in the European Union.
Details of the proposal include an obligation on all ships to buy fuel at a registered bunker fuel supplier.
All bunker fuel suppliers would undergo “mandatory registration” and would have to “collect and transfer greenhouse gas contributions to the International GHG fund administrator”.
The fund manager would allocate revenues for “mitigation and adaptation activities in developing countries”, Denmark will argue at the meeting.
Money should also be targeted at research and development projects for efficient ship design.
“The International GHG Fund provides a simple mechanism that will result in significant reductions in global GHG emissions primarily by funding mitigation and adaptation activities,” the proposal said.
The fund is not, technically speaking, a tax on shipping, because the money collected “would by nature cater for offsetting some of the negative effects of international shipping on the climate by allocating revenues to specific international purposes with a view to addressing climate change” and would not pass through national finance ministries.
But in a sign of the hurdles it faces, Denmark admits the proposal will “probably imply a political decision to regard such specific and significant purposes high on the international agenda as not conflicting with issues of earmarking hypothecation and sovereignty.
“This is to say that GHG contributions could be considered as contributions which, like general taxes, are collected according to national law but which, unlike general taxes, do not pass through national authorities or treasuries.”
Compliance
All ships above 400 gt on international routes would be expected to contribute. The proposal makes several suggestions on the level of the levy, from US$7.5 per tonne of bunker fuel to US$45.
At US$45, total emissions from international shipping would be offset by one-third, it is claimed.
“Evasion and fraud could largely be eliminated if all bunker fuel suppliers are required to become registered bunker fuel suppliers,” the proposal says.
“Port state control inspections of ships that cannot provide evidence for having purchased bunker fuel from registered bunker fuel suppliers should result in detaining the ship and preventing it from operating until a non-compliance contribution has been paid directly to the International GHG Fund.”
The fund would have an assembly and a secretariat headed by a director. Parallels were drawn with the International Oil Pollution Compensation Fund.