Proponents argue that a carbon tax would create a fair pricing mechanism to incentivize the transition to cleaner fuels and reduce shipping emissions, addressing climate vulnerability, especially for Pacific island nations. Conversely, opponents, including the US and countries like China and Brazil, advocate for a credit trading model, suggesting that a universal levy may disproportionately burden certain economies and lead to retaliatory trade measures.

If implemented, the carbon tax could raise operational costs for shipping companies, potentially leading to increased shipping rates. This might incentivize companies to invest in cleaner technologies and fuels, although it could also lead to economic repercussions such as inflation in shipping-related goods, particularly in markets heavily dependent on maritime transport.

If the carbon tax is approved, the regulations would likely take effect in 2027, with countries required to implement measures to reduce emissions accordingly. This could include transitioning to zero-emission fuels, investing in cleaner technology, and developing specific compliance structures for shipping companies globally.

Shipping accounts for approximately 3% of global CO2 emissions, making it one of the hardest sectors to decarbonize. This percentage represents a significant increase in emissions over the past decade, and addressing these emissions poses unique challenges compared to other sectors, such as aviation and road transport, largely due to the international nature of shipping and the lack of national regulatory frameworks.

For the carbon tax to be successful, broad international cooperation is essential, as shipping is a global industry. Countries need to agree on the tax structure, ensure compliance across jurisdictions, and coordinate on the use of tax revenues to support transitions in developing nations. This cooperation is crucial to avoid competitive disadvantages and to make substantial progress toward emissions reduction.