World Bank has published a new report Distributing Carbon Revenues from Shipping, in which it discusses which countries could access carbon revenues, for what purposes, and on what terms.
According to the World Bank, a smartly designed distribution framework for carbon revenues can deliver on the twin goals of maximizing climate benefits and ensuring an equitable transition for countries, especially for the most vulnerable.
Key findings in the report:
- A significant share of carbon revenues needs to be channeled to support shipping’s decarbonization.
- Maximizing climate outcomes calls for financing climate action beyond maritime transport.
- An equitable transition can be facilitated by spending carbon revenues beyond maritime transport.
- Prioritizing developing countries as primary recipients of carbon revenues promotes a more equitable outcome.
IMO is focusing on energy efficiency, new zero-carbon fuels and technologies, and ways to make these changes cost effective and equitable for countries. Putting a price on carbon emissions is one way to do that, the World Bank noted.
A carbon tax sets a price on carbon and can help reduce GHG emissions and generate revenue. According to the World Bank, estimates show that in shipping alone, putting a price on carbon could raise $40 to $60 billion dollars each year between 2025 and 2050.
So how could this money be put to work?
The World Bank proposes the following suggestions:
- It could be used to speed decarbonization in the shipping industry, which will require trillions of dollars in investment. Carbon revenues could finance and then accelerate shipping’s move away from fossil fuels. There is a great need for investment in zero-carbon fuel production and in maritime infrastructure – including efficient ports – that promotes decarbonization, provides development opportunities, reduces transport costs, and builds resilience in the face of extreme global events.
- Reinvesting carbon revenues into port infrastructure can help lower the costs of final delivered products – including food and other essential supplies. Transport costs add up: in Sub-Saharan Africa, for example, transport costs can represent up to 50% of food prices, and over a third of the food produced in Africa is lost due to poor logistics. Investing carbon revenues in improving ports – and their linked transport – can help make logistics more efficient and resilient. Ultimately, reducing time in transport can help to offset the cost of a carbon levy on shipping in developing countries.
- Just as importantly, the money could be used more broadly, beyond the shipping industry, to help nations and industries mitigate and adapt to climate change. Especially for countries most vulnerable to climate change, such as Small Islands Developing States (SIDS) and Least Developed Countries (LDCs), broadening the use of revenues beyond maritime decarbonization addresses equity concerns since very often their ability to spend within the maritime transport sector is limited. Making sure that the transition to zero-carbon shipping leaves no country behind is central to the debate about next steps.
The World Bank supports that Small Island Developing States (SIDS), and Least Developed Countries (LDCs) -countries most at risk from climate change – should get more in the way of help from carbon revenues. These countries would benefit from a dedicated portion of carbon revenues.
There is a big gap between the climate finance provided and the estimated climate needs of those countries. On top of that, the most vulnerable countries often struggle to access climate finance due to lack of capacity, the World Bank claimed.
