Shipping is central to global trade and it is at the fore front of the continent’s blue economy. The shipping industry is responsible for 3 per cent of emissions globally. Proposals to introduce a global shipping levy is set to disproportionately impact African countries which could increase import and export costs. CNBC Africa’s Aby Agina spoke to Eldine Chilembo Glees, Maritime Policy Consultant, Micronesian Center for Sustainable Transport for more.
Shipping is central to global trade and it is at the fore front of the continentâs blue economy. The shipping industry is responsible for 3 per cent of emissions globally. Proposals to introduce a global shipping levy is set to disproportionately impact African countries which could increase import and export costs. I spoke to Eldine Chilembo Glees for more. Eldine Chilembo Glees, Maritime Policy Consultant, Micronesian Center for Sustainable Transport for more. Let's look at what the shipping industry is for African communities and for Africa, right? Shipping is central to global trade and that means that automatically it's very crucial to Africa's blue economy agenda. It is at the fore front of trade in Africa but also food security. It secures food security within the African continent. But now the shipping industry on the other hand is also responsible for 3 per cent of greenhouse gas emissions worldwide. And 3 per cent might seem like a very small number until you put it into a different perspective. If the shipping was a country, the industry was a country, then it would be amongst the 10 top emitters of greenhouse gas emissions in the world. And we all know just how disproportionately affected African countries are to the negative impact of climate change. So to its credit, the International Maritime Organization, which is the United Nations body that regulates maritime shipping internationally, has set some really high ambitious decarbonisation targets. These started back in 2018 and there were some major discussions in 2023. There were some other discussions last year. And in April this year, this will be the final, the industry is hoping to finally ratify or vote on, hopefully they don't like voting, they would like to all agree on a consensus of a set of regulations that will help decarbonise the shipping industry. And this, they want this to be in line with the 1.5 targets that are the Paris Agreement, the same ambitious targets that the Paris Agreement had put forward. So the nature of these targets include a technical measure and an economic measure. That's just a very simple way of saying there'll be some rules and regulations, and then there will be also a form of a tax on shipping emissions, on carbon emissions. And why does this matter to Africa? Why does this matter to African states? This is because there is already a very solid case study for what a tax on emissions for shipping and how that will affect African nations. Right now, last year, the EU ETS, it's called the EU Emissions Trading Scheme, came into force, and it was already estimated that it's going to cost Ghana about 90 million euros per year to pay for those emissions. So essentially what Europe requires any country that trades with Europe to do is any time a ship coming from the port, from any African port, Europe comes in bringing its trade and its goods, will have to pay for every carbon emission that ship has emitted to the environment. And that money goes to EU pockets. And that money stays in the EU and helps the EU continue to decarbonize and go green. This is all part of the European Union's agenda to go green. And so this is what's happening in a microcosm, and it's essentially what's very similar to what will happen at an international level at the International Maritime Organization. Now, African representation and active participation in these intersessional working groups is very critical because the purpose of these working groups at the IMO, the International Maritime Organization, is to discuss and negotiate questions like who pays for this tax on emissions? We call it a levy. I like to call it a levy. It's called a shipping levy for ease. And so how much will that levy be? How will the funds be distributed? And then who will administer those funds? So those are some of the questions that need to be debated in these working groups, in these meetings, coming up to April 4th, when a committee will meet to actually decide which kind of regulations will be enforced. And once those regulations are enforced, then member states are obligated to follow them. And so if we do not have African representation in this room actively advocating for making sure that the funds and the revenue that will be generated from these taxes and these levies on shipping will actually go to supporting our domestic shipping sector. So my concern is that African maritime administrators and experts will be absent from these discussions, and these crucial questions will be answered either way, but they will not be without our input and likely without our benefit. And historically, it's shown that when Africa is not at the table, then we're often on the menu, which is unfortunate, isn't it? This is a critical juncture for African countries, considering that the new global shipping levy will have far-reaching ramifications on the cost of trade. How can African countries put up a joint force together to ensure that they benefit out of this deal? Right now, what's being debated at the IMO are two different proposals. One is a levy system, and the other is called a flexible mechanism system. What the levy essentially looks like is, it's a proposal that's been put forward by the Pacific Island countries, some Caribbean countries, and some African states, and also the EU, and also, interestingly enough, the shipping industry itself also endorses a levy system. The reason why they do this is for so many reasons. One is that it can generate up to 60 billion annually in revenues, and the argument is that these revenues need to be distributed under what is known as the polluter pays principle. What that essentially means is that if we're to have a just and an equitable transition, that means that the countries that are disproportionately affected by climate change will need these revenues in order to develop their domesticâessentially, the global South will need to benefit more from this because they contribute less to emissions, but then they're the most vulnerable, and they're in need of these funds in order to develop our port infrastructures, in order to develop our R&D, which is our research and development into new technologies that will help us transition away from fossil fuels and our reliance on fossil fuels, and also develop greener alternatives because we have the resources in Africa to do this. We just need to be able to have that financial support to also do that. A levy system will essentially level that playing field and give us the opportunity to also compete at an advantage with the global North, and this also ensures that it makes a businessâit makes sure that it makes it expensive to not transition away from fossil fuels, which is what is causing climate change, right, this rapid increase in climate change, because if you make it more expensive to use fossil fuel, then the industry will very quickly develop new alternative fuels and will look at green hydrogen and ammonia and whatever other alternative fuel sources are there, wind propulsion technology, for example. These are technologies that can be scaled if we make the business case for why we need to move away from fossil fuels. Now, what a flexible mechanism does, on the other hand, is that it's a credit trading scheme. Emissions continue to be a big concern considering that shipping as an industry is one of the largest polluters, but in equal measure, a lot of this is not going to benefit Africa. If African countries are not on the table, how important will it be for Africa to negotiate for a win-win outcome? That means that ship owners will simply just try to buy credits that will allow them to continue polluting, and so this will not meet the targets that the IMO set out to meet, which is to decarbonize the credit industry, because if people are given the choice and they're like, well, if I can just pay to pollute, then I'll pay to pollute, and so that doesn't benefit anybody. It increases negative impacts of climate change, it increases food security issues in Africa, and it leaves us at a disadvantage, because then the countries that already have resources to decarbonize will decarbonize and will be rewarded for it, and us as African countries, we don't have the infrastructure to decarbonize, we'll have to pay fines. So essentially, it'll be taking money from poor countries and giving it to the rich countries. That's what a credit trading scheme looks like, and that's why it's very dangerous for us to continue. And so all the while, the climate change will continue to impact us the most, while people continue, while the global north continues to advance and leave us behind. And so I think that's why it's so crucial for African countries, and to their credit, a lot of African countries are in the room. They're asking questions, they're debating, they're having, they're critically questioning all the proposals at the table. So I don't want to say that I haven't seen a lot of, I've seen a lot of countries within our community. So my plea is to any member, IMO member state, that isn't actively engaging in these proposals and these conversations, to come to the table, to come to the room, and to come to the IMO in two weeks' time, and have these discussions, and advocate for their own countries and their economic development.
Theme: Navigating the implications of a global shipping levy for African countries
The global shipping industry plays a vital role in the movement of goods across the world, including within Africa's blue economy. However, it is also a significant contributor to greenhouse gas emissions, accounting for 3 per cent of emissions globally. This fact has raised concerns about the environmental impact of shipping and has prompted discussions about the need for decarbonization measures. In a recent interview with Maritime Policy Consultant Eldine Chilembo Glees, key issues related to the global shipping levy and its potential implications for African countries were discussed in detail. African countries heavily rely on the shipping industry for trade and food security, making it a crucial component of the continent's economic development. However, the industry's environmental footprint cannot be overlooked, especially in light of the disproportionately adverse effects of climate change on African nations. Recognizing this, the International Maritime Organization (IMO) has set ambitious decarbonization targets aimed at aligning with the goals of the Paris Agreement. These targets include technical and economic measures, such as a proposed levy on shipping emissions. The introduction of a global shipping levy poses both challenges and opportunities for African countries. One of the key concerns is the potential impact on import and export costs, as seen with the EU Emissions Trading Scheme, which imposed a significant financial burden on countries like Ghana. The debate at the IMO revolves around two main proposals: a levy system endorsed by Pacific Island countries, some Caribbean nations, and the EU, and a flexible mechanism system based on credit trading. The levy system, supported by various stakeholders, including the shipping industry itself, aims to generate substantial annual revenue of up to 60 billion dollars. The funds collected under this system would be distributed based on the 'polluter pays' principle, ensuring that countries most affected by climate change receive the necessary resources to transition to greener technologies. This approach not only levels the playing field but also incentivizes the development of sustainable alternatives to fossil fuels, ultimately benefiting African nations. On the other hand, the flexible mechanism system, centered on credit trading, raises concerns about its effectiveness in achieving decarbonization targets. By allowing ship owners to purchase credits to continue polluting, this system may undermine efforts to reduce emissions and address climate change. For African countries, active participation in the discussions at the IMO is crucial to secure a favorable outcome that aligns with their economic interests and sustainability goals. Eldine Chilembo Glees emphasized the importance of African representation in shaping the regulations and distribution of funds generated from the shipping levy. With April marking a crucial juncture for the IMO to finalize its decisions, African maritime administrators and experts must actively engage in advocating for policies that benefit their domestic shipping sectors. Failure to participate effectively in these discussions could result in African countries being sidelined and disadvantaged in the distribution of resources. As the global shipping industry undergoes a transformation towards decarbonization, African countries have a unique opportunity to drive sustainable development and mitigate the impacts of climate change. By collaborating and advocating for their interests at the international level, African nations can ensure that the benefits of the global shipping levy are equitably distributed. The decisions made in the coming weeks will shape the future of shipping and environmental sustainability for years to come.
"Failure to participate effectively in these discussions could result in African countries being sidelined and disadvantaged in the distribution of resources."
Africa, shipping industry, global trade, greenhouse gas emissions, decarbonization, International Maritime Organization, Paris Agreement, EU Emissions Trading Scheme, sustainability, climate change, economic development, renewable energy, sustainable development, environmental impact