Emissions from international civil aviation and maritime transport fuels, known as 'bunker fuels', are two of the fastest-growing greenhouse gas emission sources. In 2005, they accounted for some 5.3 per cent of global carbon emissions. The Intergovernmental Panel on Climate Change predicts that they will increase to 10 to 32.5 per cent of global emissions by 2050.
A carbon levy on these fuels presents not only an innovative approach for curbing emissions growth in these sectors but also a means to raise significant finance to support developing countries in adapting to the effects of climate change.
Developingcountries will be heavily impacted by climate change despite the fact that they bear little responsibility for causing the problem. Conservative estimates by the World Bank suggest that the cost for developing countries of simply adapting to an approximately 2degreewarmer world, let alone reducing their own emissions, is in the range of USD $70 billion and $100 billion a year.
Countries at the United Nations climate talks, now underway in Warsaw, have recognised this issue and have stressed the importance of assisting developing countries to mitigate their emissions and adapt to the impacts of climate change. Under the negotiations, developed countries have pledged to raise USD $100 billion in 'new and additional' climate finance by 2020 to support developing countries' transitions towards climate-resilient economies.
This is a valuable goal, yet it remains largely unclear what financial support will be available before 2020. No plan to achieve the long-term goal for 2020 has been agreed on to date.
Although funding assisting countries to adapt to the effects of climate change is more urgent for the most vulnerable and least developed states – including Bangladesh, the Solomon Islands and Rwanda – far less adaptation funding is available than funds supporting emission reductions, or mitigation.
Disappointingly, rich developed countries such as Australia and the US are attempting to shift the climate finance narrative. These nations are now asking for reliance on the private sector to mobilise the majority of the $100 billion pledged to assist developing parties, despite the fact that private climate finance has been historically ineffective at addressing adaptation.
The increased need for public finance for adaptation is manifest and has been re-iterated by the majority of developing nations at the climate negotiations in Warsaw. The reluctance of developed countries to pledge such funding arises in large part from the question of where this finance would come from.
Yet atax on international aviation and shipping bunker fuels offers a promising option for raising significant public funds for adaptation.
From an environmental perspective these sectors are undercharged, especially when compared to domestic transportation, which is subject to domestic carbon pricing mechanisms in many developed countries.
The International Monetary Fund and the World Bank estimate that by 2020 a globally implemented charge of USD $25 per tonne of carbon on bunker fuels could raise approximately USD $12 billion from international aviation and $26 billion from international maritime activities.
In Australia, a charge of this kind could generate between USD $200 and $500 million. Such figures are comparable to the $309 million allocated by Australia to adaptation in developing countries between 2010 and 2012, an intensive period of financing. These funds have supported climate adaptation projects in developing countries around the world, including capacity-building for more climate-resilient agriculture in Papua New Guinea, and the construction of dykes that protect communities in Vietnam from the enhanced threat of storm surges and flooding caused by sea-level rise.
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