Taxing Carbon Emissions from International Shipping

Abstract

According to the International Maritime Organization (IMO), maritime transport emits around 1 billion tonnes of CO2 annually and was responsible for approximately 2.5% of global greenhouse gas emissions in 2014. The prediction is that greenhouse gas emissions from maritime transport alone may increase between 50 and 250% by 2050, depending on future economic and energy developments. In spite of that, there is no concerted action or plan to tax or capture the CO2 emissions derived from international maritime shipping – the most widespread and popular form of transportation. This occurs in an environment where, from the perspective of corporate taxation, the international maritime industry is one of the sectors that is often taxed at some of the lowest tax brackets, if compared to other business. This article fulfils the threefold purpose of (1) discussing the international standards to which the international maritime transport network is subjected, from international public law and environmental law perspectives; (2) analysing the international tax regime applicable to the taxation of income derived from international shipping transport; and finally, (3) suggesting future policy approaches based on the principles and premises identified, to tackle carbon emissions derived from international maritime transport. The article purports to provide a full overview of the direct and indirect tax obligations which the maritime industry is under, and suggest policy approaches to assure that the environmental cost of transport is captured in the final price of products traded internationally, in order to reestablish geographic economic equity through the application of a carbon tax instrument.