Making the switch to clean energy – a cost for industry

Norwegian government officials have confirmed that the introduction of a carbon tax on shipping is being considered by the authorities. It would be the first carbon levy in the world on shipping and could substantially increase the cost of transporting freight by sea in the region.

The tax will be called the Carbon Fund and will be modelled on the country’s successful NOx Fund, a levy on the poisonous nitrogen oxide gas emissions from ships which was first introduced in 2007 and reduced NOx emissions by 16,000 tonnes between 2011 and 2017, according to official figures. The NOx Fund was used to finance research into cleaner technology.

Narve Mjøs, Program Director, Green Coastal Shipping Program – known as Grønt Kystfartsprogram (GKP) – told FreightWaves, “Discussions are ongoing between the government and representatives from the industry.”

A carbon fund introduced in Norway could be used as a blueprint at the International Maritime Organization (IMO), which is committed to reducing carbon emissions by 50 percent by 2050, to broaden the levy to a global tax on shipping’s carbon emissions.

The NOx Fund levy was increased on 1 January 2019 to NOK14.5 per kilogramme (kg) at the higher rate and NOK8.5 per kg at the low rate. From 2020 through to 2025, the payment rates are expected to be NOK16 and NOK11 per kg respectively.

However, one Norwegian industry official, who would only speak to FreightWaves anonymously, said that the levy for carbon could be set initially at €60 ($68) per tonne, rising to €120 ($166) per tonne subsequently. He went on to say, “The price of shipping today is set far too low and the tripling of the cost of diesel would be necessary to make alternatives more attractive.”

A global tax on carbon would increase the cost of transporting freight substantially, because the levy would inevitably be passed on to the shipping line’s customers and ultimately to consumers.

The last IMO report on the maritime industry’s carbon emissions indicated that they comprised 2.8 percent of global emissions, around 1 billion tonnes. A tax of $160 per tonne would put the total cost to the industry at $160 billion annually.