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At the most recent UN Climate Change Conference in Cancun, Mexico in December 2010, governments saved the global climate negotiations from collapse. But they did not solve the climate crisis.
Two challenges are particularly pressing. First, governments must close the gap between the cuts to greenhouse gas emissions pledged so far and those needed to avoid catastrophic climate change. Second, rich country governments must mobilize the money needed to fill the Green Climate Fund (GCF) established in Cancun.
International shipping is a major source of greenhouse gas emissions. Shipping emissions – or ‘bunkers’ in the jargon of the UN climate negotiations – are large and growing fast. A single ship can emit more in one year than many small island states. Yet they are not currently regulated under the global climate regime.
Agreement to apply a carbon price to shipping can both reduce emissions and raise funds for climate change adaptation and mitigation in developing countries. But since developed countries must lead the fight against climate change, such a scheme must ensure developing countries face no net costs as a result. The next climate change conference, COP17 in Durban, South Africa at the end of 2011, provides an opportunity to agree the three key principles of such a deal:
- Meaningful emissions reductions from the international shipping sector;
- No net costs for developing countries; and
- Substantial revenues for the Green Climate Fund.
This paper shows how such a deal is possible. A moderate carbon price of $25 per ton is likely to raise the costs of global trade by just 0.2%, but generate $25 billion per year to compensate developing countries, and provide more than $10 billion per year for the Green Climate Fund.