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Green recovery or 'nightmare' for trade? Europe wants to tax emissions from ships

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Reference:CGTN | Updated:4 Feb 2021

Europe's plan to raise billions each year for coronavirus relief by charging ships for their pollution could inflame trade tensions at the worst moment for the global economy and set back efforts to tackle the climate crisis.

The European Commission is proposing to extend its Emissions Trading System (ETS) to shipping as one of a series of measures to help pay for rebuilding the EU economy, and to promote a green recovery from the crisis.

The European Union plans to spend 30% of its €750 billion ($889 billion) coronavirus recovery fund and next seven-year EU budget on climate-related projects in a bid to become the first carbon-neutral continent.

    But the proposed shipping tax has run into fierce opposition from the industry, which says it would undermine efforts to tackle climate change at a global level and is likely to spark a backlash from non-EU countries, raising the specter of new trade disputes.

    The ETS already caps greenhouse gas emissions from more than 11,000 power and manufacturing plants, as well as all internal EU flights, covering some 500 airlines. Together, the activities it covers generate nearly half the bloc's greenhouse gas emissions. Companies receive or buy emission permits or "allowances," which can subsequently be traded. The number is reduced over time so that emissions fall.

    The Chamber of Shipping of America told CNN Business that it is urging all non-EU governments to oppose the extension to shipping and "recognize the pre-eminence" of the International Maritime Organization, a UN body, in tackling emissions from ships.

    Ships carry 80% of world goods trade by volume, according to the United Nations Conference on Trade and Development. Any increase in costs from pollution charges could be passed on by operators to businesses and consumers in the form of higher prices.

    Critics of the proposal say that countries outside the European Union are likely to view it as little more than a way to raise money. The European Commission has estimated that extending the ETS to the maritime sector and requiring airlines to pay more for their pollution could generate €10 billion ($11.8 billion) a year.

    "This is an admission that this is not about climate whatsoever, it's about raising funds," said Lars Robert Pedersen, deputy secretary general of international shipping association BIMCO, which is headquartered in Copenhagen.

    The proposal amounts to asking US and Chinese shipping companies to help finance Europe's recovery plan, Pedersen told CNN Business. He said it is likely to face staunch opposition, of the kind experienced when the European Union tried to include international aviation in the ETS in 2012.

    EU officials eventually relented, after the United States threatened to ban its carriers from complying with the directive and China threatened to withhold outstanding plane orders from Airbus (EADSF). As a result, the ETS only covers flights between EU countries, as well as Iceland, Liechtenstein and Norway.

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