OG’s third birthday panel discussion: taxing aviation and shipping
Last Thursday was a real thrill for OG as we celebrated our third birthday at London’s beautiful Somerset House. Between drinks and canapés we held a stimulating panel discussion on “Climate, finance & international transport: how should shipping and aviation pay for their environmental impacts in climate vulnerable countries.” Read on to hear about the discussion’s main points.
(From left to right) Attracta Mooney, Danny Sriskandarajah, Aoife O'Leary, Rt Hon. Lord Deben, Secretary-General Arsenio Dominguez.
Sandwiched between a stunning view of the Thames and Somerset House’s glowing courtyard, we at OG were excited last week to celebrate our third birthday. As our CEO Aoife O’Leary said, “It’s completely bonkers, both because it’s been three years, and also because it’s only been three years.”
The event was held on the penultimate day of two weeks of negotiations at the International Maritime Organization (IMO) centring largely on the measures to phase out shipping emissions, including a pricing mechanism for the shipping sector’s greenhouse gas (GHG) emissions – so the theme of the night’s panel was particularly apt. We are incredibly grateful for the invigorating discussion conducted by our speakers the Rt Hon. Lord Deben, Chair of the Council for Net Zero Transport, and former Chair of the UK Climate Change Committee, Arsenio Dominguez, Secretary-General of the IMO, Danny Sriskandarajah, CEO of the New Economics Foundation, and our own CEO Aoife, as well as our moderator Attracta Mooney, Financial Times climate correspondent.
Updates from the International Maritime Organization
The conversation began with a brief update from the Secretary-General on the IMO negotiations as they went into their final day. His main point was positive, that delegates were on track to approve measures that will be finalised next year and eventually come into force in 2027. These will take the form of a GHG pricing mechanism and a GHG fuel standard, on international shipping emissions.
Nuancing this commentary on the ongoing discussions, Aoife agreed that we may be on track to put measures in place but retrained focus on the degree of their ambition: “The question is whether it’s enough, and whether it will actually bring about the decarbonisation of the shipping sector, and also ensure it is equitable,” she said, recognising the years of effort put in by climate vulnerable countries to make sure this is the case.
What’s the result of under-ambitious measures? National or regional jurisdictions implementing their own more robust legislation, and risk an unequal and inequitable transition at the global level. “[The transition] is going to happen,” Aoife said, “the question is whether it happens globally and together or whether we’re going to see countries divided going forward.” While the Secretary-General made clear that incrementalism is important for ensuring all views are accounted for in such diplomatic forums like the IMO, Lord Deben took issue with the speed of such an incremental approach in the face of the climate crisis’s urgency: “we talk about this as if we have all the time in the world. It’s just nonsense to say that by these small incremental steps we’ll get to net zero.”
Aviation taxation: a “win win win”
Turning to aviation, Danny Sriskandarajah started by describing aviation taxation as a “win win win”. The first win is in the balance of who bears the levy’s brunt: the global distribution of flying makes any sort of tax inherently progressive, with 80% of the global population having never taken a flight, and 1% takes 50% of all flights. Any levy amounts to a tax on the globe’s wealthier contingent. The second win is in abating polluting behaviour, and the third in the opportunities to equitably distribute these new revenues to fund the green transition or loss and damage.
Homing in on the details, Lord Deben opted for putting private flights first in the firing line: “If you want to have [a private flight] because you’re snooty enough or you think yourself important enough, then okay, but you pay every penny [of the climate damage you cause],” he said.
Beyond the economics of the tax itself, part of the challenge, according to Danny, is displacing prevailing narratives about flying’s economic benefits. “The assumptions that were made about the true economic benefits of flying,” that it brings business and jobs that cannot be achieved through less-polluting activities, “I think we need to rip them up and start again.”
Dispersing revenues from aviation and shipping taxation
Once the case for a levy has been made, the question remains as to where the revenues should go. The Secretary-General noted that this is again an area where international diplomatic arenas like the IMO are so crucial. Revenues are needed to drive the research to see alternative fuels come into play at scale, but the Secretary-General justified his tentativeness around too-prescriptive revenue allocation citing the diverse needs of Member States. One particular risk is over-complicating trade routes in ways that could disproportionately affect certain countries.
Aoife pushed back against such a hands-off approach to revenue allocation, noting the shipping industry’s evasion of environmentally conscious decisions, particularly its tendency to opt for LNG as a decisively unsustainable alternative to conventional fossil fuels. Channelling revenues to the industry without regulating their use may only accelerate unsustainable practices.
Expanding on the discussion of revenue dispersal beyond the IMO discussions, Danny introduced the crucial question of polluters paying for loss and damage. “I do think there’s a very compelling, almost moral case, for using at least some of the proceeds to address the lives and livelihoods that are being wrecked by climate breakdown,” he said, citing the fact that the last 20 years have seen an eightfold increase in weather-related humanitarian disasters. He advocated financing the already underfunded international humanitarian system in anticipation of the inevitable disasters to come, rather than focusing solely on helping affecting countries rebuild in the wake of extreme weather events.
Danny also noted a common thread linking aviation and shipping . “We’re victims to an incomplete and potentially disastrous version of globalisation,” he said, a phenomenon that has been accompanied by “a dereliction of duty on the part of policymakers” to regulate unsustainable activity.
International shipping and aviation are both staples of globalisation, fundamental to the movement of goods and people that is its central benefit, and to the disastrous climate impact that is its defining consequence. Both sectors have also long evaded adequate regulation. In our work holding polluters to account and driving policy to inspire climate action, it is this failure that OG strives to correct and will continue to do so into its fourth year and beyond.
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