The international maritime sector accounts for approximately 3% of global greenhouse gas emissions, primarily driven by the combustion of heavy fuel oil (HFO) in large container ships. To align with global climate targets, the International Maritime Organization (IMO) has established pathways to transition the fleet toward zero-emission fuels, such as green ammonia and e-methanol.
Currently, fossil-based marine fuels remain substantially cheaper than their sustainable alternatives, creating a significant price barrier for shipowners. To correct this market failure, regulatory bodies are implementing policy packages. These include direct capital grants to support the retrofitting of dual-fuel engines, and the introduction of carbon levies or fuel duties on high-carbon bunker fuels.
By levying a charge on traditional marine fuels, policy-makers aim to internalise the external costs of shipping emissions. This fiscal measure alters the financial incentives for ship operators, raising the costs of carbon-intensive operations and encouraging investment in cleaner propulsion technologies.
Explain what is meant by the term 'indirect tax'.
