Ships carbon levy: Mombasa shippers brace for freight hike

Cargo ship terminal, Unloading crane of cargo ship terminal, Industrial port with containers and container ship. [Courtesy] The carbon levy on ship emissions will likely burden consumers in Kenya and Africa, despite the continent contributing the least to greenhouse gases. The levy agreed last week has drawn mixed reactions, with importers saying it will be a huge burden, although the aspect of environmental protection was important. Shipping lines globally are already preparing to implement the tax on containers come 2028 after it was decided by the United Nations' International Maritime Organisation (IMO) in London following negotiations among member states that include Kenya. Analysts have warned that the new carbon levy on shipping could add US$150 (Sh19,350) to US$300 (Sh38,700) per shipping container, which could lead to higher prices for fuel and other imported commodities in the country. Mr Agayo Ogambi, chief executive officer of the Shippers Council of Eastern Africa (SCEA), said that although they are yet to determine the full impact of the new levy on shipping, it was obvious the burden will be passed over to importers and eventually the consumers. Although protection of the environment is important, this levy is big and will impact the consumers. We have seen the reports on the new tax, but we are yet to make a calculation and determine its full impact," said Ogambi. He said there was a need to strike a balance between protecting the environment and consumer interests to ensure imported goods are affordable. Kenya Ships Agents Association (KSAA) chief executive officer, Mr Elijah Mbaru, said although Africa is the least carbon dioxide polluter at about 4 per cent, it has to pay the new levy like the rest of the other regions after the IMO decision. "This levy is going to be paid by the consignee, who will pass it on to the final consumer. And because it is a net importer of fuel, the cost of imported goods will likely be higher when it comes into effect," he warned. He said Kenya and Africa are likely to pay for the wrong deeds of other regions, which are big polluters, following the IMO verdict. Shipping lines at the headquarters globally will work together to roll out the cargo tax on shipping as the clock ticks towards 2028. Mbaru noted that Africa is vulnerable because it relies on farming, while global warming has had devastating effects, such as drought and floods. Shipping is considered a significant source of greenhouse gas (GHG) emissions, contributing to about 3 per cent of the global GHG emissions. This is so because of the sector's rapid growth, reliance on carbon-intensive fuels and the volume of trade transported by sea. In 2018, global shipping emissions reached 1.076 billion tonnes of carbon dioxide. The IMO has been working to reduce GHG emissions from shipping, with goals like achieving net-zero emissions by 2050 and reducing emissions by at least 40 per cent by 2030. The UN body has implemented measures like the Energy Efficiency Existing Ship Index (EEXI) that require ships to assess their energy efficiency and carbon intensity. Factors that contribute to the high emissions from shipping include increasing demand for shipping, the carbon-intensive nature of bunker fuels and the volume of global trade carried by sea. Last week, Kenya joined 62 other maritime nations in supporting the historic UN decision to impose the world's first carbon levy on shipping emissions that is likely to make fuels costly. Kenya voted alongside major economies like China, the European Union, India and Brazil in favour of the new policy. "This was a difficult but necessary decision for climate action," commented Mr John Omingo, a Kenyan delegate to the London forum. The decision means that businesses and households must prepare for a future where filling up a tank and transporting essential goods will cost more. "The IMO's decision marks a turning point for global shipping, but for Kenya, the immediate reality is simple: fuel prices are set to rise, and there is no easy way around it," said Omingo, a former acting director general at Kenya Maritime Authority (KMA). The levy will apply to large ocean-going ships of over 5,000 gross tonnage that account for about 85 per cent of carbon dioxide emissions from marine shipping fleets globally. The new policy introduces a global fuel standard that will progressively lower the annual greenhouse gas fuel intensity of marine fuels and a greenhouse gas pricing mechanism requiring high-emitting ships to pay for their excess pollution. Under the new system, ships that exceed emission limits will need to acquire remedial units to offset their excess pollution. Vessels operating with zero or near-zero emissions will be eligible for financial rewards, creating a market-driven push toward cleaner maritime transport. The IMO net-zero fund will support innovation, research, infrastructure and transition initiatives in developing countries. It will be used to mitigate negative impacts on vulnerable countries such as small island developing states and least developed countries, which bear the brunt of both climate change and economic pressures in the shipping sector.

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