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Carbon Tax

A Pricey Omission: Not Charging Ships for Their Pollution Costs the UK Dearly, £1.6bn/yr

UK £1.6bn/yr

New analysis by Transport & Environment (T&E) shows that in 2021, carbon dioxide (CO2) emissions from UK shipping were 22 million tonnes (Mt) – equivalent to 11 million cars. If included in the UK Emissions Trading Scheme (ETS), these emissions would generate ~£1.76bn for the Exchequer. This amount, annually, would cover the government’s own estimated ~£800m/yr cost of cleaning up the domestic shipping sector’s emissions twice over.

Sadly though, this is not yet the plan despite the recommendations of the UK Climate Change Committee. If the government implements its proposals to expand the UK Emissions Trading Scheme (UK ETS) to shipping, T&E analysis shows that only ~10% of those 22Mt would be included in the ETS, generating just ~£170m/yr. At present levels of emissions, the government would be walking away from £1.6bn/yr and leaving ~90% of UK shipping emissions unregulated.

There are serious problems with how the government calculates UK shipping emissions, how it assigns responsibility for them and how it plans to regulate and, ultimately, abate them. To begin addressing these issues, the government must first ensure that the UK shipping emissions inventory is accurate and switch to an activity-based measure based on UK Monitoring, Reporting and Verification (MRV) data for all its shipping emissions. It should then expand the scope of the ETS to include all vessels above 400 gross tonnage (GT) and include 50% of emissions from UK international voyages.

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Full Press Release:

UK government missing out on nearly £2bn a year by not taxing shipping pollution

Applying polluter pays principle to pollution from ships would benefit the climate and provide a boost for public finances

Cash-strapped Britain could benefit from an additional £1.8 billion a year if it were to tax shipping emissions, a new Transport & Environment (T&E) analysis shows. Pricing the UK’s shipping emissions is a win for the climate and a win for the exchequer, says T&E.

UK shipping activity was responsible for 22 million tonnes of CO2 in 2021 – equivalent to a third of all the UK’s cars. If the UK government were to include all the sector’s emissions in its cap and trade scheme – the UK ETS – these emissions could generate nearly £2 billion annually. However, T&E’s analysis shows that with the government’s current plans, less than 10% of UK shipping emissions would be covered, generating just £170 million a year.

The government is currently considering an extension of its carbon market into shipping but only to ships that are above 5000 gross tonnage (GT) and making domestic voyages. This means a cargo or passenger ship sailing, for example, from Felixstowe to Calais or from New York to Liverpool, would not be made to pay anything. This is despite these international voyages making up for about 90% of the UK’s shipping emissions.

Jon Hood, sustainable shipping manager at T&E UK, said: “The government is currently forfeiting nearly two billion pounds a year by not pricing shipping pollution. With public debt and borrowing costs at an all time high, this would raise significant funds with the added bonus of helping the UK on its path towards net zero. It’s a win-win.”

UK shipping emissions need to halve by 2030 if the UK is to meet its climate targets. International shipping emissions will be included in the UK government’s Carbon Budgets from 2033 – a cap on the country’s total carbon emissions – meaning the government must find ways to reduce them, says T&E.

Including international shipping emissions in the ETS has also been recommended by the UK Climate Change Committee, while the government’s recently-published independent review of Net Zero recommends expanding the ETS into new sectors.

Originally published by Transport & Environment.

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Transport & Environment’s (T&E) vision is a zero-emission mobility system that is affordable and has minimal impacts on our health, climate and environment. Created over 30 years ago, we have shaped some of Europe’s most important environmental laws.


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