Staff Climate Notes

Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping

By Simon Black, Ian W.H. Parry, Sunalika Singh, Nate Vernon-Lin

October 4, 2024

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Simon Black, Ian W.H. Parry, Sunalika Singh, and Nate Vernon-Lin. "Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping", Staff Climate Notes 2024, 003 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400290244.066

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Summary

The need to decarbonize international aviation and maritime has long been overlooked. The two sectors account for a small but rapidly growing share of global CO2 emissions, and could rise to as much as 15 to 40 percent by 2040. Pricing these emissions could help global climate policy in two ways. First, it could accelerate technological development while incentivizing efficiency, kick-starting the sectors’ transition to net zero while addressing the sectors’ hitherto favorable tax treatment. Second, pricing could raise up to $200 billion a year in revenues by 2035, which could be allocated to climate finance or other uses. There are significant political obstacles, however, notably reaching consensus on revenue allocation and managing price impacts, which are substantive for flight tickets but less so for shipped goods. Pricing variants, like ‘fee and rebate’ schemes (feebates), have lower price impacts but raise fewer revenues. This paper discusses these policies, using a new model to quantify impacts on fuel use, emissions, revenues, production and economic costs, and on vulnerable states..

Subject: Aviation, Carbon tax, Climate finance, Economic sectors, Energy conservation, Environment, Greenhouse gas emissions, Taxes

Keywords: Administration, Aviation, Carbon pricing, Carbon tax, Climate finance, Climate mitigation, Design issues, Energy conservation, Feebates, Global, Greenhouse gas emissions, IMF analysis, IMF staff Climate, IMF staff Climate note, IMF Staff Notes Series, Instrument choice, International Civil Aviation Organization, International Maritime Organization, Maritime, Net zero, Part of the International Monetary Fund

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