Simon Black, Ian Parry, Sunalika Singh, and Nate Vernon-Lin from the International Monetary Fund discuss the strategies available within the aviation and shipping sectors toward a more sustainable economy with a net zero emission target. These two sectors are both affected by the impact of climate change and require significant restructuring despite key differences including (1) the type of demand, with higher fossil fuel prices from carbon pricing regulations potentially reducing international passenger travel without impact on shipping products of aviation freight; and (2) tax base mobility, as ships are less constrained by fuel prices and can refuel in ports with lower prices thanks to high volume bunkering.
Implementing carbon pricing at an international level for aviation and shipping could help align with the Paris Agreement in heavy polluting sectors as well as incentivize the development of efficient low-carbon technologies through accurate price signals. The authors introduced two policy scenarios to address different levels of climate ambition. The first one favors a net-zero pathway with a linear carbon price increase from $20 per tonne in 2028 to $170 in 2035 to $500 per tonne by 2050, which is in line with the International Energy Agency. The second approach is more moderate with a carbon price reaching $250 by 2050.
In both cases, aviation and maritime emissions will peak around 2030 before declining steadily. Beyond the ecological benefit, the predictable price increase provides the appropriate signals to investors who can better foresee the market evolution. Additionally, the revenue generated from global carbon taxes could be reinvested into climate adaptation, included in the climate finance needs, and used to provide income support for the workers or specific industries affected by cost increases, such as the tourism sector, which accounts for a significant share of the GDP for many developing countries.
Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping (imf.org)
