The International Monetary Fund (IMF) expects $200 billion in climate finance for developing countries by 2035 from carbon taxes paid by aviation and shipping firms.

Carbon taxes are penalties for businesses that exceed the standardized levels of carbon emissions as a way to force firms to shift to cleaner fuels to help mitigate climate change.

“There is an urgent need for global action to kick-start the sectors’ decarbonization. The time has come for a global tax on international aviation and shipping,” IMF said in its Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping report released Friday.

Barriers

However, the IMF said several barriers to decarbonization in both industries remain, mainly the guidelines for pricing carbon emissions and facilitating payments of carbon taxes.

“There is opposition by several countries to the establishment of the robust price signals needed to level the playing field for zero-emission fuels,” IMF said.

Despite such challenges, the IMF said the International Civil Aviation Organization (ICAO) and International Maritime Organization (IMO) continue to discuss with all stakeholders on carbon pricing, stressing other options like carbon emissions trade would be less helpful both to globally sustainable economic growth and businesses’ profits.

Carbon emissions trade allows more carbon-emitting firms to buy carbon credits from more environment-friendly firms or countries.

One credit allows the emission of one ton of carbon dioxide or the equivalent of other greenhouse gases based on the Glasgow COP26 climate change summit.

Reducing dependence

on traditional fuels

Carbon emissions trade aims to make dirtier firms become less dependent on traditional fuels so they will not keep spending on carbon credits to sustain their business operations.

“A carbon tax is the most desirable instrument overall — it is simpler than an emissions trading regime and provides more certainty over future prices, which is important for mobilizing investment in zero-emission fuels,” IMF said.

In terms of carbon tax monitoring, the IMF said new technologies have been developed to help authorities fulfill this task.

“Systems could now be administratively feasible with recent innovations in digitalized payments, fuel-reporting requirements, satellite tracking of planes/ships, as well as tax collection by national authorities or new specialized funds supervised by the ICAO and IMO,” IMF said.

Department of Finance Secretary Ralph Recto has said that the government has started exploring policies on carbon taxes and carbon emissions trade to increase government revenues for long-term socioeconomic growth.

“There is increased momentum in the establishment of carbon pricing systems in the Asia-Pacific region. Carbon pricing instruments serve as a powerful fiscal tool, allowing us to incorporate the social and external costs associated with carbon emissions,” he said.

The Philippine government commits to reduce emissions from climate change-inducing greenhouse gases by 75 percent by 2030.