Impacts of Shipping Carbon Tax on Dry Bulk Shipping Costs and Maritime Trades—The Case of China

Abstract

Greenhouse gas (GHG) emissions in shipping have been receiving growing concerns in the maritime industry. Recently, the International Maritime Organization (IMO) is considering the introduction of a global shipping carbon tax, which has become the most talked-about topic in both industry and academia. To assess the potential impact of the carbon tax on maritime trades, a trade-volume-based model of shipping carbon emissions was developed. Considering that bulk shipping is the second-largest carbon emitter in the maritime industry and the low value-to-weight nature of bulk cargoes, the model was applied to analyze the dry bulk trade in China, one of the leading countries in the global dry bulk trade. The results show that the introduction of the carbon tax could have significant impacts on freight rates and commodity prices. Depending on the trading regions and the carbon charges, shipping freight rates would increase by 10–30%, which is equivalent to 1–4% of the trading prices. Additionally, since shorter shipping distances may have less emission per trading tonnage, the shipping carbon tax may significantly change the dry bulk trade patterns, resulting in China’s increasing reliance on nearby countries, e.g., India and Australia, for the import of key commodities. These findings can help shipping companies and sectors make better carbon reduction responses, such as redeploying their fleets, promoting the development of low-carbon shipping technologies, and increasing investments in Australia, as well as South and Southeast Asia.