Navigating the Shipping Carbon Tax: Assessing the Impacts on African Economies

As the push for a global carbon tax on shipping gains momentum, a new report highlights the potential adverse effects on African economies. The report warns that the tax may also negatively impact food security across the continent. Three Africa-focused policy organizations have concluded that as the International Maritime Organization (IMO) moves forward with plans to introduce a levy or carbon pricing mechanism to discourage shipping emissions, Africa must brace for significant impacts.

Charting the Challenges Ahead: The Shipping Carbon Tax and Africa's Economic Landscape

Shipping Disruptions and Trade Implications

The report suggests that the imposition of a carbon levy on shipping is likely to reduce the supply of maritime services among African countries by up to 7%. This could have a significant impact on both imports and exports, with the higher shipping costs leading to increased prices for merchandise transportation. The analysis indicates that imports are expected to decline by 0.04% while exports may increase by 0.21% in aggregate.

Ripple Effects on GDP and Household Incomes

The report also highlights the potential impact on the gross domestic product (GDP) of many African countries, albeit marginally. Equatorial Guinea, which is projected to be the worst affected, could see its GDP slashed by 0.121% due to the carbon tax. Furthermore, the report warns that the tax could lead to a decline in household incomes across the continent, with Ghana potentially experiencing a 0.101% reduction, which is ten times the forecast reduction for European household incomes.

Threats to Food Security

The report raises concerns about the negative impact of the carbon tax on food security in Africa, a continent already grappling with acute food shortages, with around 20% of the population being undernourished. The report states that the tax could increase global prices of agricultural and processed food commodities by 0.011% and 0.013%, respectively. As Africa is a net importer of food, this increase in prices could exacerbate the existing food security challenges, particularly for countries like Egypt, Morocco, Ghana, Nigeria, and Ethiopia, which are expected to see a decrease in agricultural imports.

Navigating the Transition: Challenges for African Fleets

The report also highlights the challenges faced by African countries in adapting to the new emissions reduction measures. For instance, Ghana's limited fleet is expected to become too costly to operate, risking obsolescence if stringent emission reduction requirements are implemented. This could have significant implications for the country's maritime transportation capabilities and overall economic resilience.

Equitable Redistribution: A Call for Balanced Policies

The report recommends that the IMO adopt greenhouse gas (GHG) reduction measures that allow for the redistribution of a significant portion of the revenues raised towards funding out-of-sector mitigation and resilience efforts. The authors emphasize the need for the IMO to ensure that the costs and benefits of efforts to cut emissions from shipping are equitably shared between countries, recognizing the unique challenges faced by African economies.The findings of this report underscore the complex and multifaceted implications of the proposed shipping carbon tax for African nations. As the global community grapples with the urgent need to address climate change, it is crucial that the unique circumstances and vulnerabilities of African economies are carefully considered in the design and implementation of any such policy measures. Navigating this transition will require a collaborative and equitable approach that supports the continent's sustainable development and food security goals.