Article Synopsis

The European Commission proposed taxing ship emissions to raise funds to help rebuild the EU economy damaged by the Covid-19 pandemic. The EU is focusing rebuilding efforts on a "green recovery" in its "bid to become the first carbon-neutral continent." However, the proposed tax is opposed by the shipping industry which forecasts the tax would kindle new rounds of trade disputes between the EU and non-EU countries.

The EU currently caps greenhouse gas emissions and allows firms to buy or sell the allocated emissions permits as needed. Low polluting firms are granted emissions permits for their low emissions which can then be sold to high polluting firms. Over time this practice incentivizes high polluters to invest in greener technologies as the cost to pollute increases.

If the EU is allowed to tax ships, then the higher costs would be passed on to consumers and ships carry about 80% of the world's trade goods. Critics of the proposal maintain it is merely a way for the EU to generate extra cash and his little to do with the environment. The European Commission counters that argument by stating that transport ships account for about 25% of Europe's greenhouse gas emissions and a "90% reduction in transport emissions is needed by 2050" for the EU to achieve its goal of becoming a carbon-neutral continent.

1. Fill in the blank: One way to curb overproduction of a good is to levy __________________.

2. Greenhouse gas emissions from ships are an example of; a. a negative externality b. a revenue generation stream c. a positive externality d. none of these

3. True or false: The European Commission wants to generate revenue by taxing shipping so that it can invest in a green recovery from the pandemic.