Home > Externalities > Shipping Industry pays for Negative Externalities – is it fair?

Shipping Industry pays for Negative Externalities – is it fair?

ShippingThe shipping industry is taking a big hit on two fronts as it tries to stay afloat. With the current global conditions the industry itself is in the middle of a major downturn as there is too much supply chasing too little demand. To make matters worse the International Maritime Organisation (IMO) has introduced stricter environmental regulations to curb pollution – negative externalities. New regulations that ships have to adhere to:

1. Ships now have to burn cleaner and better grade fuel like diesel – ships used to burn cheap unrefined crude. This means a 50% increase in the cost of fuel
2. The IMO is making ship operators buy tradeable permits to emit CO2.
3. They are also introducing new standards for cleaner ballast water. It has been estimated that approximately 60,000 ships would need to be refitted and that would cost up to $1.7m each.
4. The EU are also proposing to introduce recycling levies on vessels calling at EU ports to pay for the safer scrapping of old ships

Is this fair? 90% of global trade is carried on shipping containers but they only emit 2.7% of the CO2 in the world. It seems that as a lobby group the shipping industry has been too fragmented and unable to influence policy like that of the airlines. See graph below for negative externalities.

Gulf oil spill - negative externalities

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