India and the IMO Carbon Levy: Navigating a Greener Future for Shipping

The International Maritime Organization (IMO) has recently taken a historic step in the fight against climate change with the announcement of a Global Carbon Levy on Shipping, set to be implemented in 2028. For India, a country with a rapidly growing maritime sector and a major hub for international trade, this development marks both an opportunity and a challenge in aligning its shipping industry with global environmental standards.

What the Carbon Levy Means for India

A carbon levy is essentially a tax on greenhouse gas (GHG) emissions. In shipping, it will apply to vessels based on the amount of carbon dioxide (CO₂) they emit during their voyages. The goal is to hold polluters financially accountable while incentivizing the adoption of cleaner fuels and technologies. For Indian shipping companies, this levy will mean increased operational costs if they continue using traditional bunker fuels, but it also opens avenues for innovation and investment in greener shipping solutions.

Indian ports like Mumbai, Chennai, and Kandla handle millions of tonnes of cargo annually. With the carbon levy in place, shipping lines operating in and out of India will be encouraged to adopt alternative fuels such as LNG, green ammonia, or hydrogen. This aligns with India’s broader environmental goals, including the National Action Plan on Climate Change (NAPCC) and efforts under the International Solar Alliance, showcasing India’s commitment to sustainable maritime practices.

Short-Term Impacts on India’s Shipping Sector

Initially, the levy is expected to increase costs for high-emission vessels, which could lead to higher freight charges for Indian exporters and importers. Companies may need to invest in cleaner technologies, retrofit vessels, or explore hybrid fuel solutions to reduce tax liability. While this may put pressure on smaller shipping operators in India, it also incentivizes efficiency improvements and adoption of modern, energy-efficient vessels.

Long-Term Opportunities

Over the long term, the carbon levy presents a significant opportunity for India’s maritime industry. Shipping companies investing in low-emission vessels and alternative fuels will gain a competitive edge internationally, as global clients increasingly prefer environmentally responsible logistics. India’s shipbuilding sector, including public and private shipyards, can also benefit by focusing on constructing energy-efficient and hybrid vessels designed to meet IMO’s new standards.

Furthermore, the levy could stimulate growth in related green sectors. For instance, India could expand its LNG bunkering infrastructure and explore renewable energy projects at ports, creating jobs and supporting sustainable development goals. Revenue generated from the levy—estimated globally at $10 billion annually—could, if strategically utilized, fund research, infrastructure, and training programs for India’s maritime workforce.

Challenges and Global Context

While the carbon levy is a step forward, it has faced criticism for not being aggressive enough to protect vulnerable nations. Developing countries, including some in Asia, have argued that the levy “does too little, too late.” India will need to balance compliance with the levy while ensuring that its shipping sector remains cost-competitive and globally connected.

The country’s diplomats and maritime policymakers must actively participate in IMO discussions to ensure India’s interests are safeguarded and opportunities maximized.

Why This Matters for India

Shipping accounts for nearly 3% of global greenhouse gas emissions, and India, as one of the top maritime nations, has a responsibility and an opportunity to lead in sustainable shipping practices. By embracing the carbon levy proactively, Indian shipping companies can reduce emissions, enhance operational efficiency, and contribute to global climate goals.

Moreover, India’s ports, shipyards, and maritime workforce will be better positioned to benefit from emerging green technologies and international collaborations.

Conclusion

The IMO carbon levy represents a historic shift toward greener maritime operations. For India, it is a call to action: to modernize its shipping sector, invest in cleaner fuels, and actively participate in shaping the future of global maritime sustainability. While challenges remain, the carbon levy offers India a clear path toward a more sustainable, environmentally responsible, and globally competitive shipping industry.