Navigating Climate Action: Assessing the Economic Impacts and Trade-offs of a Shipping Carbon Tax for African States

This report by the Africa Policy Research Institute analyzes the economic implications of a proposed International Maritime Organization (IMO) shipping carbon levy on African states. Using the GTAP-E model, the study finds that such a levy would generally reduce GDP and household incomes across Africa, increase global food prices, and exacerbate existing freight cost imbalances. The report advocates for an equitable transition where revenues are redistributed as direct grants to climate-vulnerable nations for out-of-sector projects like renewable energy and resilient agriculture.

• A shipping carbon levy is projected to reduce the supply of maritime shipping services among African countries by up to 7%, leading to a general decline in international trade and an increase in commodity prices.
• The economic impact on GDP varies by country, with most African nations seeing limited negative effects. Equatorial Guinea is forecast to be the worst affected with a GDP reduction of 0.121%, while South Africa is projected to see a slight growth of 0.009%.
• The levy is expected to threaten food security by increasing global prices for agriculture and processed food commodities by 0.011% and 0.013% respectively, which is particularly impactful for African countries that rely heavily on food imports.
• Household incomes in Africa are forecast to fall disproportionately compared to other regions. For example, Ghana is projected to experience a 0.101% reduction, which is 10 times the reduction forecast for European households.
• African trade routes already suffer from structural imbalances in freight costs; the report notes that freight per nautical mile from Rotterdam to West Africa (USD 0.33) is nearly double that of Rotterdam to Canada (USD 0.17).
• The EU-ETS carbon tax has a significantly more punitive effect on African cargo than on other regions. The emissions surcharge per nautical mile for Europe-West Africa trade is approximately USD 0.034, compared to EUR 0.0035 for Europe-Canada trade.
• Stakeholders in Ghana's maritime sector express concern that a high Well-to-Wake (WtW) fuel standard could render Africa's limited fleet—largely composed of old tankers—obsolete, as they are too expensive to retrofit.
• The report argues that revenue redistribution must be based on a Multidimensional Vulnerability Index (MVI) rather than just Gross National Income (GNI) per capita, to ensure countries like Ghana, which have similar vulnerabilities to Least Developed Countries (LDCs), are not excluded.
• To ensure an equitable transition, the report recommends that the IMO redistribute revenues as direct transfers (grants) rather than loans, funding out-of-sector projects such as green hydrogen production and resilient agriculture.
• Africa possesses significant potential for green hydrogen production, which could reduce continental emissions by up to 40% and provide a viable energy carrier for zero-emission shipping.

APA

Ogbugo, M. (2024). Navigating Climate Action: Assessing the Economic Impacts and Trade-offs of a Shipping Carbon Tax for African States. Africa Policy Research Institute. https://afripoli.org/navigating-climate-action-assessing-the-economic-impacts-and-trade-offs-of-a-shipping-carbon-tax-for-african-states

Chicago

Ogbugo, Maria. Navigating Climate Action: Assessing the Economic Impacts and Trade-offs of a Shipping Carbon Tax for African States. Africa Policy Research Institute, 2024. https://afripoli.org/navigating-climate-action-assessing-the-economic-impacts-and-trade-offs-of-a-shipping-carbon-tax-for-african-states.

Wikipedia

{{cite report |last1=Ogbugo |first1=Maria |title=Navigating Climate Action: Assessing the Economic Impacts and Trade-offs of a Shipping Carbon Tax for African States |publisher=Africa Policy Research Institute |date=9 October 2024 |url=https://afripoli.org/navigating-climate-action-assessing-the-economic-impacts-and-trade-offs-of-a-shipping-carbon-tax-for-african-states |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ogbugo2024navigating, author = {Ogbugo, Maria}, title = {{Navigating Climate Action: Assessing the Economic Impacts and Trade-offs of a Shipping Carbon Tax for African States}}, institution = {Africa Policy Research Institute}, year = {2024}, month = oct, url = {https://afripoli.org/navigating-climate-action-assessing-the-economic-impacts-and-trade-offs-of-a-shipping-carbon-tax-for-african-states}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }