Dan Jørgensen: A shipping levy is an innovative source of climate finance

Countries clashed at this week’s UN International Maritime Organization meeting over the possible rollout of a global levy on greenhouse gas emissions in the shipping sector.

China, Argentina and Brazil were among those pushing back against the suggestion of a shipping levy, just weeks after around 20 countries backed the carbon tax at a summit hosted by French president, Emmanuel Macron, in Paris.

Dan Jørgensen, Denmark’s minister for development co-operation and global climate policy — who has long championed the idea of a shipping levy — says the world must come up with “innovative sources of financing”, such as the maritime tax, to help countries deal with climate change.

Speaking after the summit in Paris, Jørgensen talked to Attracta Mooney, the FT’s climate correspondent, about the need to increase climate financing, how to phase out fossil fuels, and why this year’s COP28 climate summit might be the most important yet.

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Attracta Mooney: How has the summit in Paris been for you? 

Dan Jørgensen: I definitely think it’s been a positive experience, in the sense that there really is a growing momentum in the world (for) climate financing. And we do need to accelerate the mobilisation of more private financing — that is clear to everybody. Also, I think it’s become clear that we should not look at climate financing as something that is in conflict with poverty eradication. Actually . . . these are two sides of the same coin. I also experienced an openness to one of my main arguments, which is that we need to look for innovative sources of financing. I would underline that we have a window of opportunity now: negotiations with the International Maritime Organization on the taxation of shipping. 

AM: So where did discussions in Paris get to on shipping? 

DJ: There hasn’t been a meeting like a parliamentarian session or a council meeting. The actors haven’t been collected around one table and forced to take a decision on a certain proposition. So, in that sense, I’m not able to say exactly where all countries are. But what I can say is . . . there were a lot of very strong voices advocating the need for more financing (and) the need to mobilise more money — and also a very positive attitude towards a shipping levy, which could be a very important first step in that direction. 

We are one of the strongest proponents for this (shipping) tax and we have been working on it for a long time. I would also say that this is something that we need a decision on, pretty soon. 

AM: Do you really think that will happen? 

DJ: There’s definitely a very big possibility. I don’t really see why the decision should not be made. It’s clear that we will not be able to agree on all the details: how it should end up looking; how big it will be; what the revenue will go to . . . all of those discussions. Maybe they will have to be taken later on. That is OK.

(But) I really urge all parties to make sure we do get some of the bigger decisions — on why we need a carbon-neutral shipping sector. That is a very necessary decision to make. One of the ways to achieve that will be creating economic incentives for doing it. Here, a levy will definitely be the most effective way.

We will need to mobilise more money for international climate financing. And, here, we have a potential global source. It would be very timely to do it just before the World Bank meeting in Marrakech (in October), where we would also push for more reform in order for the bank to mobilise more money. (That is) also just before the COP(28 UN climate) meeting in Dubai, where certainly financing will be at the core of the discussion. So it would be a breakthrough . . . because the agenda is linked. 

AM: There are objections, right, from some countries? You alluded to maybe not being able to agree on how exactly to do this. What do you think of the Marshall Islands and Solomon Islands proposal (for a tax of $100 per tonne of CO₂ emissions from shipping)? 

There were a lot of very strong voices advocating the need for more financing . . . and also a very positive attitude towards a shipping levy, which could be a very important first step in that direction

DJ: Well, we are certainly allies with the small island states and we have been standing side by side with them in arguing their need for more mitigation action — and more action on loss and damage — for a long time. So they are allies. We also take some of the concerns they have into consideration and accept them as very valid. I consider the two island states as very strong proponents for a (shipping) tax, and for more efforts on mitigation, and for more efforts to raise financing with regards to the loss and damage fund. We should find solutions on (that).

AM: President Ruto of Kenya has said there is a need for a new green bank, that is independent of the IMF and the World Bank. His argument is that the current system means poor countries end up paying far more to borrow than developed countries, because the global financial architecture is set up in such a way that it supports the West. He said a green bank where everyone was a shareholder — and there was no dominant shareholder — should be the basis. He wants it funded via taxes, such as the maritime levy and a financial transaction tax.

His argument is that the current system has left many countries just drowning in debt and it’s not fair to expect them to take on even more debt to do an energy transition or cut emissions — while the rest of the Western world isn’t having to pay anywhere near these levels to borrow. What do you think about that?

DJ: This is the first time I heard about these proposals. But what I will say is I certainly do agree that it is a paradox that countries hit hardest by climate change — and which will be in the future — are the same countries that aren’t really to blame for climate change. The reason why we are in this situation is because (some) countries on the planet have been burning fossil fuels for 400 years, basically. That has led to our (economic) growth and the wealth that we have.

So this is why it’s very fair to talk about a common but differentiated responsibility — meaning that the global North has a bigger responsibility than the global South.

Now, having said that, it is a differentiated responsibility, but it is still a common responsibility because all countries need to be on board for this transformation if we are to stay below 1.5 degrees (of global warming above pre-industrial levels). And the good news is that many of the investments that countries have to make in some developing countries are rational, plausible and sensible things to do. By the way, they would be (sensible) even if there was no such thing as climate change, because renewable energy — clean, renewable energy — is cheap, it’s flexible, and it’s better for the health of the people.

Obviously, there is a need to mobilise more financing so that this is not something that the developing countries themselves only have to find resources to deploy. We (in the developed world) should definitely be of assistance. In Denmark, we do this via our public grants. No doubt we could get much more funding that way. As we talked about earlier, the reform of the multilateral development banks (MDBs) is also a way to get there.

So, although I probably share many of the points (of view) of the (Kenyan) president, I’m not necessarily sure that a new institution would be the right way to go. First of all, it would probably be a very, very long process to create one of them. And second, I’m not sure that it would not just get delayed.

We want to try to reform the existing system. And I do see some opportunities for that to happen. We have, for instance, new leadership in the World Bank (president Ajay Banga) who has expressed some very ambitious ideas on these issues. 

AM: What do you make of him? 

DJ: I think he’s a very competent person who is very engaged. I think he has a very good understanding of the challenges that the global South is facing. I think he also takes his position at a time when there is a window of opportunity for reform. So I am extremely optimistic. 

AM: What about the Bridgetown agenda (proposals put forward by the prime minister of Barbados to transform global development finance)? What is your view on the proposal for more paid-in capital (by shareholders of the World Bank) and also foreign exchange guarantees?

DJ: Definitely many of the proposals on this agenda are on the table and are being discussed now . . . What I consider the most important is, first and foremost, the bank needs to embrace climate action as a core objective, and to be able to mobilise more private investments. This means, of course, also looking down at the credit rating of the bank — it still needs to have the highest rating.

First and foremost, the (World) Bank needs to embrace climate action as a core objective, and to be able to mobilise more private investments

I think there is room still to take more risks and thereby mobilise more money. And, finally, the bank also needs to look at the way it’s organised internally and the way that policies are being adopted. So let’s say easier access to money, more agile and (a) faster way of making a difference. 

AM: Do you think we will get some sort of consensus on the reform of the MDBs? 

DJ: I am actually optimistic that this will be the year where, finally, we will get some big progress . . . We’ve got some very strong voices and international negotiations putting pressure on the MDBs. We also have on our side many progressive European countries and the European Union. So. So, yes, I am fairly optimistic. 

AM: Is there anything else on your agenda right now? What else are you thinking about? What is your key focus around climate change? 

DJ: Well, this is pointing towards COP 28 which, in my opinion, will be the most important COP since the Paris Agreement (was reached at COP21, in 2015). We will have to do what is called the global stock take, which means that we will look at where are we with regards to staying below 1.5C (of global warming) and what needs to be done to make sure that happens.

We already know the answer to the first question: we are very far from where we need to be. So, therefore, the focus needs to be on the second question: what can we do? And I expect a very concrete road map to be adopted: how much to reduce (emissions) by when; with a specific focus on action before 2030. Because the science is pretty clear: If we don’t reduce emissions by more than 40 per cent before 2030, then we cannot stay below 1.5C.

After that, who knows what will happen? The science describes some very worrying trends. The truth of the matter is that self-enhancing effects can set in and a lot of the things that we’ll see will be irreversible. So this is why it’s extremely important that we focus on the short term.

$100bn


Climate finance funding agreed by countries at the 2009 UN Climate Change Conference, known as COP15

Also, it’s very necessary that we have some solutions on financing . . . the rich countries need to mobilise $100bn a year from 2020-2025 for the financing (a figure agreed at COP15 in 2009). It is really, in my opinion, very embarrassing that something (still) needs to happen. We need to get that done and we need further steps going forward on the loss and damage fund. 

AM: My understanding is that there wasn’t much progress at the Bonn meeting on climate change (in June). There was quite a lot of arguing about the metrics: what metrics to even use, what data to consider, and on the 1.5C (target). I appreciate you saying we need some sort of concrete road map but, if countries can’t even agree on using 1.5C or the Intergovernmental Panel on Climate Change scenarios, do you think we can actually get this (road map)? 

DJ: That remains to be seen. And it’s not something that we haven’t seen before. These are primarily technical meetings and there are also negotiators with no political mandate in the building. That is not to say I wouldn’t have applauded if they had made more progress. But I’m just trying to make people understand there’s a technical process and there’s a political process. I would actually say that the political process is going in the right direction. It started back in Copenhagen in March with the ministerial meeting we hosted together with the outgoing (COP conference) president and incoming presidency. Then, we had the Petersburg Climate Dialogue in Berlin. Then there will be the pre-COP in October. And, then finally, the COP in November and December. 

So there will be a lot of possibilities for decision makers to actually do the right thing. Now, will it be easy? Obviously not. But I spoke also to Dr Sultan al-Jaber (president-designate of COP28 in November) yesterday. He is now travelling the world collecting all of the different positions and trying to find ways to make decisions happen. I think that is the right way of doing it. That is the way the British presidency did it before COP26 (in Glasgow) and the Egyptian president did it for COP27 (in Sharm el-Sheikh).

But we will not know whether there will be an ambitious output before the last couple of days of COP. It is sometimes a little bit frustrating. But, on the other hand, it also gives reason for optimism. Because, when you think about it, it really is quite incredible that more than 100 countries — where everybody has a veto power, because of the way decisions are made at the United Nations Framework Convention on Climate Change — actually end up taking some quite ambitious decisions.

The decision to make a loss and damage fund last year is an example of that.

This year, we really need everybody to step up because we need to make decisions that are larger than the ones we normally do. It’s not possible to make decisions on one specific thing, like we did last year, which was a loss and damage fund. That was an important decision. But, this year, we need decisions on adaptation, and on financing, and certainly on mitigation, with a focus on the phasing out of fossil fuels. 

AM: How is the conversation going around that? 

DJ: There’s no doubt that there’s a momentum building around phasing out fossil fuels. In Glasgow, we decided to phase down unabated coal, which was the first time fossil fuels were mentioned in a COP process — they have never been mentioned in that text before.

Now, the next step is to say we will phase out all fossil fuels. And, last year, (at COP27) there was some support for that stance. But, this year, I expect it to be higher on the agenda. For instance, the EU will argue that this is one of the most important things that we need. And we also have very strong voices from the global South arguing that this needs to be a part of the final compromise, to show the world that the COP process is actually the place to make these decisions. Because if, in the process, we don’t acknowledge what is the source of the problem, what is the source of climate change — which is, of course, primarily burning fossil fuels — then it becomes increasingly difficult to take seriously. 

AM: To take the (COP) process itself seriously? 

DJ: Yeah. 

AM: The incoming (COP28) presidency have been fairly consistent in talking about phasing down fossil fuel emissions. They did say recently about phasing down fossil fuels, but gave no kind of timeline. You did say that you have been speaking to Dr Sultan (al-Jaber, COP 28 president and chief executive of the United Arab Emirates’ state oil company). What’s your sense there?

DJ: One thing I have noticed is that Dr Sultan has said, publicly, that he will applaud the day when the last barrel of oil is sold. That is something that is quite extraordinary from an oil-producing country (United Arab Emirates). I do also think that the presidency is having a very professional and inclusive approach in the process.

At the end of the day, of course, the success of the presidency will be measured on the results. And we also need to remember that whether or not we can get ambitious results depends on the parties. Are countries really willing to sign up to these promises? I very much hope that they are, and I think that it should probably have been done years, if not decades ago. So the pressure is on — and we need to make the right decisions now.