The LPDD team is thrilled to announce the publication of a new model law, a federal Arctic Shipping Tax Act. The model law was drafted by Nick Ognibene, Esq., and Cara Eisenstein, Legal Assistant, with oversight by Ken Rivlin, Esq., all from the firm Allen & Overy. Peer reviewing was contributed by Aoife O’Leary, Director, International Climate, Environmental Defense Fund, and James J. Murray, Esq. The model law is available to view here.
Excerpted from the introductory memorandum to the model law:
Unfortunately, thinning polar sea ice presents a significant commercial opportunity for the international shipping industry, as the opening of new Arctic routes has the potential to dramatically shorten voyages and increase profits. Shipping voyages through Arctic waters emit GHGs and other pollutants directly into the Arctic environment and disturb the sea-ice cover, reducing the albedo effect and thus perpetuating and accelerating dangerous cycles of global warming through positive feedback loops. In particular, such voyages release black carbon, a soot particle byproduct of fuel combustion, which, when deposited onto ice, absorbs heat and blocks ice’s usual reflective properties, leading to an increase in the absorption of the sun’s rays.
Because Arctic shipping has the potential to significantly increase the rate of global warming, the U.S. Congress should institute its own measures in the face of stagnant multilateral efforts to enact regulation. The proposed Arctic Shipping Tax Act would impose a tax on the greenhouse gas content of fossil fuels used by commercial shipping vessels engaged in international shipping in Arctic Circle waters in the thirty days prior to calling at a United States port. The amount of the tax is calculated as the greenhouse gas content of the covered fuel used multiplied by the carbon tax rate. The initial rate of the tax is set at $10 and will increase annually over the course of a ramp-up period by $5 until the tax rate reaches $25. Ten years after the initial imposition of the tax, the tax rate will reach the goal rate of $30. The Bill also sets out provisions relating to enforcement, including recordkeeping and penalties.