Ahead of Marine Environment Protection Committee (MEPC) meeting at the end of September, the International Chamber of Shipping (ICS) has presented a carbon levy proposal to increase the uptake of alternative fuels in the marine shipping sector.
The ICS proposal, developed with the governments of Bahamas and Liberia, aims to achieve the UN International Maritime Organization’s (IMO) target to achieve net-zero greenhouse gas (GHG) emissions from international shipping by or around 2050. A GHG fee would be charged to ships per tonne of CO2 equivalent (CO2e) emitted, combined with a ‘feebate’ mechanism to incentivise the accelerated production and uptake of zero/near-zero GHG marine fuels.
The mechanism is designed to narrow the significant cost gap with conventional marine fuels, around USD2.5 billion per year would also be allocated to an IMO net-zero shipping fund to support maritime GHG reduction efforts in developing countries.
The main objective of the proposed IMO mechanism is to accelerate the production and uptake of new green marine fuels by reducing their cost disadvantage, with feebates (rewards) being reallocated to ships for the CO2e emissions prevented by not using conventional fuel oil.
ICS noted that if for the first five years of implementation, IMO sets the reward rate at about USD100 per tonne of CO2e prevented (including upstream emissions), the proposal suggests that a GHG Fee initially equivalent to about USD60 per tonne of conventional fuel oil consumed by ships could be sufficient.
Guy Platten, ICS secretary general, said that it was time for governments to “bite the bullet” and unless a distinct pricing mechanism is introduced, “we genuinely fear that shipping’s transition to net zero by or around 2050 will be unlikely to succeed.”
He added: “A GHG pricing mechanism using a flat rate GHG fee and a feebate element will be vital to bring about the rapid development and uptake of green marine fuels. To incentivise the production and use of green marine fuels our proposal includes a carefully thought out feebate mechanism, which is fuel neutral, to incentivise prevention of up to 100 million tonnes of GHG emissions per year during the first five years. This will help de-risk investment decisions and enable shipping to rapidly reach a “take-off” point in the use of green marine fuels, something which is needed urgently as their current availability is virtually zero.”
