Wednesday, December 18, 2019

Ship Owners Propose Mandatory Levy on Marine Fuel to Achieve Greenhouse Gas Reduction

Five Billion Dollars to Fund Research Into New Power Sources for Global Shipping
Shipping News Feature

WORLDWIDE – Despite the much touted figure that international shipping moves 90% of the world's trade goods whilst emitting only 2.5 - 3% of global greenhouse gas emissions, the maritime sector, and indeed the whole logistics profession, is taking the matter extremely seriously and bidding to its cut harmful CO2, and other pollutants, either partially or completely.

The incoming sulphur cap mandated by the International Maritime Organization (IMO) which comes into effect in the New Year goes some way to do this but now a revolutionary move from a group of ship owning maritime interests, which together represent over 90% of the world’s ocean tonnage, looks to solve the problem for good and all.

A proposal has been submitted for a mandatory fuel levy, applicable worldwide to supply $5 billion in funds over the next decade to eliminate anthropogenic CO2 from the water borne supply chain. In order to achieve the Paris Agreement’s climate change goals, rapid decarbonisation is essential and it is the responsibility of the IMO to undertake this.

Highlights of the proposal (which can be viewed in full HERE) are:

  • A new non-governmental Research & Development organisation to pave the way for decarbonisation of shipping
  • Core funding from shipping companies across the world of about USD 5 billion over a 10-year period
  • To accelerate the development of commercially viable zero-carbon emission ships by the early 2030s

The plan is to monitor fuel use ship by ship, figures which are already submitted to the IMO, and charge a levy on fuel use based on these. The estimated income from such a move would generate circa $500 million per annum, thus arriving at the $5 billion funding required for research and development of the fuels and technologies necessary to achieve the stated goals.

The ambitious IMO targets include an absolute cut in the sector’s total greenhouse gas emissions of at least 50% by 2050, regardless of trade growth, with full decarbonisation shortly after. The 2050 target will require a carbon efficiency improvement of up to 90%, which is incompatible with a continued long-term use of fossil fuels by commercial shipping.

Meeting the IMO GHG reduction goals will require the deployment of new zero-carbon technologies and propulsion systems, such as green hydrogen and ammonia, fuel cells, batteries and synthetic fuels produced from renewable energy sources. These do not yet exist in a form or scale that can be applied to large commercial ships, especially those engaged in transoceanic voyages and which are currently dependent on fossil fuels.   

The shipping industry is proposing the establishment of an International Maritime Research and Development Board (IMRB), a non-governmental R&D organisation that would be overseen by IMO Member States.  

The IMRB will be financed by shipping companies worldwide via a mandatory R&D contribution of $2 per tonne of marine fuel purchased for consumption by shipping companies worldwide, which will generate about $5 billion in core funding over a 10-year period. 

This $5 billion in core funding over a 10-year period generated from the contributions is critical to accelerate the R&D effort required to decarbonise the shipping sector and to catalyse the deployment of commercially viable zero-carbon ships by the early 2030s.   

Although the R&D programme and its funding is an initiative of the leading international shipowners’ associations, additional stakeholders’ participation is welcomed. A global fund can be established quickly, and the shipping industry is confident that other stakeholders will also want to contribute, potentially generating substantial additional funding for R&D.    

In a proposal to the UN IMO, the industry has set out details for governance and funding of the coordinated R&D programme, which can be put in place by 2023 via amendments to the existing IMO Convention for the Prevention of Pollution from Ships (MARPOL). The shipping industry’s proposal will be discussed by governments in London at the next meeting of the IMO Marine Environment Protection Committee in March 2020.

The international ship owning associations making this proposal, which collectively represent all sectors and trades and over 90% of the world merchant fleet, are: BIMCO; Cruise Lines International Association (CLIA); INTERCARGO; Interferry; International Chamber of Shipping (ICS); INTERTANKO; International Parcels Tanker Association (IPTA) and the World Shipping Council (WSC).

Photo: Low emission vessels are already appearing in the ferry sector, much as small electric cars can now be seen on many roads. The ambition is to extend and expand the technologies to make them more practical on a much larger scale.