US$2.5Bn per year would also be allocated to a dedicated net-zero shipping fund
Guy Platten : Unless a distinct GHG pricing mechanism and feebate programme are included in the IMO regulations adopted next year, we genuinely fear shipping’s transition to net zero by or around 2050 will be unlikely to succeed
The International Chamber of Shipping (ICS) has presented a revised proposal to International Maritime Organization (IMO) that would introduce payments for greenhouse gas (GHG) emissions
Working with the governments of the Bahamas and Liberia, ICS has presented a revised proposal for carbon pricing to “ensure delivery” of IMO’s long-term target of achieveing net-zero GHG emissions from international shipping by or around 2050.
A fee charged to ships
At the heart of this proposal is a fee charged to ships per tonne of CO2 equivalent emitted, combined with a so-called “feebate” mechanism to incentivise the accelerated production and uptake of zero/near-zero GHG marine fuels, such as green ammonia, hydrogen and methanol, sustainable biofuels, and new technologies such as onboard carbon capture.
GHG pricing mechanism
The principal purpose of the proposed maritime GHG pricing mechanism is to narrow the significant cost gap with conventional marine fuels. Around US$2.5Bn per year would also be allocated to a dedicated net-zero shipping fund to support maritime GHG reduction efforts and the ongoing energy transition in developing countries.
Reward rate
ICS said it has no view on what the GHG fee should be, which would depend on the reward rate agreed per tonne of GHG emissions prevented by the use, by ships, of zero/near-zero GHG energy sources. But the group said, if, for the first five years of implementation,
US$100 per tonne
IMO sets the reward rate at about US$100 per tonne of CO2-equivalent prevented – including upstream emissions, the proposal suggests a GHG fee initially equivalent to about US$60 per tonne of conventional fuel oil consumed by ships could be sufficient to achieve the purposes of the measure.
Pacific islands
In a separate proposal submitted to IMO, Pacific islands are pushing for a higher greenhouse gas emissions price and simple fuel standard. The 6PAC+ Alliance of Small Island Developing States has submitted a series of proposed measures to IMO, saying they are following the scientific assessment from IMO’s GHG impact review.
The 6PAC+ alliance
The 6PAC+ alliance’s submissions to IMO highlight the necessity of combining technical measures with GHG pricing mechanisms to meet these targets. They propose a universal mandatory levy on all GHG emissions, coupled with a simplified global fuel standard (GFS).
This combination is designed to promote the energy transition within the shipping industry, provide essential incentives, and ensure a level playing field and a just and equitable transition for all.
UNCTAD’s new report estimates a US$150-300/tonne price on shipping’s carbon would raise up to US$127Bn per annum between 2027-2030.
All raised their eyebrows
“When we first called for a levy in 2020, everyone said it was too hard to do. When proposed an entry price of US$100/tonne they said it was far too high. When they delayed and we revised the figures and raised the price to US$150/tonne last year, they all raised their eyebrows. But, as it turns out, we are fully aligned with the science,” said Permanent Secretary for Infrastructure in the Solomon Islands Allan Lillia.
Other proposal
“With the science now in from the IMO’s comprehensive impact assessment, the evidence is that a levy and simple GFS with a high entry price is no more costly than any other proposal and the only measures combination that can effectively deliver the levels of efficiency and equity needed,” the proposal said.
Ambition targets
With shipping emissions expected to rise significantly due to increasing global trade, the 6PAC+ alliance, initially led by six Pacific countries, has been pivotal in advocating for high ambition targets, including a GHG price on shipping emissions.
“The 6PAC+ alliance is committed to ensuring that the transition towards green shipping practices takes the most effective and lowest cost pathway and delivers a just and equitable solution, particularly for those on the frontline of climate impacts,” Marshall Islands Special Envoy For Maritime Decarbonization Albon Ishoda said.
About 20% of the operational fleet by 2030 be capable of burning green fuel
Bite the bullet
Secretary general Guy Platten stressed governments should ‘bite the bullet’ and take the plunge. “Unless a distinct GHG pricing mechanism and feebate programme are included in the IMO regulations adopted next year, we genuinely fear shipping’s transition to net zero by or around 2050 will be unlikely to succeed,” he said.
While industry estimates peg about 20% of the operational fleet by 2030 to be capable of burning green fuel, those fuels are likely to be in short supply.
Conventional fuel oil.
ICS’ proposed mechanism aims to accelerate the production and uptake of new green marine fuels by reducing their cost disadvantage, with feebates (rewards) being disbursed to ships for the emissions prevented by not using conventional fuel oil.
IMO mechanism,
If enacted, the fees from ICS’ plan will be collected, and rebates disbursed, via a web-based automated IMO mechanism, a prototype for which ICS has already developed and submitted to IMO.
20% of the revenue
From the revenue generated from the GHG fee, an amount equivalent to 20% of the revenue allocated to support the feebate programme will be transferred annually to the newly proposed IMO Net Zero Shipping Fund, with this proportion subject to adjustment within five years of entry to force.
Take-off point
Mr Platten said ICS believes this model is 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 100M tonnes of GHG emissions per year during the first five years.
This will help derisk 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,” he said.
Risk of supply shocks
He added, “Any failure to agree a flat rate GHG fee applicable to all ships globally would also lead to a proliferation of piecemeal, unilateral GHG charges being applied to shipping worldwide – regionally or nationally – with regulatory chaos, economic inefficiency, the risk of supply shocks and disruption to seaborne trade, and damage to IMO’s authority as shipping’s global regulator.”
Pricing mechanism
In the view of ICS, a maritime GHG emissions pricing mechanism means all ships should contribute GHG fees equally on the basis of their actual GHG emissions, consistent with fair competition and the ‘polluter pays’ principle.
Bahamas, Liberia
The latest proposal from the Bahamas, Liberia and ICS will be discussed at the next round of IMO negotiations, which resume in London on 23 September, to develop a new package of mid-term GHG reduction regulations for international shipping, for adoption by governments in 2025.
The full submission to the IMO is available here.
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