At the heart of the proposal is a GHG Fee, 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, such as green ammonia, hydrogen and methanol, sustainable biofuels, and new technologies such as on-board carbon capture.
While the principal purpose of the proposed maritime GHG pricing mechanism is to narrow the significant cost gap with conventional marine fuels, around US$2.5 billion per year would also be allocated to an “IMO Net Zero Shipping Fund” to support maritime GHG reduction efforts in developing countries. This is to help ensure that shipping’s transition to net zero will be truly global and that green fuels will be available in all ports worldwide.
ICS takes no view on the quantum of 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 if, for the first five years of implementation, IMO sets the reward rate at about US$100 per tonne of CO2e prevented (including upstream emissions), the proposal suggests that 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.
The primary 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 disbursed to ships for the CO2e emissions prevented by not using conventional fuel oil.
GHG fees will be collected, and feebates disbursed, via a web-based automated IMO “mechanism”, the prototype for which ICS has already developed and submitted to IMO.
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.
ICS Secretary General, Guy Platten comments:
“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.”
Guy Platten further explained:
“It is time for governments ‘bite the bullet’. Unless a distinct GHG pricing mechanism and feebate programme are included in the IMO regulations adopted next year, we genuinely fear that shipping’s transition to net zero by or around 2050 will be unlikely to succeed.”
ICS Deputy Secretary General added:
“In addition to the implications for the achievement of United Nations climate change goals, 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 and/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.
In the view of ICS, a maritime GHG emission 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.”
The latest proposal from 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.
source: ICS
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
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