Shipping body responds to proposal to hasten decarbonisation of global commercial fleet
LAST week’s Strait Talk looked at a proposal being made by the International Chamber of Shipping (ICS) to speed up the decarbonisation of the global commercial fleet.
ICS deputy secretary general Simon Bennett has responded to the points I made as follows:
“ICS is grateful to the Singapore Business Times for explaining the proposal recently made by the shipping industry to its global regulator, the UN International Maritime Organization (IMO) for a Fund and Reward (F&R) measure, to accelerate the decarbonisation of shipping and help it to achieve net-zero CO2 emissions by 2050...
“It is very much hoped that the government of Singapore will give serious consideration to supporting this proposal...
“However, the author of the article Is shipping setting the right course for net zero suggested that the measure needs a lot more scrutiny before IMO creates what he described as the first “global taxation system”, and that he was “troubled by the idea of a global taxation bureaucracy collecting and distributing billions of dollars”...
“To be clear, what is being suggested is not a tax, as no money will be collected by or pass through governments. Instead, what is being proposed – with the full support of the industry, as represented by the world’s national shipowners’ associations, including the Singapore Shipping Association – is a contribution system to help the industry maintain control over its destiny. The principal purpose, via an IMO Fund, will be to narrow the price gap between conventional marine fuels and alternative fuels. This is to incentivise the production of low and zero-carbon fuels by energy producers, and their uptake by first movers, to reach a ‘take-off’ point by 2030 on a pathway to full decarbonisation by the entire global industry by 2050...
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“The system of rewards for the CO2 emissions prevented by the use of eligible alternative fuels will be relatively simple to administer and will not require a massive bureaucracy. This is because the quantum of the contribution by ships per tonne of CO2 emitted to the IMO fund, and the reward rate from the IMO fund for ships per tonne of CO2 prevented by the use of eligible alternative fuels, will be fixed by regulation and administered via a fully automated system. The prototype for this has already been developed by the industry using the existing IMO Fuel Oil Data Collection system, through which the annual bunker consumption of ships is already verified by approved Recognised Organisations on behalf of national maritime administrations such as the Singapore MPA...
“While a small proportion of the total funds collected will probably be used to support the maritime decarbonisation efforts of developing nations, the vast majority of the funds collected will be used to reward ships using low and zero-carbon fuel, or technologies such as carbon capture, and will not pass into the “coffers” of governments...
“Given the incredible scale of the challenge of achieving ‘net-zero’ emissions from this ‘hard to abate’ shipping sector in less than 30 years, the industry has concluded that this is not going to be achieved by additional technical regulations on their own. Agreement on some kind of economic measure to incentivise rapid transition, which for shipping can only be made to work at the global level via IMO, is therefore going to be vital.”
So, am I persuaded? Well to an extent, yes. I do accept that politically going down the F&R path makes a lot of sense. Having talked with Bennett this week in some detail on the way the collection of the levy will be carried out and enforced, I am less worried about the “taxation” aspect. We are still talking, though, about a lot of money. And I still think the technologies, especially carbon capture, could be developed in time if technical regulations are required.
Nevertheless, given that the F&R proposal is on the table and the political alternatives now are bleak, the chances are that the IMO will go down this route.
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