Shipowners propose CO2 levy and billion-dollar fund for shipping's green transformation
16 Feb 2023
A fund collecting USD 10bn a year is enough to reduce the price difference between fossil and sustainable fuels in shipping, according to international shipowner organization.
A carbon levy on shipping activities could generate USD 10bn every year for a global fund that will use the income to support the industry’s transition to sustainable fuels, suggests the International Chamber of Shipping (ICS) in a formal proposal to the UN’s International Maritime Organization (IMO).
The cornerstone in the ICS proposal is an IMO-administered fund, which will receive income from a global CO2 levy on shipping operations.
The ICS suggests that the IMO introduces a fixed levy per tonne emitted CO2.
According to the proposal, the levy can be set ”at a relatively low level” and still be high enough to reduce the price difference between conventional marine fuels on one side and sustainable fuels on the other.
Income from the levy, which, according to the proposal, could amount to USD 10bn every year, should be used as an incentive to shipowners for pushing the green transformation of their fleets.
”The funds collected would be used to reward the uptake of alternative fuels by first movers, based on the CO2 emissions prevented, which will significantly reduce the price gap whilst minimizing the additional cost of marine fuel to ensure that there will be no disproportionately negative impacts on trade, which is a legitimate concern among many developing economies,” writes the ICS in a press release.
Recommends low carbon levy
As the IMO is only free to make consensus-based decisions, the ICS recommends that the CO2 levy is set relatively low to best ensure political support from all membership nations.
The proposal is based on an ambition to achieve carbon neutrality within shipping prior to 2050.
”With political will, it can be readily adopted via the existing IMO MARPOL Convention by 2024, so that our commitment to net zero by 2050 can remain plausible given the enormous challenge of transitioning the entire global industry to new fuels and technologies in less than 30 years,” reads the press release.
According to the ICS’ calculations, a future carbon levy for shipping could be set at approx. USD 50 per tonne of fuel consumed by a vessel – which would be enough to finance a global fund until 2030.
Another important element in the proposal is that the fund should promote shipping’s green energy transition in third-world countries as well.
So far, however, the IMO has proved an inefficient organization when it comes to adopting new climate regulations for shipping.