ICS Proposes Zero Emission Shipping Fund to IMO
The International Chamber of Shipping (ICS) has submitted a detailed proposal to the IMO for a Zero Emission Shipping Fund.
In recognition of the urgency to move forward with workable solutions to meet ambitious net zero targets, shipowners globally have agreed to mandatory contributions on ships’ GHG emissions to raise billions of dollars annually, says ICS.
The shipping industry’s updated proposal is co-sponsored by Bahamas and Liberia (two of the world’s largest flag State administrations, measured in gross tonnage). The proposal builds on the “feebate” concept put forward by the Government of Japan and support from EU States at the IMO for a flat rate levy-based global contribution system.
Significantly, the updated proposal adds a structure for transparency and accountability for how the billions of dollars raised will be used, including those funds to be allocated for use in developing countries.
Guy Platten, ICS Secretary General, explained: “The transition to net zero shipping must be truly global. Otherwise, it will not succeed. ICS fully supports the net zero goal which IMO has agreed for shipping. The 2050 goal will only remain plausible if government negotiators now roll up their sleeves to develop the regulations needed to establish the Zero Emission Shipping Fund. A global GHG pricing mechanism for shipping urgently needs to be agreed on next year, which will de-risk investment in zero GHG marine fuels and provide billions of dollars of funds to support developing countries.”
He says, if we don’t achieve a take-off point in the production and uptake of zero GHG marine fuels by 2030, it’s hard to see how net zero will be achieved by 2050. “The groundwork has been done and the regulatory architecture has been carefully laid out. All that is needed is political will from governments to implement this fit-for-purpose solution quickly and effectively.”
The Zero Emission Shipping Fund and the “feebate” mechanism will be considered by IMO Member States at their next round of GHG negotiations in March. Governments have already unanimously committed to developing a GHG pricing mechanism for international shipping by 2025. If governments agree, the Fund will be approved next year to help achieve net zero GHG emissions from shipping by or close to 2050, in line with the ambitious GHG reduction targets adopted by IMO Member States.
Under the proposal, contributions from ships per tonne of CO2e emitted will be used to reduce the significant cost gap between zero GHG fuels and conventional fuel oil, providing financial rewards (feebates) to ships for the GHG emissions prevented by use of these new marine fuels.
The proposal will include support for the production of zero/near-zero marine fuels and the roll-out of new bunkering infrastructure in developing countries’ ports worldwide, as well as supporting training in the safe use of new fuels.
A detailed impact assessment has already been conducted by Clarksons Research for ICS that highlights that a contribution rate which adds a cost in a range between US$20 to $300 per tonne of fuel oil consumed would have no disproportionately negative impacts on national economies in terms of delivered cargo prices.
The ICS calculates that to reach the IMO target for 5-10% of the energy used by shipping to come from zero/near-zero GHG sources by 2030, the cost of reducing the cost gap with conventional fuel oil and rewarding the accelerated uptake of alternative fuels would be between $5 to $10 billion per year.
The ICS suggests that generating $5 to $10 billion per year might require a contribution by ships to the Zero Emission Shipping Fund equivalent to between about $20 and $40 per tonne of fuel oil consumed. However, the actual contribution rate will be higher, depending on the amount of funds which IMO Member States decide to collect via the Fund for the separate IMO GHG Maritime Sustainability Fund to support developing countries.
