ICS Wants “Feebate” Solution for 2050 Targets

The International Chamber of Shipping (ICS), working with the governments of Bahamas and Liberia, is proposing a “feebate” (rewards) mechanism to ensure delivery of the IMO’s target to achieve net zero GHG emissions from international shipping by or around 2050.

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 incentivize 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 what the actual GHG fee should be, but if, for the first five years of implementation, the 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.

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 program would be transferred annually to the newly proposed IMO 2 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 incentivize the production and use of green marine fuels our proposal includes a carefully thought out feebate mechanism, which is fuel neutral, to incentivize 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.”

He says 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 – regionally and/or nationally – with regulatory chaos, economic inefficiency, the risk of supply shocks 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 proposal will be discussed at the next round of IMO negotiations, which resume on September 23, to develop a new package of mid-term GHG reduction regulations for international shipping, for adoption by governments in 2025.