Report outlines policy measures to make zero-emission shipping commercially viable

A new report launched by the Getting to Zero Coalition on 18 January has outlined policy measures that could help ‘close the competitiveness gap between fossil fuels and zero-emission alternatives in shipping as well as enable an equitable transition’. Entitled Closing the Gap, the report has been prepared for the Coalition by UMAS.

Explaining the need for the report, Christian M. Ingerslev, CEO of Maersk Tankers, said: ‘The cost of zero-emission fuels must be significantly reduced to close the competitiveness gap with fossil fuels. To bridge this gap, we need to realise the potential of public-private collaboration. As companies, we must develop and deploy solutions at scale while policy makers must put in place the necessary regulation to make zero-emission shipping commercially viable and the default choice by 2030.’

According to the report, there are ‘multiple potential policy options’ for closing the competitiveness gap – but the ‘preferred way forward’ to support the shipping sector through an ‘equitable’ zero-emission transition would be to adopt a policy package that ‘combines the strengths of the different policy options whilst mitigating their weaknesses’.

The report suggested that a policy package could consist of a global market-based measure (MBM) that collects revenue, which is then used fairly to support the transition, and a direct command-and-control measure to send an ‘unequivocal signal’ to the market that a fuel transition will take place. The report added that this could be complemented by voluntary initiatives, information programmes and national and regional policy measures to stimulate investments, encourage knowledge sharing and support capacity development.

Isabelle Rojon, Principal Consultant at UMAS and lead-author of the report, emphasised the importance of an equitable transition.

‘Decarbonisation policy for shipping needs to be as much about equity and fairness as it is about climate change mitigation,’ Rojon maintained.

‘Vast inequalities exist globally, many of which are worsening in the face of climate change. With careful policy design and use of carbon pricing revenues, we can ensure that maritime climate policies do not exacerbate these inequalities. Furthermore, embedding equity into policy measures will help secure the multilateral agreement that is urgently needed.’

Tellingly, the report estimated the carbon price required under full decarbonisation by 2050 or 50% decarbonisation by 2050 and found that there is ‘no big difference in average price level between the two scenarios’. An average carbon price of just under $200 is required for shipping’s full decarbonisation, whereas under the 50% reduction scenario it is around 10% lower.

Kasper Søgaard, Managing Director of Global Maritime Forum, commented: ‘The report shows that the introduction of a relatively low carbon price in the 2020s that is gradually increased to around $200 will make it possible to fully decarbonise shipping and create an industry that is powered solely by net-zero energy sources by 2050. This level of carbon price is in line with what is estimated by, for instance, the International Energy Agency (IEA) as needed across all industries to achieve the Paris Agreement goals, indicating that shipping is not a unique case.’

The report emphasised the importance of coordinated action, arguing that while national and regional action are important and have a role in the transition, the work on a global package of policies will be key.

While the report plotted a course of action for the next three decades, it argued important decisions need to be taken now, in 2022.

According to Dr. Alison Shaw, Research Associate at UCL and co-author of the report: ‘This year will be critical for decisions on climate policy in the IMO. Our report shows that there is no single perfect policy and that a successful transition will likely hinge on developing and deploying a mix of policies which can address different aspects of the transition.’

Dr Shaw concluded: ‘The imposition of market-based measures on the shipping industry is relatively uncharted, so the sooner policy-makers can surmount this challenge together, the better for the transition, the industry, and the environment.’

Source: Bunkerspot