Shipping gears up to debate carbon levies

Ahead of the next session of the Marine Environment Protection Committee (MEPC), scheduled to start at the end of September, proposals are pouring into the International Maritime Organization (IMO).

The headline from the global gathering is expected to be the deliberations on some form of carbon levy.

Lobby group, the International Chamber of Shipping (ICS), has rebooted a greenhouse gas (GHG) levy scheme it has been touting for a number of years. The reworked proposal, pitched in partnership with the Bahamas and Liberia, is a rewards programme to incentivise accelerated production and uptake of zero/near-zero GHG marine fuels, plus a separate IMO fund to be allocated billions of dollars annually to support maritime GHG reduction efforts in developing countries.

ICS emphasised in a release that delivery of IMO GHG reduction targets for 2030, 2040 and 2050 will only be plausible if governments “bite the bullet” and adopt a maritime GHG emission pricing mechanism in 2025 for global implementation in 2027. 

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 incentivise 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 o-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 $2.5bn per year would also be allocated to an IMO Net Zero Shipping Fund to support maritime GHG reduction efforts in developing countries.

ICS said it has no view on the quantum of what the GHG fee should be, which would depend on the reward rate agreed per tonne of GHG emissions prevented by the use, by ships, of zero/near-zero GHG energy sources. But the lobby group said if for the first five years of implementation, IMO sets the reward rate at about $100 per tonne of CO2e prevented — including upstream emissions, the proposal suggests that a GHG fee initially equivalent to about $60 per tonne of conventional fuel oil consumed by ships could be sufficient to achieve the purposes of the measure. 

Pushing for a far higher levy than the mooted $60 per tonne is a proposal from the 6PAC+ alliance of Small Island Developing States (SIDS), a group of Pacific Island nations, which calls for a universal mandatory levy of $150 per tonne on all GHG emissions, coupled with a simplified global fuel standard, a combination designed, according to its backers, to promote the energy transition within the shipping industry, provide essential incentives, and ensure a level playing field and a just and equitable transition for all. Other proposals are expected to be submitted in the coming weeks.