Bunker levy approach for shipping needs thought

2011.6.22-CarbonP.jpgA bunker levy on ship fuel use to cut greenhouse gas (GHG) emissions is gaining support of interests inside and outside the maritime sector. At the end of the day, however, any financial impost drawn up for shipping needs to do more than collect money, it must incentivise a fundamental shift to clean energy and low emissions to be politically and environmentally sustainable in the long run.

The World Bank has announced its support for a bunker levy on international shipping, essentially a tax on fuel usage as a proxy for carbon emissions, to raise funds for climate change financing in the developing world. It will recommend this approach for action to the G20 finance ministers meeting in October, given that progress within the UN towards a new global climate treaty that would include the international shipping and aviation sectors is so slow.

One of the few things that the UN climate change convention (UNFCCC) has managed to agree on in recent years is that industrialised nations should help the developing world to cut GHG emissions and adapt to climate change by making available funding of $100 billion a year by 2020. The World Bank's announcement reflects the attitude of many at the multilateral level, the UN and international aid organisations, who see shipping and aviation as convenient 'cash cows' for the climate funding challenge.

The International Maritime Organization (IMO), meanwhile, is considering a range of market-based measures (MBMs) for application to international shipping, hoping it can move first and ward off the imposition of regulation from outside the sector - from the UNFCCC, or more likely the EU with its own regional scheme to cut shipping emissions. The various MBM options fall into two categories; bunker levies and emissions trading. The International Chamber of Shipping (ICS) and others in shipping have come out firmly in support of a bunker levy.

There are two broad schools of thought within shipping to the looming threats of GHG regulation in shipping. There are those who see it as just another impost on shipping and, if it is inevitable, then let's just pay the tax, fine or whatever penalty regulators come up with and get on with the business of shipping. Understandable in many respects, and the World Bank's declaration will only entrench that response among many ship operators.

Then there are those that see that what is ultimately inevitable is that the maritime sector, like other emitting industries, will be required to actively reduce its GHG footprint and make an environmental, not just financial, contribution to the fight against climate change; that regulation is ultimately going to require emissions reductions and a genuine clean energy conversion, not just penalties for emissions so that ship operators can continue to emit at or near the same rate.

The Global Shippers Forum (GSF) contribution to the debate is an indication that the second approach might be more realistic. Representing customers of ship operators, those freighting their goods around the world, GSF fears that a bunker levy imposed under the first approach will just see the cost passed on by ship operators to their customers with no significant cut in emissions.

GSF wants to see the maritime sector come up with "a rigorous scheme targeting operational efficiencies and other measures to reduce shipping carbon emissions". Given the increasing emphasis on 'greening' and 'de-carbonising' supply chains, along with the efforts that are going into cutting emissions meaningfully in other industries, such as energy generation and transport, this would appear to be a better approach to the GHG cost threat in shipping. Reducing emissions, does afterall lower the cost of compliance.

An IMO-agreed measure is probably more likely to help ship operatorsshift to cleaner energy and meaningfully reduce carbon emissions, rather than just collect money, but it appears unlikely at this stage that IMO can reach agreement before others act.

Carbon Positive

This article has been initially published at www.carbonpositive.net