The International Chamber of Shipping (ICS), working with the governments of Bahamas and Liberia, has presented a comprehensive new proposal to ensure delivery of the ambitious IMO target to achieve net zero emissions from shipping.
According to ICS, 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 on-board carbon capture.
Funding for global GHG reduction efforts
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.
Determining the GHG fee amount
ICS takes 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 if, for the first five years of implementation, 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 to achieve the purposes of the measure.
Objectives of the IMO mechanism
The primary objective of the proposed IMO “mechanism” is to accelerate the production and uptake of new green marine fuels by reducing their cost disadvantage, with feebates (rewards) being disbursed to ships for the CO2e emissions prevented by not using conventional fuel oil.
Implementation and revenue allocation
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 will be transferred annually to the newly proposed IMO Net Zero Shipping Fund, with this proportion subject to adjustment within five years of entry to force.
It is time for governments ‘bite the bullet’. Unless a distinct GHG pricing mechanism and feebate programme are included in the IMO regulations adopted next year, we genuinely fear that shipping’s transition to net zero by or around 2050 will be unlikely to succeed.
… Guy Platten further explained
Furthermore, Simon Bennett, ICS Deputy Secretary General, added that, in addition to the implications for achieving the United Nations climate change goals, any failure to agree on a flat rate GHG fee applicable to all ships globally would result in a proliferation of piecemeal, unilateral GHG charges imposed on shipping worldwide. He noted that this could lead to regulatory chaos, economic inefficiency, the risk of supply shocks and disruptions to seaborne trade, and damage the IMO’s authority as the global regulator of shipping.
I think digitalization and decarbonization are going to have a massive transformative effect on our industry we’re just seeing the start of that transformation now as new technology comes on stream.
… Guy Platten had said to SAFETY4SEA during the 2024 Posidonia exhibition
Last year, when IMO announced the renewed GHG strategy, Simon Bennett had also emphasized that this goal can only be realized if the IMO quickly implements a global levy on ships’ GHG emissions to fund a proposed ‘fund and reward’ mechanism.
