The International Chamber of Shipping (ICS) has submitted proposals to the IMO this week suggesting that a mandatory carbon levy on ships would incentivize the use of alternative marine fuels, such as ammonia, methanol and hydrogen.
Given that ICS has serious concerns about the proposed use of the Carbon Intensity Indicator (CII) framework within an economic measure and in combination with ICS’s previous proposal for a flat rate contribution system, ICS suggested some ”refinements to the fund and reward proposal which could address these concerns whilst still allowing it to achieve the same objectives.’
The ICS fund and reward (F&R) proposal combines elements of various recent GHG reduction proposals from a number of governments, plus a flat rate contribution system previously proposed by ICS and INTERCARGO, and ideas recently put forward for a global IMO measure by the EU 27.
Through this new fund and reward system, ICS highlights that billions of dollars could be raised annually through a mandatory flat rate contribution per tonne of carbon emitted. The fund would reward ships according to annual reporting of avoided CO2 emissions through the use of alternative fuels. For example, a ship powered by ammonia could receive a “reward” of more than $1.5m annually. The system could be up and running by as soon as 2024, if governments could agree on the regulatory framework at the forthcoming IMO meeting in December 2022, after COP 27 and ahead of the next IMO Marine Environment Protection Committee in London.
In summary, the variables which would determine the calculation of the quantum of the contribution by ships to the IMSF under this suggested F&R measure would include the
following:
.1 Total annual funding required to meet obligations of IMSF (total annual funding required for rewards programme plus funding for other agreed purposes) which would depend on:
- The percentage alternative energy goal agreed for 2030 e.g. 5%;
- The different types of alternative fuels that were determined to be eligible for rewards;
- The agreed minimum percentage of total annual contributions to IMSF that are allocated for the funding of rewards;
- The agreed minimum percentage of total annual contributions to mIMSF that are allocated for all purposes other than rewards;
.2 The reward rate for CO2 emissions prevented using “eligible alternative fuels” which will depend on:
- The average global price of conventional fuel (Diesel/Gas Oil) in the five years preceding the adoption of the measure;
- The agreed percentage of this five year average global price on which the reward rate will be based; and
.3 Agreed estimates of the minimum annual total fuel consumption of ships, during the first five years of implementation, to which mandatory contributions are applicable.
An impact assessment commissioned by the ICS found that a financial contribution of around $100 per tonne of CO2 would be unlikely to result in disproportionate negative impacts on national economies. ICS added that its proposals would ensure that at least five per cent of the energy used by the world fleet in 2030 is produced from alternative fuels, or roughly 15 million tonnes of new fuels.
We must narrow the significant price gap of new, very expensive, alternative fuels to accelerate their production and take-up, so that we reach a take-off point by 2030 on our pathway to net zero by 2050. But it is crucial that our industry also supports maritime greenhouse gas reduction efforts in developing countries.
..said ICS general secretary Guy Platten.
ICS believes that this fund has the potential to go beyond the traditional reach of the IMO, boosting investment for the fuel production and bunkering infrastructure in ports worldwide which is vital for maritime decarbonization.
