Carbon levy should fund cleaner shipping fuels, say top executives

Shipping executives think that a carbon levy should be spent on developing cleaner fuels. [Photo: Shutterstock]

Executives at some of the world’s top shipping groups are advocating a levy on carbon emissions on shipping in an effort to shape tightening rules on greenhouse gas emissions while providing a means to fund development of cleaner fuel sources.

“To meet international shipping’s decarbonisation challenge, the maritime industry needs a carbon levy, it is coming, and we should shape it,” said Andreas Sohmen-Pao, chairman of BW Group at the Global Maritime Forum in Singapore last week.

The comments followed closed working group discussions on the need for a levy on carbon emissions from shipping with other executives from companies including Cargill Ocean Transportation, Euronav, Angelicoussis Group, Torvald Klaveness Group, Norwegian bank DNB and mining giant BHP.

Maritime shipping, which represents about 90% of international trade, accounts for about 2-3% of global carbon dioxide (CO2) emissions. The UN’s International Maritime Organisation (IMO) has a goal to cut greenhouse gas (GHG) emissions by 50% from 2008 levels by 2050.

Immediate action is needed if the global shipping industry is to meet this target, the International Renewable Energy Agency (IRENA) said in a report released last week.

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In the absence of suitable mitigation policies, GHG emissions associated with the shipping sector could grow between 50% and 250% by 2050, it added.

But how to achieve this remains unclear as alternatives to fossil fuels, such as biofuels and hydrogen-based solutions, remain uneconomical and require significant infrastructure investments and technological advances, the report said.

“We have an opportunity to shape a new maritime future, create a new business opportunity and drive innovation,” said Sohmen-Pao.

The IMO will introduce tougher rules on the sulphur emissions in January as part of regulatory steps to clean up shipping.

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The conceptual carbon levy is not without its structural and operational challenges and may be faced with scepticism by some in the industry that view it as an additional item in a long list of costs.

However, funds generated by the carbon charge could be used to develop competitive and scalable alternative fuel solutions.

“A maritime green fund could accelerate decarbonisation in shipping, support scaling and infrastructure to deliver new fuels, while taking into consideration the impact on trade and developing states,” said Sohmen-Pao.

“We have a responsibility as an industry to do something.”

While discussions around a market based mechanism have taken place at the IMO, there have yet to be specific proposals for a carbon levy submitted to the agency. Such a process still could be years away.

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