Design and Implementation of the Vessel Efficiency Incentive Scheme
The World Shipping Council together with the Government of Japan issued a paper entitled "Design and Implementation of the Vessel Efficiency Incentive Scheme (EIS)" providing an explanation of how this innovative carbon emission reduction proposal would work, and why it offiers effciency, cost, and environmental advantages when compared to other proposals. The EIS is a further refinement of the previous proposal that was submitted by the World Shipping Council to the IMO in January 2010.
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EXECUTIVE SUMMARY
The Vessel Efficiency Incentive Scheme or “EIS” is a proposal made by Japan and the World Shipping Council at the International Maritime Organization (IMO) to stimulate significant improvements in the carbon efficiency of the world’s maritime fleet. The proposal would establish explicit efficiency standards for both new and existing ships in the world fleet. Vessel efficiency would be measured using the Energy Efficiency Design Index (EEDI) developed by the IMO.
New and existing ships meeting the specified standards would not be subject to any fees or costs other than those costs associated with the design and installation of more efficient ship technologies. Those ships that fall short of the specific standards would be required to pay a fee (or penalty) that is based on the amount of fuel consumed and how far short of the standard the specific ship falls. As such, the per-unit fee applied to each tonne of fuel is adjusted based on the relative efficiency of the vessel.
The EIS allows a ship to avoid recurring regulatory costs by meeting the standards established in the Convention. This feature is unique to the EIS proposal and is significant as it provides an option in the marketplace for cost avoidance that is not available in a system that would impose a uniform levy or tax on all ships and all fuel purchases (Danish et al. proposal) or in emissions trading proposals that require the purchase of emission credits. In those systems, the ship may reduce its costs by improved vessel efficiency or the use of selected technologies, but it cannot fully avoid these costs because those proposals would require on-going payments of capital over time as every tonne of fuel or CO2 is taxed equally regardless of the vessel’s efficiency.
Application of a uniform fuel levy or emissions trading scheme would result in a much larger increase in the cost of maritime transportation and world trade, because the primary focus of these proposals is revenue generation rather than a focus on maximizing improvements in the shipping sector itself. By focusing on accelerated improvements in fleet efficiency, the EIS proposal would reduce the actual carbon footprint of the industry, and serve the interests of society by increasing the energy efficiency of the industry that transports the majority of global commerce.
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Source: World Shipping Council