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[Updated] Fuel Tax Proposed to Fund $5 Billion R&D Plan

ships

By The Maritime Executive 12-18-2019 12:01:00

Eight global shipping associations have submitted a plan to the IMO for a fuel tax dedicated to helping eliminate CO2 emissions from international shipping. The tax would generate funds of about $5 billion over a 10-year period. 

The proposal includes the establishment of a new non-governmental R&D organization to accelerate the development of commercially viable zero-carbon emission ships by the early 2030s. 

The International Maritime Research and Development Board would be overseen by IMO Member States and would be financed by shipping companies worldwide via a mandatory R&D contribution of $2 per tonne of marine fuel purchased. 

The associations making the submission collectively represent all sectors and trades and over 90 percent of the world merchant fleet: BIMCO, Cruise Lines International Association, Intercargo, Interferry, International Chamber of Shipping, Intertanko, International Parcel Tankers' Association and the World Shipping Council.

The organizations say the industry-wide move to accelerate R&D is necessary to ensure the ambitious CO2 reduction targets agreed to by IMO Member States in 2018 are met. The targets include an absolute cut in the sector’s total greenhouse gas emissions of at least 50 percent by 2050, regardless of trade growth, with full decarbonisation shortly after. 

The 2050 target will require a carbon efficiency improvement of up to 90 percent, which is incompatible with a continued long-term use of fossil fuels by commercial shipping, say the organizations, suggesting instead technologies such as green hydrogen and ammonia, fuel cells, batteries and synthetic fuels produced from renewable energy sources. These do not yet exist in a form or scale that can be applied to large commercial ships, especially those engaged in transoceanic voyages and which are currently dependent on fossil fuels. 

The proposal will be discussed by governments in London at the next meeting of the IMO Marine Environment Protection Committee in March 2020.

Although the R&D program and its funding is an initiative started by the international shipowners’ associations, additional stakeholders’ participation is welcomed.  

Speaking on the announcement, Esben Poulsson, Chairman International Chamber of Shipping said: “This proposal is simple, accountable and deliverable, and we hope governments will support this bold move.”

Speaking on the announcement, Dimitrios J. Fafalios, Chairman of INTERCARGO said: “INTERCARGO Members are committed to energy efficiency and GHG emissions’ reduction by continuously improving the fuel consumption of their vessels which is necessary on a day-to-day basis, due to the nature of the dry bulk tramp sector. Together with our industry partners we are presenting a longer-term proposal with our full support of the International Maritime Organization’s strategy and ambitions on GHG emissions’ reduction.” 

Welcoming the news, UK Chamber of Shipping Chief Executive Bob Sanguinetti said: “This new multi-billion-dollar fund is a game-changing development. It shows just how serious the industry is about reducing its emissions and tackling climate change. It is a huge step in the right direction to achieving net-zero emissions by 2050.”

Speaking on behalf of Germanys shipping community, Alfred Hartmann, President of the VDR, said: “The shipping industry wants to meet or where possible even exceed the climate goals set by the IMO. Therefore, we need a technological revolution. The aim of our R&D program is to accelerate this.”

The move from the shipping industry comes in the context of E.U. Parliament potentially trying to include shipping in the E.U. emissions trading scheme, which taxes CO2 at $28 per tonne (current prices), making the $2 figure comparatively modest. A Transport & Environment spokesperson told The Guardian: “That amount is simply ridiculous.. To rein in long-ignored maritime emissions and make shipping do its fair share, Europe must bring shipping into its carbon market and mandate CO2 standards for all ships calling at its ports.”

Guy Platten, secretary-general of the ICS, told BBC News that the levy small enough to be agreed by shipowners in the developing world, but big enough to make a difference.