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Shipowners Say Charterers Should Pay EU Carbon Fees Going to R&D Fund 

shipowers say charterers should pay carbon fees for R&D fund
(file photo)

Published Nov 3, 2021 4:43 PM by The Maritime Executive

After saying that it fears the EU’s FuelEU Maritime program might be a missed opportunity, the European Community Shipowners’ Associations (ECSA) is taking on one of the most controversial sections of the proposal the EU Emissions Trading System. In a newly released position paper, the industry group is calling for legally binding requirements for charterers to pay the “carbon tax” levied under the FuelEU proposal with the funds dedicated to the development of low- and zero-carbon fuels and propulsion techniques. 

The group lobbying on behalf of European shipowners says that they recognize the importance and welcome the increased climate ambition of the ‘Fit for 55’ package. Unlike other industry associations, the ECSA has signalled acceptance of the effort instead focusing on specific shortcomings instead of criticizing the entire proposal. They are concerned that although the proposals make references to the use of funds and who pays the fees, it lacks the legally binding structure. In their previous comments, the ECSA also expressed its concern about the substantial enforcement loopholes that it believes undermine the environmental objects of the EU.

“Even though our first preference always is an international regulation for shipping at IMO level, the sector should contribute its fair share to address the climate crisis at EU level as well,” said Claes Berglund, ECSA’s President. 

The position paper highlights two specific recommendations that the ECSA says are required to make the EC ETS system both fair and meaningful. They are advocating for a dedicated fund to be set up to stabilize the carbon price, with the revenues generated supporting the uptake of clean fuels. They also focused on the issue of who is responsible for the costs.

The ECSA says that it supports the proper implementation of the “polluter pays” principle and the pass-through of the costs of the EU ETS to the entity responsible for making operational decisions, which affect the CO2 emissions of a ship. However, they note that while the drafts recognize the role of the commercial operator, no binding requirements are introduced and the pass-through of the costs is left to the devices of the market instead. 

“Applying the ‘polluter pays’ principle to shipping is critical for taking further efficiency measures and for the uptake of clean fuels in the sector,” said Sotiris Raptis, ECSA’s acting Secretary General. “ECSA supports that the commercial operator should bear the costs of the EU ETS. The law should require the entity responsible for the decisions affecting the CO2 emissions of a ship to bear the costs arising from the implementation of the EU ETS in the context of a contractual agreement.” 

The European shipowners propose the introduction of a legally binding requirement in the articles of the EU ETS proposal. Such a requirement, they said, should provide for passing through the costs of the system from the shipping companies to the commercial operators.

The group also focuses on the structure in place for the use of the funds. While saying they support a dedicated fund to be set up under the EU ETS to stabilize the carbon price, they are concerned over the lack of a legally binding structure to dedicate the funds for shipping’s energy transformation.  They are calling for any revenues generated under the EU ETS to be used to financially support R&D projects and contribute to lowering the price differential between cleaner and conventional fuels. 

A sector-dedicated fund should be established that will support the R&D and innovation projects aimed at fuels and technology. The fund should also assist in bridging the price gap that is likely to develop between conventional fuels and the new clean alternative.

The comments are offered within a broader framework that seeks to ensure the EU ETS proposal develops a framework to support shipping. The ECSA focuses on other key concerns including making sure early movers are not penalized, a level playing field for all companies, scalability aligned with the IMO’s efforts, and not incentivizing a shift from sea to road. 

The EU is scheduled to conclude its comment period on the Fit for 55 package and consider all the comments received as it moves to debate and passage of the environmental policies.