ICS proposes GHG pricing mechanism to aid net zero goals

The International Chamber of Shipping (ICS) has presented a new

international shipping by or around 2050.

At the heart of the proposal is a GHG Fee, charged to ships per tonne of

CO2 equivalent (CO2e) emitted, combined with a “feebate” mechanism to

incentivise the accelerated production and uptake of zero/near-zero GHG marine

fuels, such as green ammonia, hydrogen and methanol, sustainable biofuels, and

new technologies such as on-board carbon capture.

While the principal purpose of the proposed maritime GHG pricing mechanism

is to narrow the significant cost gap with conventional marine fuels, around

$2.5 billion per year would also be allocated to an “IMO Net Zero Shipping Fund”

to support maritime GHG reduction efforts in developing countries.

According to the ICS, this will help to ensure that shipping’s transition

to net zero will be truly global and that green fuels will be available in all

ports worldwide.

The ICS does not take a specific view on the GHG Fee amount, as it depends

on the agreed reward rate per tonne of GHG emissions prevented by ships. For the

first five years, if the IMO sets the compensation rate at around $100 per tonne

of CO2e prevented, a GHG Fee of approximately $60 per tonne of conventional fuel

oil consumed by ships could be sufficient, said the organisation.

The primary objective of the proposed IMO “mechanism” is to accelerate the

production and uptake of new green marine fuels by reducing their cost

disadvantage, with feebates (rewards) being disbursed to ships for the CO2e

emissions prevented by not using conventional fuel oil.

GHG fees will be collected, and feebates disbursed, via a web-based

automated IMO “mechanism”, the prototype for which ICS has already developed and

submitted to IMO.

From the revenue generated from the GHG fee, an amount equivalent to 20 per

cent of the revenue allocated to support the feebate programme will be

transferred annually to the newly proposed IMO 2 Net Zero Shipping Fund, with

this proportion subject to adjustment within five years of entry to force.

The latest proposal from Bahamas, Liberia, with which the ICS is working,

will be discussed at the next round of IMO negotiations, which resume in London

on 23 September, to develop a new package of mid-term GHG reduction regulations

for international shipping, for adoption by governments in 2025.

ICS Secretary General, Guy Platten said: “A GHG pricing mechanism using a

flat rate GHG fee and a feebate element will be vital to bring about the rapid

development and uptake of green marine fuels.

“To incentivise the production and use of green marine fuels our proposal

includes a carefully thought out feebate mechanism, which is fuel neutral, to

incentivise prevention of up to 100 million tonnes of GHG emissions per year

during the first five years.

“This will help de-risk investment decisions and enable shipping to rapidly

reach a “take-off” point in the use of green marine fuels, something which is

needed urgently as their current availability is virtually zero.

“It is time for governments ‘bite the bullet’. Unless a distinct GHG

pricing mechanism and feebate programme are included in the IMO regulations

adopted next year, we genuinely fear that shipping’s transition to net zero by

or around 2050 will be unlikely to succeed.”

Earlier this summer, a green shipping conference in Belize City, Belize

boosted the International Maritime Organization (IMO)’s work to support

Caribbean countries in decarbonising their maritime sector.