ICS proposes 1st global carbon levy to speed up industry decarbonisation

The International Chamber of Shipping (ICS), the global trade association for ship operators, has put forward a comprehensive proposal for a global levy on carbon emissions from ships, in what would be “a first for any industrial sector”.

ICS, which represents the world’s national shipowner associations and more than 80% of the merchant fleet, presented a submission to the UN calling for an internationally accepted market-based measure to accelerate the uptake and deployment of zero-carbon fuels.

The new proposal was backed by Intercargo, the trade association for dry cargo shipowners.

The money would go into the International Maritime Organisation’s “IMO Climate Fund” which would be used to deploy the bunkering infrastructure required in ports throughout the world to supply fuels such as hydrogen and ammonia.

The fund would calculate the climate contributions to be made by ships, collect the contributions, and give evidence they have been made. 

To minimise burden on the United Nation member states and ensure the rapid establishment of the carbon tax, the framework proposed by industry would use the mechanism already proposed by governments for a separate $5 billion research and development fund.

The R&D fund, of a mandatory $2 levy per tonne on marine fuel, would be used entirely to fund the research and development of alternative zero-carbon fuels and propulsion systems.

IMO is scheduled to approve the R&D fund at a meeting which is to be held in November immediately following the UN Climate Change Conference of the Parties (COP).

“What shipping needs is a truly global market-based measure like this that will reduce the price gap between zero-carbon fuels and conventional fuels,” Guy Platten, secretary-general of ICS, commented.

“There’s no question that improvements in technology can enable the transition to zero-emission shipping. However, huge leaps must still be taken if we’re to achieve the readiness levels needed for deployment at scale. This includes building the necessary infrastructure to support such as transition.”

Furthermore, ICS believes that a mandatory global market-based measure (MBM) is strongly preferable over any unilateral, regional application of MBMs to international shipping, such as that proposed by the European Commission which wishes to extend the EU Emissions Trading System to international shipping.

“A piecemeal approach to MBMs, (the EU ETS will only apply to about 7.5% of global shipping emissions), will ultimately fail to reduce global emissions from international shipping to the extent required by the Paris Agreement, whilst significantly complicating the conduct of maritime trade,” according to the ICS.

“The World Bank and numerous studies have concluded that the most appropriate global MBM for reducing carbon emissions from shipping is a levy-based system,” Platten added.

“Adopting our proposal for a levy-based system, will avoid the volatility that exists under emissions trading systems, such as the EU ETS – which in the case of shipping, seem to be more about generating revenue for governments from non-EU shipping, than helping shipping to decarbonise.”

Last September, Trafigura, one of the world’s largest ship charterers, has proposed that the IMO introduces a carbon levy between $250 and $300 per metric tonne of CO2 equivalent on shipping fuels, which would be a medium option.

The system would be overseen by the IMO, and it would be adjusted as the competitiveness gap narrows.

Trafigura believes the revenue raised from this levy could be partly used to fund further research and development into alternative fuels.

Some portion of the revenue should be used to help developing countries to manage the energy transition processes and to help them mitigate the consequences of climate change.