The proposal, submitted to the
International Maritime Organization (IMO) ahead of next month’s gathering of
the Marine Environment Protection Committee (MEPC), addresses the industry’s
challenge to bridge the price gap between the cleanest fuels and fossil fuels.
Through
the Green Balance Mechanism, fees are taken from fossil fuels and allocated to
green fuels used, so that the average cost of fuel is equal. The greater the
greenhouse gas emission reductions a fuel delivers – on a well-to-wake lifecycle
basis – the greater the financial allocation received. The monies collected in any given year is determined by the amount of
green fuels used, allowing for a relatively low fee at the start of the
transition.
The
minimum fee necessary to offset the price differential in a given year would be
collected by the IMO and allocated by the UN body to ships using green fuels
that meet a specific greenhouse gas threshold. Further specifics of the
proposal are carried in a slide below.
“The
Green Balance Mechanism is adaptable and fully integrated with a greenhouse gas
fuel-intensity standard,” a release from the WSC stated today, adding, “It can
be used as a targeted greenhouse gas pricing mechanism, or a possible addition
to an integrated measure.”
Many
other GHG proposals are being put forward for consideration at MEPC next month.
“It is essential to have a new approach to greenhouse gas pricing that would
drive demand for cleaner fuels from the start of the transition. We need the
support of authorities, vendors, and customers,” commented K.H. Wu, CEO of
Evergreen, Taiwan’s largest containerline.
Soren Toft, CEO of Mediterranean
Shipping Company (MSC), the world’s largest containerline, said energy
producers needed to commit to provide alternative fuels to shipping, and they
need to be incentivised to produce them. “The WSC’s GBM proposal provides
this incentive by creating a mechanism to balance the price of alternative
fuels with higher GHG emitting fuels on the market today thus accelerating
demand,” Toft argued.
The task at hand at next month’s MEPC
is to translate the net-zero by 2050 ambition of last year’s diplomatic
agreement into concrete action with plenty of competing visions on how this can
be achieved.
The
International Chamber of Shipping has proposed a zero-emission shipping fund
(ZESF), co-sponsored by the Bahamas and Liberia, whereby contributions from
ships per tonne of CO2e emitted would be used to reduce the significant cost
gap between zero GHG fuels and conventional fuel oil, providing financial
rewards to ships for the GHG emissions prevented by new marine fuel use.
Eight Pacific and Caribbean small
island developing states (SIDS) have updated a proposal they’ve been touting
for years, namely
a universal mandatory levy on GHG emissions, with an entry price now of $150
per ton/CO2-equivalent, in combination with a global fuel standard. They also
have set out a common position on revenue disbursement, arguing for the
majority of funds to come to the priority needs of climate most vulnerable states.