The International Chamber of Shipping (ICS) has submitted a refined proposal to the UN shipping regulator that seeks the establishment of a system of sustainability funds and rewards to accelerate the adoption of alternative fuels by the sector and its transition to a future net zero.
The refined proposal combines elements of its previously proposed carbon tax proposal that was submitted by the International Maritime Organization (IMO), as well as submissions from other countries.
ICS said the fund could raise billions of dollars annually, which would then be committed to reducing the price gap, globally, between existing high-carbon marine fuels and alternative fuels, as well as supporting investment. much needed in developing countries for production. of new marine fuels and supply infrastructure.
The funding and reward proposal would use a flat-rate contribution system calculated per tonne of CO2 emitted by a ship and the aim is to keep the market-based measure relatively simple to avoid market distortion.
The proposal is submitted to the IMO ahead of the Marine Environment Protection Committee (MEPC) in November.
“ICS sees the immediate need to ensure that e.g. 5% of the energy used by maritime transport in 2030 could be produced from alternative fuels by reducing the price gap with conventional fuels through a program of rewards for the CO2 emissions avoided by ships that use “conventional fuels”. eligible alternatives. This would accelerate shipping’s transition to new fuels to reach a ‘lift-off’ point on the path to full decarbonization, while allowing the proposed contribution per tonne of CO2 emitted to be set at an amount that would avoid disproportionate negative impacts on States,” ICS said in the paper.
Under the proposal, all applicable ships will be required to make an annual contribution per tonne of CO2 emitted to an IMO Maritime Sustainability Fund (IMSF), calculated on a tank-to-wake basis over a five-year period. IMO is due to re-examine the approach as part of a five-year review, to be completed within three years of the measure coming into force.
ICS added that with “political will” the funding and rewards system could be established by 2024.
As a result, ships burning fuels with a lower CO2 conversion factor, such as LNG or methanol, would make a smaller contribution compared to ships using only liquid fuel oil. Some alternative, zero-carbon fuels, including some that when consumed by a ship may be eligible for rewards, will not require a contribution to the IMSF.
For a ship that uses more than one type of fuel, the CO2 emitted by different types of fuel must be calculated separately and then added as a basis for calculating the total contribution.
The data to support the implementation of the IMSF contribution system will use the existing IMO Fuel Oil Data Collection System (DCS) for ships’ fuel oil consumption to minimize the administrative burden on member states, ICS said.
To help bridge the price gap between conventional liquid fuel oil and “eligible alternative fuels”, the idea is to reward IMSF ships based on the CO2 emissions they avoid using alternative fuels.
Since alternative fuels have different energy densities, the avoided CO2 emissions would be calculated based on the energy consumed compared to liquid fuel oil. Alternative fuels that are eligible for the reward would be considered and specified by the Committee.
For example, ammonia-burning ships would need 10,000 tons of ammonia during a calendar year to reduce 13,786 tons of CO2 emissions. Based on a reward rate of, e.g. around $100 per ton of CO2 avoided, they would receive an annual reward of around $1.38 million for the total CO2 emissions avoided during a year. The actual amount of this annual reward would depend on the IMO agreed reward rate.
“With the ICS fund and reward proposal, IMO member states have a new but very short window of opportunity to implement a global economic measure that can boost the development and production of alternative fuels for shipping. To achieve net zero by mid-century, these new fuels need to start becoming commercially available in significant quantities no later than around 2030,” said ICS President Emanuele Grimaldi.
Contributions made to the fund would be used to accelerate the development and adoption of alternative fuels by rewarding ships using alternative fuels, as well as to finance capacity building and negative impact mitigation in developing countries.
This would include the deployment of maritime alternative fuel production facilities and new bunkering infrastructure that may be required to accelerate the transition, and funding from the IMO GHG Trust Fund and IMO CARES, to support other projects. maritime GHG reduction projects in developing countries, especially SIDS. and WFP.
A portion would also be distributed for applied research and development (R&D) programs on alternative fuels and innovative technologies.
The proposal comes as pressure mounts on the IMO to adopt more ambitious decarbonisation targets ahead of the adoption of a revised IMO GHG strategy due in 2023.
In 2018, the IMO adopted an initial strategy for the reduction of GHG emissions from ships, which calls for a reduction in the carbon intensity of international shipping by at least 40% by 2030, with efforts to reach 70%. by 2050, compared to 2008.
Industry bodies and certain member states have been urging the IMO to end climate emissions from ships by 2050 in line with global 1.5 degree emissions commitments. Being a political body, it has been extremely difficult to find common ground among IMO members to support the net zero emissions commitment, especially for countries that rely heavily on fossil fuels.
Ahead of COP 27, the industry proposal is also seen as relevant in the context of total CO2 emissions from international shipping, considered a ‘hard-to-reduce’ sector, accounting for 2-3 percent of the total. of greenhouse gas emissions from the world economy. gas emissions.
Source: Jasmina Ovcina Mandra at World Maritime News (Offshore-energy.biz)