The head of a major shipping company wants his sector to implement a carbon tax by 2025, and he is confident his customers will be willing to pay for it.
Making shipping pay for its pollution is vital if the industry wants to decarbonize by 2050, said Christian Ingerslev, chief executive officer of Maersk Tankers A/S, which manages the world’s largest fleet of vessels carrying petroleum products.
Eliminating emissions before mid-century would give the sector a chance to align with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels, according to a study.
A high carbon price could drive up the cost of marine fuel, the sector’s biggest expense. A.P. Moller-Maersk A/S previously proposed a rate of $150 per ton of CO2, which would increase the cost of a common marine fuel in Rotterdam by about 75%, using current figures.
Commodities giant Trafigura Group Pte suggested $250 to $300 per ton.
Ingerslev said he does not have a specific starting price in mind, but wants it “high.” Even so, the effect will be negligible because shipping-which carries more than 80% of globally traded goods-remains cheap, he said.
“Shipping is a negligible cost relative to the products we consume,” Ingerslev said in an interview at the World Maritime Forum Annual Summit last week.
The cost of transporting a ton of diesel or jet fuel by ship is less than 5% of the value of the cargo.
The cost of bunker fuel for ships would only account for a portion of this already small amount
Customers are willing to pay as long as they pay the same as others.
Still, for some products, an additional shipping cost will be significant. “Will there be products that will stop circulating if we increase the price? Yes. And maybe they should.” A carbon tax is needed before 2030 to kick-start the technology.
NOTE: Aligning shipping’s decarbonization trajectory with the Paris Agreement requires 5% of the international marine fuel mix to be zero emissions by 2030, according to the Getting to Zero Coalition, a group of more than 150 companies.
He said green corridors are a good starting point for decarbonizing shipping.
Container ships would be the first because the routes are more fixed than for tankers or dry cargo.
NOTE: Green corridors are specific steps aimed at reducing emissions.
He said it is difficult for tanker owners to order ships at this time
“If you buy a ship today and you make a mistake, you will get a very large retrofit bill or your ship will be obsolete.”
On biofuels for shipping, he said they “are not sustainable because we can’t scale.”
On LNG, he cited a World Bank report critical of LNG.
NOTE: A global carbon tax on the industry would come from the International Maritime Organization, the regulator of shipping. Discussions are in the early stages. The next major IMO meeting on marine pollution will be in late November.